Trucking Companies: Register As An LLC Formation

Trucking Companies: Register As An LLC Formation

Those who are looking to enter the trucking business may find themselves overwhelmed by the numerous business structure options available. From sole proprietorships to corporations, it could be difficult for new owners to determine which is the best fit for their new business. However, when it comes to trucking companies, there is one option that stands out. Business owners should strongly consider registering their trucking company as an LLC.

LLCs are a beneficial tool because they allow business owners to protect themselves from debts and liabilities. That’s because the business’ assets and liabilities are kept entirely separate from the owners’ assets and liabilities. In an industry where a lot can go wrong, it’s imperative that owners make efforts to protect themselves.

For example, truckers could get in an accident while driving for which they were at fault. The driver who was harmed in the crash could sue the driver and the trucking company. If the business owners structured the company so that it existed as a partnership or sole proprietorship, the driver harmed in the accident could go after the owner’s personal assets, including their home. However, if the trucking company is structured as an LLC, the owners’ personal assets would be kept safe.

The fact of the matter is, too much can go wrong on the road. Accidents are bound to happen, especially when truckers spend so many hours behind the wheel. Whether it’s a fender bender or heavy traffic that causes the entire cargo shipment to spoil, it’s better that business owners take measures to protect themselves from debts and liabilities.

LLCs could also be a beneficial choice for trucking business owners because they can register in other states quickly. Owners will likely pick one state in which they would file as a domestic LLC. This would be the state in which their primary office was located. Then, they would file as a foreign LLC in the other states in which they conduct business. Registering as a foreign LLC is as simple as submitting paperwork to the respective state’s Secretary of State Department and paying the filing fee.

LLCs are the ideal solution for small businesses, such as trucking companies who are just beginning to establish themselves. That’s because LLCs do not require the formalities that other corporations do. For example, an LLC formation does not have to host an annual meeting of stockholders, nor must they issue stock. In time, as a business grows, the owner of a trucking company may want to consider changing their structure to that of a corporation. But for the time being, filing as an LLC should suffice.

As mentioned, LLCs are beneficial because they shield their owners from liabilities and debts. Truckers who are not employees of a company, but are instead independent contractors, should strongly consider registering themselves as an LLC. This should make no difference to the trucking company hiring the independent contractor, as they will submit a 1099 one way or the other.

But, it could have significant benefits to the trucker. For one, they would protect themselves from debts and liabilities without having to pay expensive insurance premiums. Perhaps more importantly, there could be numerous tax benefits as well. When filing taxes as an independent contractor, business owners are required to pay the entirety of their taxes at their personal tax rate. The employer is not required to pay any of these taxes.

However, when filing as an LLC, owners can elect corporate taxation. This means that the business’ earnings and losses are taxed at the corporate rate, which is often much less than the personal tax rate. LLC owners can elect to file at the corporate rate by submitting a form 8832 to the IRS.

Additionally, independent contractors are subject to the individual limits for retirement funds and life insurance policies. However, LLCs grant business owners greater contribution limits for both. If a business owner is particularly concerned about his or her family’s future, filing as an LLC could allow them to make more aggressive payments toward retirement.

Independent trucking contractors who elect to register as an LLC could find it easier to keep track of their business expenses. It can be difficult to distinguish between business and personal expenses, especially while on the road. However, if an independent contractor establishes themselves as an LLC, he or she would be able to open a business bank account. This would likely come complete with a company card, which would protect the contractor’s personal line of credit were they unable to make payments.

Additionally, creating an LLC could allow truckers to lease their personal assets to their new business entity. For example, imagine a trucker who works as an independent contractor owns their own rig. They have purchased the truck with their own money, and it is now in their possession. Upon establishing an LLC, the trucker, otherwise known as the owner of the rig, could lease the asset to the LLC.

Doing so would allow owners to create an business expense for the LLC that they could deduct from their taxes. This would also serve to add more income to the family’s bottom line. If you choose to do this, we recommend drawing up a formal lease agreement before doing so.

One critical element worth mentioning are registered agents. LLCs are required to have a registered agent on file with the state in which they are conducting business. The registered agent must be at a physical address during regular business hours. This can be particularly difficult for truckers, considering they are on the road frequently. This would also be difficult to maintain if the business owners were to file as an LLC formation in multiple states.

Truckers should consider a third-party registered agent company to serve as their registered agent. This will ensure that they receive all critical paperwork and correspondence, especially while on the road.

As a trucker, you are likely concerned about things such as life on the road and confirming that shipments arrive safely and promptly. It can be difficult to manage the administrative aspect of a business while traveling. Fortunately, DoMyLLC can help. From helping you through the filing process to serving as your registered agent, we can make the administrative side of the business easy on you.