Starting a Trucking Business, have a few questions.

[His Grace]

Why not make an S-Corp

From my reading, all an S-corp does is split the SS: 7.5% paid by the employee and 7.5% paid by the company, instead of just a regular LLC where the owner of the LLC pays the full percentage. and since I own it, I would be paying it anyhow, am I correct?

 

[LUBaseball2]

^^This.

Employment Tax: Savings vs. Paperwork

A major factor that differentiates an S corporation from an LLC is the employment tax that is paid on earnings. The owner of an LLC is considered to be self-employed and, as such, must pay a “self-employment tax” of 15.3% which goes toward social security and Medicare. The entire net income of the business is subject to self-employment tax.*

In an S corporation, only the salary paid to the employee-owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, there is the potential to realize substantial employment tax savings. Case in point:

Mary owns a print shop. In keeping with the industry standard, Mary decides that a reasonable salary for a print shop manager is $35,000 and pays herself accordingly. Mary’s total earnings for the year are $60,000: $35,000 paid in salary and the remaining $25,000 paid as a distribution from the S corp. Mary’s total employment tax is $5,355 (15.3% of $35,000).

If Mary were the owner of an LLC, she would have to pay employment tax on the entire $60,000, equaling $9,180. But as an S corporation, she realizes savings of $3,825 in employment tax.

One might assume that these savings could be further manipulated by reducing the salary to an extremely low amount and attributing the rest of one’s earnings to distributions—but this would be an incorrect assumption. In practice, the IRS is careful to notice whether a salary is reasonable by industry standards. If it determines a salary to be unreasonable, the IRS will not hesitate to reclassify distributions as salary.

Still, while the potential employment tax savings may make the S corporation an attractive structure for your business, bear in mind that you would then have to deal with all the paperwork associated with payroll tax. The payroll tax is a pay-as-you-go tax that must be paid to the IRS regularly throughout the year--on time, or you will incur interest and penalties. The paperwork alone can be an overwhelming task for someone who is not familiar with this; and if you expect to incur losses or otherwise experience a cash flow crunch during the year that would hinder you from paying the payroll tax when due, this could present a problem.

Owners of LLCs pay their self-employment tax once a year on April 15 when income taxes are normally due. Income tax filings are also relatively easy for the owners of an LLC: A single-member LLC files the same 1040 tax return and Schedule C as a sole proprietor; partners in an LLC file the same 1065 partnership tax return as do owners of traditional partnerships.


Why not just pay yourself an average trucker wage then pocket the rest?

 

[His Grace]

LU,

Thank you for that, what a great article.

So it looks like it may be more trouble to do an S-Corp?

Employment Tax: Savings vs. Paperwork

A major factor that differentiates an S corporation from an LLC is the employment tax that is paid on earnings. The owner of an LLC is considered to be self-employed and, as such, must pay a “self-employment tax” of 15.3% which goes toward social security and Medicare. The entire net income of the business is subject to self-employment tax.*

In an S corporation, only the salary paid to the employee-owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, there is the potential to realize substantial employment tax savings. Case in point:

Mary owns a print shop. In keeping with the industry standard, Mary decides that a reasonable salary for a print shop manager is $35,000 and pays herself accordingly. Mary’s total earnings for the year are $60,000: $35,000 paid in salary and the remaining $25,000 paid as a distribution from the S corp. Mary’s total employment tax is $5,355 (15.3% of $35,000).

If Mary were the owner of an LLC, she would have to pay employment tax on the entire $60,000, equaling $9,180. But as an S corporation, she realizes savings of $3,825 in employment tax.

One might assume that these savings could be further manipulated by reducing the salary to an extremely low amount and attributing the rest of one’s earnings to distributions—but this would be an incorrect assumption. In practice, the IRS is careful to notice whether a salary is reasonable by industry standards. If it determines a salary to be unreasonable, the IRS will not hesitate to reclassify distributions as salary.

Still, while the potential employment tax savings may make the S corporation an attractive structure for your business, bear in mind that you would then have to deal with all the paperwork associated with payroll tax. The payroll tax is a pay-as-you-go tax that must be paid to the IRS regularly throughout the year--on time, or you will incur interest and penalties. The paperwork alone can be an overwhelming task for someone who is not familiar with this; and if you expect to incur losses or otherwise experience a cash flow crunch during the year that would hinder you from paying the payroll tax when due, this could present a problem.

Owners of LLCs pay their self-employment tax once a year on April 15 when income taxes are normally due. Income tax filings are also relatively easy for the owners of an LLC: A single-member LLC files the same 1040 tax return and Schedule C as a sole proprietor; partners in an LLC file the same 1065 partnership tax return as do owners of traditional partnerships.


Why not just pay yourself an average trucker wage then pocket the rest?

 

[STAMPEDE3]

Get a very very good CPA and Lawyer.

he will most likely recommend an S-corp also.

