Choosing the type of business structure that fits your trucking business is one of the most significant decisions you’ll face as an owner-operator. Below are some of the best legal structures for owner-operators. We recommend you seek legal and tax advice when choosing the owner-operator business structure best for your company.
Sole Proprietorship – Most Simple Business Structure
Pro: A sole proprietorship is one of the least expensive and most straightforward business structures and it requires little setup. The owner can typically report all business income or losses on their tax return.
Con: One of the more significant disadvantages of a sole proprietorship is the lack of additional liability protection because you’re held personally liable for any debt or lawsuits your company accrues.
Requirements: Check with your local and state business advisors for more information, but at a minimum, you will likely need to obtain your Employer Identification Number (EIN) and the IRS Form W-9.
Partnership – Shared Ownership Between Two Or More People
Pro: A partnership is similar to a sole proprietorship, but ownership is between two or more people. Therefore, it makes it a standard business structure for team owner-operator drivers.
Con: Partnerships provide less liability protection than other options available. Both assets are at risk if the company fails to pay off business debts.
Requirements: Check with your local and state business advisors for more information, but at a minimum, you will likely need to obtain your EIN, IRS Form W-9, and a written partnership agreement.
Limited Liability Company – More Protection For Business Owners
Pro: A LLC offers additional liability protection for the business owner’s assets; therefore, owners may be able to report their business’ income on personal income tax returns.
Con: A LLC requires more documentation and investment. Filing fees can range from $50 to $500, and that all depends on the state.
Requirements: Check with your local and state business advisors for more information, but at a minimum, you will likely need to obtain your EIN, IRS Form W-9, and Articles of Organization.
The correct legal structure for your business should align with your overall business plan and goals. Creating a detailed plan will help point you in the right direction. Consult with other successful owner-operators while you take steps towards getting your company up and running.
