• FreeAuthority

Should I Form a Sole Proprietorship or LLC For My New Trucking Company?

Updated: Mar 16

A big step when starting your own trucking company is deciding what entity you should form: Sole Proprietorship or Limited Liability Company (LLC). This article will outline the differences between the two entities and hopefully make your decision a little easier.

Sole Proprietorship

A sole proprietorship is very common business structure that is easy to form and create. Under this entity, the sole proprietor owns the business them self. All profits and losses from the trucking company are treated as income and losses of the owner on the owner's income tax return. The best concern of having a sole proprietorship is liability. For example, if there is a lawsuit filed against a sole proprietorship, it is essentially being filed against the owner and not the business, and the owner is then liable for that lawsuit.

If this is the business entity that you choose, here are some factors to think about:

  • You must file a "Doing Business As" (DBA) Certificate if you plan to do business under a name other than your own. You can file the DBA at your local clerk's office, which requires a small fee to be paid.

  • Start your company! One of the best things about sole proprietorship is the set up. You don't need to file any additional paperwork to get started, you just need to start.

  • All your business's profits and losses will be filed on your personal tax return. It is an unincorporated business, so there is no corporate tax.

Limited Liability Company (LLC)

A limited liability company (LLC) is also an unincorporated business, but has more protection than a sole proprietorship. The profits and losses are also reported on the members of the LLC's individual tax return as there is no corporate tax. Like a sole proprietorship, an LLC isn't completely separate from the individual members, BUT the individual members will not be held liable for a lawsuit against the business. This is an LLC's biggest advantage over a sole proprietorship. To create an LLC, all documents and fees must be filed in the state where the business wants to form.

The steps below will help you form an LLC for your trucking company:

  • File all documents with your state. Documents include: Articles of Organization and Operating Agreement. Not all states offer an LLC as a business entity, so make sure your state does before filing.

  • Create an Operating Agreement. Some state require you to have an operating agreement, but don't make you file it with them. In this case, it works as an internal document that outlines how your trucking company will run, the business you decide to operate, and the payroll and share of profits and losses.

  • Articles of Organization is a required document that you MUST file.

  • Start your trucking company!

  • Your trucking company's profits and losses must be filed on your personal tax return.

Once you have established your business structure, filed all documents and paid the fees, you're one step closer to getting started!