Keep the Lawyer on retainer. You will need him. lol

 

[L8APEX]

1 word,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,



Don't




If you do, go talk to a CPA and the lawyer that sets up your LLC about the tax stuff.

+1 the trucking industry is not one you just "walk" into and make money, you have to have connections. My family started a LTL/Hotshot trucking company and it ended up costing me my social life and all I ended up with is my Lightning since I was too young to be on the payroll or own a percentage but I was supposed to get 30% @ 18. But my mother and I were forced by my grandpa to let my uncle in, who then pushed all of is us out completely. Really hurt considering we had spent 5+ long years of blood sweat and tears building the company (crappy deal).
If you can get into the black by your second year your really lucky. Taxes are some of the highest , tons government regulations and authoritys are just some of the pains. You'll likely have to get with the icc to get authority and you'll need a lawyer. Would you be getting fuel yourself or do they give you part of the fuel surcharges because if you can get 5mpg with that Mack you'll be doing good. And diesel is not cheap.
You just have to really know what you are doing because others will take advantage of you quick. For example overloading or improperly loading your trailer and leaving you with the ridiculous fines. Loads are never a a sure thing, weather, breakdowns, ect will happen.

Run away... Or it will consume you!

 

[SonicDTR]

We had a very successful family trucking business in the 80's and 90's, sold off around 2004 to a cousin, he got bigger for a few years then finally got tired of not making money and sold all the trucks and equipment. He now rents out his office and half of his 10-bay shop and runs a gas station.

I know a few guys doing ok as owner operators with a SINGLE truck, but they arent happy or rich, like someone else posted.

It seems you either have to go really big, stay really small, or just drive someone elses truck to stay alive as a driver. Your gig might be good for a year or two, but too many things could happen.

 

[His Grace]

Wow, yall are scaring me into not doing this lol.

 

[His Grace]

We had a very successful family trucking business in the 80's and 90's, sold off around 2004 to a cousin, he got bigger for a few years then finally got tired of not making money and sold all the trucks and equipment. He now rents out his office and half of his 10-bay shop and runs a gas station.

I know a few guys doing ok as owner operators with a SINGLE truck, but they arent happy or rich, like someone else posted.

It seems you either have to go really big, stay really small, or just drive someone elses truck to stay alive as a driver. Your gig might be good for a year or two, but too many things could happen.

If its good for six months I could be completely out of debt and have money in the bank.

 

[His Grace]

Okay,

Here is what I want yall to think about in my situation;

I am going in debt 50,000.00 on equipement that can be sold and honestly make 60-65k on it where I am at.

If I run my tail off for one year, and as the numbers they quoted me, I would be out of debt and have my kids college paid for lol.

Is it worth it?

Stamp and LU and a few others here have given me great advice; RUNNNNNN LOL

If thats the case, I better not pull the trigger.

Stamp, you are right, what if on the first run, my rig breaks down? well what if I make it through two months though with no problems, and have 80-100k sitting in the bank.

I guess its a gamble?

I cant tell you all how much I appreciate your input, wisdom/experience among friends is priceless.

 

[STAMPEDE3]

Like I said, I would never give up a good secure job with benifits to get into the trucking business.

However, with your job field it shouldn't be hard to get back in.

 

[ModularFan]

Like I said, I would never give up a good secure job with benifits to get into the trucking business.

However, with your job field it shouldn't be hard to get back in.

+1 jobs with benefits and good pay are hard to come by now or days.

 

[STAMPEDE3]

Okay,

Here is what I want yall to think about in my situation;

I am going in debt 50,000.00 on equipement that can be sold and honestly make 60-65k on it where I am at.

If I run my tail off for one year, and as the numbers they quoted me, I would be out of debt and have my kids college paid for lol.

Is it worth it?

Stamp and LU and a few others here have given me great advice; RUNNNNNN LOL

If thats the case, I better not pull the trigger.

Stamp, you are right, what if on the first run, my rig breaks down? well what if I make it through two months though with no problems, and have 80-100k sitting in the bank.

I guess its a gamble?

I cant tell you all how much I appreciate your input, wisdom/experience among friends is priceless.

Remember what was said, either you have to go really big or stay really small.

If you stay with 1 truck there is no way you can make the 30 loads a week we talked about.

Running full out you may average 3 a day and that is still 11.5hrs a day 6 days a week with 1 day to rest and WORK ON THE TRUCK.

It will consume you to go at a living with this.
You may get 2 months but then a set of tires or a major breakdown eats at profits and shuts the truck down for 2-5 days. now you missed 6-15 loads and are spending 3K to fix the truck.

Even oil changes are not cheap when they hold 13 gallons of oil. lol

Then you will have to take some of your profits and start saving for another truck that you will have to buy next year when the 613 starts giving major trouble.

As we last talked, if you are gonna do it and they work with you then keep your job, run 1 load a night and see how it goes.

If it was easy and a way to get rich everyone would do it.

