Looking for clarity

Discussion in 'Ask An Owner Operator' started by S.V.Buyck, Mar 7, 2021.

  1. S.V.Buyck

    S.V.Buyck Light Load Member

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    I am without a lot knowledge so I was looking for clarity. Why do some o/o pay themselves in a one truck operation? If the truck is making profit does it matter how you divide it? If gross profit is 3k for the week and you set aside some money for maintenance, taxes, isn’t the rest all yours? Can someone enlighten me please because I thought bottom line was to mak more money than a company driver.
     
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  3. Ridgeline

    Ridgeline Road Train Member

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  4. lester

    lester Road Train Member

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    Depends how you set it up. If it's just a sole proprietor yeah you can do whatever you want with the money.

    If you set the business up as a completely separate entity it's not your money, it's the businesses money. You must pay yourself a wage, with payroll taxes and everything.

    That's the short answer anyway
     
  5. S.V.Buyck

    S.V.Buyck Light Load Member

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    Okay but even if it’s the business’s money you can take it out as long as you pay taxes, am I correct? Is business taxes higher than personal taxes? I know this is a slippery slope but an one person LLC can be run as a sole proprietorship correct?
     
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  6. DaytonTD

    DaytonTD Light Load Member

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    Maybe you're a little confused why they would do this if they were a sole proprietor since its all the same account. Most O/O have a corporation though. So it is physically a different business account from which you have to actually pay yourself as an employee. Money does transfer from the business account to your personal and that is your wage.
     
  7. S.V.Buyck

    S.V.Buyck Light Load Member

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    Ok thanks, I’ll just keep doing my research and look for a good trucker cpa in my area to set me up. What type of wages do o/o pay themselves. I’m company right now and I know my wage but what’s a ballpark or is everyone different.
     
  8. truckdriver31

    truckdriver31 Road Train Member

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    $900 a week
     
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  9. uncleal13

    uncleal13 Road Train Member

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    When I had a limited company, I had a payroll account and held back my taxes on my wages, then submitted the taxes quarterly.
    I’m now a sole proprietor. I have a separate bank account for business use. When I pay myself, I transfer an amount once a month, then take a calculated portion of that and send it to a third bank account that I set aside for taxes. Then remit that quarterly.
    How much you pay yourself depends on your operation. Early years I was lucky to make $30,000 a year. Then $50k became common. Then $70-80k. Now breaking $100k, but that’s only because I’m out of the land of payments. Truck and trailer are paid for, I won’t be replacing them. Heading for retirement in a year or so.
     
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  10. DaytonTD

    DaytonTD Light Load Member

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    It depends your situation. Do you need money? Do you need a personal loan in the short term future? You can pay yourself regular payroll and pay taxes or dividends which is taxed less in some instances but banks don't really count that as income so you'll have trouble getting a mortgage or loan. Do you have your equipment paid off? Talk to accountant about your situation and he will advise the best way to place the money to minimize tax loss while meeting your personal and company needs.
     
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  11. TallJoe

    TallJoe Road Train Member

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    In a nutshell, a solo o/o pays himself a reasonable salary and then, of course, draws dividends - which are subjected to lesser taxes than the payroll.
    It is a matter of a personal challenge and daring when when a solo o/o draws more in dividends than in the "reasonable salary" - in order to make up for what the "reasonable" might have not been reasonable after all.

    Some say that from all the gross profit the "reasonable" is at least 60/40 ratio , some say 50/50...but let's be reasonable and honest here - the reasonable is reasonable only if you were able to actually hire someone to do YOUR driving work for that salary. Well, now it is a matter of interpretation and further polemic if you could find such a person or not.

    P.S. Not only the driving work but often the clerical work as well.
     
    Last edited: Mar 8, 2021
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