Wheels of Justice
So you want to own your own company
Today is the day. Today is the day I stop taking orders from people who aren’t any smarter than I am, have no more experience than I do, work less hard every day than I do and don’t even know how to drive a truck. I will start my own company so I can make the decisions and do things right. Today is the day.
Now, for the hard part. Should you incorporate your new company? If so, which type of corporation should you select and why? This is where you need professional advice.
When drivers ask me about incorporating their trucks, I always ask; “Are you judgment-proof?” Judgment-proof means that you have no income or assets and no money, and you can prove it. If you can be considered judgment-proof, then you have no need to spend the time and money to incorporate, since anyone who sues you will be unable to collect because you have nothing they can take. If you consider yourself not to be judgment-proof—that you have an income and assets—then my answer normally would be yes, you should incorporate your trucks or your business to protect yourself and your assets.
What if your corporation goes bankrupt? You will not lose your house or savings if your corporation goes bankrupt, providing the creditors are not able to pierce the corporate veil. A corporate veil is the shield that protects the shareholders, partners or members of the corporation. Creditors can pierce the veil when the owners do not treat the corporation as a true business. Each state has statutes that regulate corporations in their state so you need to be aware of those laws and follow them to protect yourself. The thing is you can’t take money for your personal use out of the corporation without first going through the taxman.
What kinds of corporation would be best for you? There are several types of corporations: LLC or limited liability companies, c-corporations or general corporations, s-corporations or closely held corporations, professional corporations, partnership and non-stock corporations. All of these options differ somewhat, and all except the partnership offer limited liability, which is one of the major reasons to incorporate.
To determine which has the best benefits for you requires a keen knowledge of corporations, the laws of the state where you incorporate and your personal financial situation. Speak with your CPA and your lawyer who might even suggest that you speak with a tax specialist such as a true tax lawyer. Spend a little money at the start to save a lot of money and heartaches later on.
Jim C. Klepper is president of Interstate Trucker Ltd., an organization that provides legal defense protection to commercial drivers. Jim is a lawyer who focuses on transportation law and the trucking industry in particular. He works to answer your legal questions about trucking, and he holds his Commercial Drivers License.