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LLC or S Corp for Trucking?

Written by Nick Webster

Published on Dec. 11, 2023, 5:04 p.m.


LLC or S Corp for trucking is a common dilemma when starting a new business in the transportation industry. If you're dreaming of owning a trucking business, it pays to take the time to select the proper business structure. Doing so can make all the difference between success and failure. Read here about Starting a Trucking Company Correctly.

There are four main types of structures from which to choose:

  • sole-proprietorships
  • partnerships
  • LLCs
  • corporations

Each has its own unique advantages and disadvantages that should be taken into consideration before making your decision. Make sure you thoroughly research each option and consult an accountant or lawyer to ensure you’re making the best choice for your business's future. In the meantime, please continue reading to learn the basics about these entity types for trucking companies. What is DOT Clearinghouse Enforcement?

Am I Required To Form a Business Entity for My New Trucking Company?

If you're starting a trucking business, you may think you of not need to create an entity for your company. In many states, that's true. Without setting up a separate entity for your business, the state will automatically treat it as a sole proprietorship. This means that there is no separation between yourself and the business… but consider this carefully.

Setting up a separate business entity takes time and money, but it has advantages. It can help protect you from any liabilities your business might incur and give you more control over decisions affecting your company in the long run. Evaluate both options carefully before deciding on how to proceed with your trucking venture. How To Request the DOT PIN Number?

Why Register a Business Through the State?

One of the most essential advantages of establishing a trucking business is that it can be legally separated from your personal assets. This means that if you are categorized as a sole proprietorship, your vehicle, home, and even your truck will be considered part of the company. Creating a business entity for your trucking company with the state can help protect these assets and provide specific tax savings. What is MC Number?

Creating a clear distinction between personal and business assets is key. You can establish separate phone lines, credit cards, and anything else that could be used for business-related activities. With such measures in place, if your company lands in hot water, then you are much less likely to lose valuable personal assets that have not been designated for professional use. By setting up these systems of protection, you can rest assured that your finances will remain secure no matter what happens to your trucking business. Visit the DOT Authority Package, which contains tips to prepare for 2022 DOT Week filings in minutes. How to get an Oregon Trip And Fuel Permit?

What Are LLCs?

Small trucking companies and independent owner-operators often register as an LLC, which stands for Limited Liability Corporation. An LLC is a business structure that protects personal assets from liabilities incurred by the business - similar to a corporation but much more straightforward to manage for small businesses. What is the DOT SAP Program?

LLCs offer many of the benefits of corporations such as limited liability for members, yet are not subject to the same stringent regulations in running the business. However, it requires its owners to be members, making it difficult to transfer ownership compared to a corporation. Must visit FMCSA Hours of Service Suspended topics.

It would be best if you got your business's Articles of Organization to create an LLC. This document includes details such as when the business was formed, who its members are, and its purpose. As part of starting the business, you must submit this paperwork to the relevant governmental body. Doing so enables your company to establish itself legally and begin operations in compliance with local laws and regulations. Additionally, having an Articles of Organization helps give your small business legitimacy in the eyes of lenders and investors. Therefore, obtaining it is a crucial step for setting up an LLC. Also, take a look at the Drug and Alcohol Program policy. What is DOT Clearinghouse Enforcement?

What Are Sole Proprietorships?

A sole proprietorship is a type of business where you are the sole owner. This may be the ideal choice for starting your own trucking business if you have the necessary funds, motivation, and other resources. When it comes to finances, this form of company is set up as the default by the government when filing taxes. Also, visit the Website link to learn more information.

With a sole proprietorship, you will be personally liable for any issues that may arise in connection with your business. This includes employee accidents or legal action against you or your company. That's why assessing all risks is essential before deciding on this kind of entity. What are the Top 3 DOT paper-appointed Violations?

What Are Partnerships?

Partnerships are a popular way to set up a business. When two or more people join to invest in the same venture, they form a partnership. Each partner contributes money and assets, shares the profits and losses, and owns the company equally. Must visit the Website link.

There are two main types of partnerships: general partnership and limited partnership. This type of arrangement can help with capital but also means sharing your profits with investors or other partners. Knowing the advantages and disadvantages before embarking on this business setup is essential for success. Check out The Basics of Farm Exemptions. You will then be able to maintain complete motor carrier authority or broker.

What Are Corporations?

Business owners can benefit from setting up a corporation to separate their personal assets from those of the business. Doing so may also reduce tax liabilities and provide a structure for dividing profits and assets amongst shareholders. But starting a corporation requires more than simply filing paperwork with local authorities. Several activities go into forming and maintaining the corporate entity, including:

  • holding annual meetings with recorded minutes
  • establishing an organizational structure
  • carrying out extensive accounting activities
  • adhering to strict legal requirements

Depending on your needs as a business owner, you may choose one of four types of corporations: C-corporation, S-corporation, non-profit corporation, or professional corporation. IFTA Sticker Registration steps.

What’s the Difference Between a Company’s Legal Structure & Tax Structure?

Registering with the state is just the beginning when setting up your business. You must also register your tax structure with the IRS to obtain an Employer Identification Number (EIN). The IRS does not recognize LLCs, so you may be classified as a sole proprietor, partnership, S-corporation, or C-corporation for tax purposes. To ensure that taxes are paid correctly and on time, it's essential to understand how different structures are taxed. That way, you can select the best option for your business.

Registering under an LLC provides the necessary protection if you're starting up a small trucking business. However, the taxation process is different than that of a standard LLC. Filing additional paperwork to become an S-corporation can be beneficial to save on payroll taxes and avoid double taxation. It's recommended to seek out professional help when deciding on this option to ensure proper regulations are followed and all requirements are met. Once done, you can enjoy the associated tax benefits of being classified as an S-corporation. Read about Texas DOT Numbers and USDOT Numbers.

So, Should My Trucking Company Operate as an LLC or S Corp?

Becoming an LLC is a popular option for trucking company owners looking to establish their business. An LLC combines the advantages of operating as a corporation, sole proprietorship, and partnership without needing shareholders. This structure offers flexibility in how one runs their company, while protecting individuals from any losses or legal action taken against them. Becoming an LLC can ensure that you have a reliable business foundation moving forward. You will need driver qualification files filed out by all employees who drive for you working. Also, take a look at what IRP or Apportioned Registration is.

We Can Provide the Support You Need To Form a Trucking Business

If you want to get your trucking authority, the first step is to register your business. Let our third-party experts help you care for the rest and ensure everything is in order. We'll be there to guide you through getting your trucking authority and even assist you with registering under the Unified Carrier Registration. What is Unified Carrier Registration?

If you haven't set up your business yet, we'd love to offer our advice and recommend partners to ensure your company gets off on the right foot. Get in touch now for a one-on-one consultation, and let us help you navigate all the necessary steps for success! What is Unified Carrier Registration?

Summary: The Differences Between an LLC & S Corp

  • Every LLC offers pass-through taxation, meaning profits and losses are passed through to the owners and reported on their individual tax returns. This allows the business owner to avoid double taxation, which S Corps are subject to. Learn here How to Prepare for a Compliance DOT Audit.
  • An LLC has fewer ownership restrictions than an S Corp, allowing for more flexibility in ownership structures.
  • An S Corp is more complex from a compliance perspective as there are strict rules on how many shareholders can be included and other requirements that must be met. Visit BOC-3
  • The two structures offer different levels of personal liability protection for owners. LLCs provide limited liability protection, whereas S Corps gives even more excellent protection if specific regulations are followed.
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