The Anderson Lease thread - redux.

I'm kinda going off on a tangent here. I was talking to another ATS L/O today and he gave me a few good ideas if they prove to be true.

We were talking about his business structure. He formed an S-Corp. I think we all know about this one.

One of the major disadvantages of Becoming an O/O is you can no longer deduct the cost of your lease (truck) payment. He was arround this was to form yet another S-Corp whose sole function was to buy the truck and lease it to the 1st S-Corp. You can now claim the depreciation and the lease payments in two different S-Corps.

Bottom line is that he only gets a $250.00 salary per week and pays little personal Federal Income Tax and he claimes he gets the Estimated Quarterly Income Tax back after a year. He ends up paying about $600.00 per quarter instead of the $3,000.00 I am paying.

I'm going to check this out.

 

Related corporation laws under the IRS will be in play here. There are also laws concerning churning an asset.

There is no problem with an O/O having the truck owned and turning around and leasing it to a corporation for the amount of the payment. This is fine if the corporation is the one using the truck.

I think your buddy here is playing with fire.

 

It sounds like you just explained it, maybe I am not explaining it well. He has gone through an experienced Corporate Lawyer every step of the way.

 

The same asset cannot be depreciated twice.

The one can set up and operating company whether it be s or whatever. This operation can deduct any payments made for the lease of the truck it it is leased.

The second business whether s or not can be the title holder of the truck. It owns the truck, so it can deduct depreciaiton on it. However, the income is the lease payment from the other business.


This sounds more like what they might be doing.


However, I think they went the long way for a short problem.

 

So, what might be a better more tax saving way to do this?

 

It is possible.

When I owned my truck, I set it up in a C corp. The attorney thought that an S was the way to go. Had to straighten him up. C corp allowed me to utilize employee benefits that were not available to s corp.

I paid a minimum wage each week. I paid my wife as well. I set the corporation up for profit and pension plans that let me shelter 25% of the salary.

The corporation leased the truck from me since I bought it personally. I had the companies I leased to pay my corporation.

You have to actually look at each situation to see what is best. My tax background enabled me to shelter the most money back and pay tax at lower rates. The c corp paid a tax at 15%. It is hard to beat that.

 

Roadmedic Can you elaborate a bit more on the differences beteween "C" and "S" corps? I'm trying to figure the best way to go about what i'm going to be doing soon as well.

I've been researching via google but alot of it is confusing to me, it talks about going public and offering stocks, etc. Do you HAVE to go public? I mean, i'm just going to run a one truck operation here but i'm trying to figure out the most cost effective (tax saving) way to do it.

Thanks in advance

 

I will try to keep it simple.

A C corporation is an tax paying business by itself. It files annual tax returns on Form 1120 and pays tax. The only way to get money out is through a salary or a dividend. It can be formed by one shareholder.
The tax rate for the net income up to 50,000 is at 15 %.

There is no legal protection in case of lawsuit in a collision to protect personal assets. They sue the owner of the corporation and the driver.

A S corporation is a business that files tax returns on Form 1120 SC. It does not pay tax. The net income of the business flows to the shareholders and is then taxed on their personal return. It also can be one shareholder as well.

 

Does an S corp have more protection against liability than a C corp does? Or is it the same?