 

[His Grace]

Good stuff,

I will start small then, doing maybe one load a night, gross 7k a week and hopefully pull 4k a week profit. Once I get 20k set back for repairs, then I may consider picking up more.

Remember what was said, either you have to go really big or stay really small.

If you stay with 1 truck there is no way you can make the 30 loads a week we talked about.

Running full out you may average 3 a day and that is still 11.5hrs a day 6 days a week with 1 day to rest and WORK ON THE TRUCK.

It will consume you to go at a living with this.
You may get 2 months but then a set of tires or a major breakdown eats at profits and shuts the truck down for 2-5 days. now you missed 6-15 loads and are spending 3K to fix the truck.

Even oil changes are not cheap when they hold 13 gallons of oil. lol

Then you will have to take some of your profits and start saving for another truck that you will have to buy next year when the 613 starts giving major trouble.

As we last talked, if you are gonna do it and they work with you then keep your job, run 1 load a night and see how it goes.

If it was easy and a way to get rich everyone would do it.

 

[GOTSVT?]

If you have the chance to work for yourself, DO IT!
You have a solid work history already in a field that isnt going anywhere, and always has a demand. If this doesnt work out, then back the the med field. At least you can say you tried.
What do you really have to lose? NOTHING.
I say go for it, and good luck. There are 2 people in life, ones that do......and ones that "think" about doing.
Good luck in your decision.
And make sure you have a solid contract in writing and a good lawyer as stated all ready.

 

[LUBaseball2]

The only people who make a lot of money for the most part in this country don't work for the man... If you have the chance can come up with a good business plan and have the supporting family to try it I would do it. Like you said before you can get a job as a Nurse where ever pretty much whenever.

As far as your question for the S Corp.. I'm an accountant sitting for the CPA right now and I just went over and asked the Tax prof. for our Corp. he said that I would be more concerned about the liability more than the taxes. With that being said say if you were to hit someone in the truck and hurt them or kill them while driving the S Corp would only be able to be sued and the assests from that taken where as you could potentially be taken for all you're worth with the LLC.

I would suggest like everyone else though talking with a lawyer and a local CPA to help you make the best decision

 

[zerocool]

As someone who has worked pretty intricately in the oil field disposal business, I say do it. No matter what you're doing, be it water hauling or mud hauling, there is money to be made. Even the low level drivers for the companies I worked with (completely crap hours though) were clearing 6 figures a year.

Where are you located? I'm on tapatalk and can't see.

 

[61mmstang94]

If you have the chance to work for yourself, DO IT!
You have a solid work history already in a field that isnt going anywhere, and always has a demand. If this doesnt work out, then back the the med field. At least you can say you tried.
What do you really have to lose? NOTHING.
I say go for it, and good luck. There are 2 people in life, ones that do......and ones that "think" about doing.
Good luck in your decision.
And make sure you have a solid contract in writing and a good lawyer as stated all ready.

While I agree with the attitude of doing, I also think much thought and redearch should be done before making serious life decisions like quitting a good job.

Seems like you're on the right track trying to figurr it out OP. Good luck, I won't offer any advice since I have zero experience in the trucking field but I do with family businesses and they take time at first but can be most rewarding if they're successful.

Sent from my BlackBerry 9650 using Tapatalk

 

[SonicDTR]

Keep in mind running a truck that hard back and forth will mean alot more maintenance than an over the road truck doing the same hours/mileage.

 

[His Grace]

As someone who has worked pretty intricately in the oil field disposal business, I say do it. No matter what you're doing, be it water hauling or mud hauling, there is money to be made. Even the low level drivers for the companies I worked with (completely crap hours though) were clearing 6 figures a year.

Where are you located? I'm on tapatalk and can't see.

That is what I was thinking also. I mean, they basically sat me down and showed me what they are currently being charged and said I could charge the same amount.

They gave me a price sheet breakdown which included $85 per load for forklift usage, $85 standby per hour, $30 per hour swamper charge, a various other holiday charges and etc that I can charge on top of the base pay for the mileage. For instance, they showed me the ticket/invoice for a recent run, it was for 50 miles, and they received an invoice for $1060.00 and time spent to do the run was 3hrs. Ideally, take out 120.00 for gas, and 10% for the companys pay (100.00) and you go home with 840.00. Not bad for 3 hours of work, and doing that 3 times a day or so is amazing to me.

Now I understand that you have to figure in insurance, maintenance, taxes and so on, but overall after a good week of around 20 doable runs you could pocket 15 grand a week. In a months time you could have 60 grand set back for emergencies.

 

[His Grace]

Keep in mind running a truck that hard back and forth will mean alot more maintenance than an over the road truck doing the same hours/mileage.

I agree you are right. Those oilfield roads aren't paved, so its going to be a bumpy ride. But on the other side of it, you wouldn't be making this money running on the road for other material. So the key is to be able to make it a few months and put cash back for a tire blowout or something else.