You are a proud owner-operator. Your truck is a source of immense pride. You keep it clean and maintain both what is in the cab and under the hood. You realize that your truck is an investment. As an owner-operator, your big rig is your source of income. It is the tool of your trade; the means you use it to feed yourself and your family.
You want to make sure that your investment allows you to “bring home the bacon.” You may have pondered integration and wondered what classification will help you enjoy maximum profit.
When it comes down to it, you can file for three different classifications of integration: S-Corp, C-Corp, or LLC (sole proprietorship). Each has different advantages and tax breaks. Before you choose one of these three options, consult a tax or legal advisor to ensure that it is the best move for you.
LLC (sole proprietorship)
An LLC is a great option because it afford you liability protection. You also avoid the taxation that corporations are subject to. An LLC is a great option for sole proprietorship, as it saves money, offers protection, and leaves open the opportunity to form future partnerships.
If you are a sole proprietorship LLC, you avoid double taxation. However, there are limits to your benefits and your potential for expansion. For this reason, many owner operators file for either C-Corp or S-Corp status.
Choosing the C-Corp option means that you have to pay an income tax (that corporations are subject to). Any shareholders you have pay individual income taxes, but are not subject to what is referred to as self-employment taxes when payouts are distributed.
The C-Corp route is usually the best option for owner-operators who do not want or do not qualify for sole proprietorship status and have a net income of under $70,000 a year.
If you make more than $70,000 a year, S-Corp status may save you tax money. Your taxable wages and SE/FICA taxes may be lowered. The downside is that there is additional cost integrated into S-Corp status (think of it as a large process and handling fee) that negates some of the tax savings.
Be sure to counsel with you financial or legal advisor before filing for an S-Corp.
If you would like more advice on what is best for you, turn to Arrow Truck Sales. We work with thousands of people just like you, and can give you a network of similar individuals who have gone through the integration process before. Contact Arrow Truck Sales in your area for more information.