What are the pros and cons of setting up an LLC for a lease?

Current company driver. Exploring the possibility of doing a lease. I was wondering if I did so if it would be a good idea to set up an LLC. I'm unsure of the pros and cons of such.
So, thought I'd ask!

And yes, I know there are LOTS of considerations besides this concerning a lease. I've got a little bit of a handle on most of those. And, I'm weighing those. But, I just don't want this post to get bogged down in folks opineing all the different aspects of doing a lease. Tentatively, I'm already thinking the cons are going to outweigh the pros. But, for reasons, I am exploring this option. It may provide me a bit more control in my specific situation.
Thanks for any input about using an LLC for a lease you can provide.

 

Your two main options are LLC or S-Corp. Yes, there are other options but just starting out, these two are your main ones. The main difference in all of these business structures our taxes, more specifically how you get taxed. I’ll try to keep it simple, but I suggest checking out YouTube, there’s a lot of great videos that talk about LLCs, S-Corp, C-Corp, Inc etc Some are even trucking specific.

LLCs are pass through businesses, which mean that profit pass through to the owner/member and then you count that as income on your personal taxes.

S-Corp, is when you become and w-2 employee of your own company, paying yourself a reasonable salary. Doing so, reduces that taxes the company pays by offsetting income with expenses.

You can also be a LLC and file as a S-Corp. Yes, it’s all complicated and technical and for each business structure, there are different paperwork file requirements, like meeting notes, payroll, etc

Again, what some YouTube videos, do some google searches and read up on LLCs, get a basic understanding of how things work and then contact a tax professional that can help you figure out which option works best for your situation.

 

Setting up an LLC or S Corp is the easy part of having your own truck or leasing one. Remember of your the driver you will get sued if in accident. You can't hide behind LLC or S Corp. The LLC or S Corp will only maybe save you on taxes some. You will have to pay someone to file the paperwork for you, unless you do it yourself.

I had S CORP. The tax guy said you save money because first you have to pay yourself a reasonable salary. You have pay taxes on that salary. You can then take the rest of the money as a Draw from your company. If I remember you did not have to pay social security tax on that money. Because as corporation you have now pay both side of social security tax. Then I had to pay tax guy to file all the paperwork. It started to get very complex with paperwork that needed to be filed. Plus paying tax guy to file everything I was paying him like $1,500 a year just for that. Plus I had to pay him to file corporate taxes at end of year plus do my personal taxes. That was probably another $1,500. It was getting expensive and pain all this for just 1 truck.

If you had company and many trucks and employees it a they only way to go but for a sing guy. I thought it was pain in butt

 

The point of an LLC is to protect your personal assets from a lawsuit after an accident. If you are the driver you will be sued anyway so the LLC does not protect you.
For tax purposes
You can file as a sole proprietor where all income is passed through to you personally and filed on a Schedule C with your 1040.
Or you can form an S-Corp. As stated above you become a W-2 employee. More paperwork and expensive to run but if you're clearing enough after expenses you can save more than enough in taxes to cover the extra work involved.

 

Also, while all of this stuff gets expensive and tedious it’s considered a normal business expense and it too is tax deductible. That doesn’t mean it’s free, just that at tax time you’ll get some credit for it in what you owe.

The tax game is all about paying the least amount of taxes you can legally. Since, things are tax differently it’s becomes a game to structure yourself in away that keeps that money in your pocket.

For example, being a w-2 employee of your own business means you only pay income taxes (social security, Medicare etc) on those wages and not all the profit the company made that year, saving you money. Additionally, you personal tax rate is going to be less than what your corporate tax rate would be, again saving you money. Then, your business gets a tax break/ deduction for the expenses of having an employee making it look as though it made less money and thereby paying less in taxes. You can then take the profit of the business and keep it in the business or as the owner of the company take a payout, which is tax at a much lower rate than regular income, you guessed it…. Saving you money.

This is where having a good tax professional is important, as tax law changes year to year, they are going to know how to save you the most money. Ideally you’ll find one that is industry specific who’s not just doing taxes but is protecting your wealth.

 

Thanks folks for the info. I really appreciate it! I've always kept my taxes really simple. But, I guess that might change. Regardless, this gives me the general info I need for now. It does look, to me, like if I go lease the complication of setting up an LLC is probably worth the effort and up front expense. Seems like it will save considerably down the line. Like I said, tend to think this isn't going to happen, but, it is a possibility worth exploring. If some of the other factors break in favor of a lease, may have to find myself a good tax person and go from there!

 

The issues with hiding all the income in the LLC , is that in a couple years when you want to buy a house , you have no or very low income on your personal tax return, and won’t be able to get a mortgage because you can’t prove the income .

 

But you won't need as big of a mortgage because you'll have a large down payment.

 

If you own your own business, the mortgage company will want at least 2 years of your taxes. They know how business works and will look at your total income.

 

Just make sure you make a decision on the LLC before you put to much time in as a lease driver. If you set up a business name and then have to change it to add LLC It resets the time you have been in business and you basically start over and have to wait that 2 years to really be able to do anything credit wise. I wish someone would have told me that cuz I had to go through that.