Which is Best for a Trucking Company: LLC or Corporation?

Starting a trucking company involves many steps, including the decision to establish the business as a limited liability company or a corporation. According to the American Trucking Association, in 2019, trucking demands represented 80.4 percent of the freight costs spent in the United States, providing this business category with a gross freight revenue of $791.7 billion. With the increased demand for truckers, setting up your company correctly can help with everything from filing taxes, getting licensed, buying insurance, and more.

Additionally, the Federal Motor Carrier Safety Administration noted as of 2017; there were 3,727,365 registered commercial drivers licenses issued to truckers. This number demonstrates significant industry growth, and it keeps growing. The growing numbers in the trucking industry are one of the reasons now is the time to start your own trucking company.

For Trucking Companies, What are The Most Common Business Options?

When establishing a new business, it is vital to determine what type of business you plan to set up. Transportation businesses have various options when establishing themselves as a business entity. Some of the most common business types available include sole proprietorship, partnership, limited liability company (LLC), and corporation. Determining the best option to use when setting up your business can help set the path to a successful future.

What is a Sole Proprietorship?

A sole proprietorship is when you are the only owner of the business. A sole proprietorship might be the best option for starting your own trucking business if you have the means, motivation, and other resources. For income purposes, this form of business is the government's default type of company when filing taxes. However, with a sole proprietorship, you are liable for all business-related incidents, including employee accidents and other incidents where other parties can take legal action against your company and yourself. Unfortunately, a sole proprietorship is not the best option when establishing a new trucking company.

What is a Partnership?

A partnership is a business set up with a relationship between two or more parties who share equal ownership of the company. This type of business involves investors who put money and assets into the business and share profits and losses. The two most common partnerships include a general partnership and a limited partnership. This method of establishing a business is helpful when needing help with capital. Still, it can limit your profits because you have to share it with various investors/partners.

What is a Corporation?

A corporation offers business owners an opportunity to separate their assets from the assets and debts incurred by their business. For tax purposes, establishing a corporation can help limit the number of shareholders and how much business profits and assets are divided. However, setting up a corporation involves holding annual meetings with recorded minutes, a well-documented organizational structure of the company, extensive accounting activities, and following detailed legal requirements. Types of corporations include a C-corporation, S-corporation, non-profit corporation, and professional corporation.

What Type of Business is a Trucking Company?

Knowing which category your trucking company will fall under can help determine which type of business you should establish. There are five common categories under which classify a trucking company, including the following:

• For hire truckload carriers
• Private fleets
• Less than truckload carriers
• Household movers
• Inter-model

What is The Best Business Structure for a Trucking Company?

Out of all the different types of business structures available when establishing a trucking company, selecting the best option for your needs can help with future taxes and business-related activities. A trucking company's two most common options are an LLC and an S-corporation. Each option has its benefits and can determine how the business operates.

Should a Trucking Company be an LLC or S Corp?

A limited liability company, or an LLC, establishes a business using a combination of a corporation, sole proprietorship, and a partnership. An LLC is possible with no other partners and is a standard option for sole proprietors looking to convert their businesses into a formal LLC without the need for shareholders.

Most trucking company owners choose to establish an LLC for their business because it offers flexibility in how they run their company. The significant benefit of founding an LLC is that you, as an individual, are protected against losses and lawsuits.

What Do You Need to Start a Trucking Company?

Establishing a new trucking company involves several steps to ensure it is appropriately completed and ready to start making you money. The following things are needed to create a trucking company:

• Write a business plan: The business plan should contain a set of goals, a roadmap to success, and solutions to potential obstacles in the future.
• Legally establish the company: Determine whether you want an LLC or corporation for your trucking company.
• Obtain all necessary business licenses and permits: Check with local, state, and county governments for a list of required documents, including a commercial driver's license (CDL), a USDOT number, and a motor carrier operating authority number.
• Purchase or lease equipment: Ensure you have all the proper equipment, including trucks, safety equipment, and loading equipment.
• Select the best insurance coverage: Purchase an insurance policy designed to protect you, your employees, and your business, including primary liability insurance, cargo insurance, passenger accident insurance, and physical damage insurance.
• Establish a method to track income and expenses: Use a bookkeeping software program or hire an accountant to help track and report income and expenses.
• Find clients: Seek clients who need help transporting items and grow your business.
• Remain compliant: Create a plan to ensure your trucking company stays compliant by filing taxes, staying licensed, and maintaining insurance policies.

Companies such as IncFile, Northwest, and ZenBusiness are great options when looking for help to establish your business as an LLC or a corporation. No matter if you're looking for the bare basics or a more robust support, you have many service options to choose from, including registered agent for a year, virtual office service, domain name + business email, business contract templates, among others.

These companies have great pricing options, great reviews online, incredible customer service, and ease of use as you can have your startup essentials all in one place. They will take care of things like renewing your registered agent yearly as well as the mandatory annual report, so you won't have to.

Best States to Form an LLC for Trucking Company

When establishing an LLC or corporation for trucking business, some states are better than others to use as a home base of operations for transportation companies. Some of the best states to form an LLC for a trucking company include:

State	PROS	CONS
Delaware	• Low filing fees and franchise fees • Increased privacy protection allowing • LLC owners to remain anonymous • Unique court system - Delaware Court of Chancery - for corporate legal disputes • No corporate income taxes	• Dual registration for out-of-state LLCs • Tax benefits do not carry over for out-of-state business • No flat franchise taxes
Nevada	• No franchise taxes • No state taxes for personal income or corporate income • Increased privacy protection allowing LLC owners to remain anonymous • Business owners do not need to lit their assets at the state level • No operation meetings or annual meetings required	• Tax benefits do not carry over for out-of-state business • Annual business license and filing fees • Gross earnings over $4 million may be subject to taxes
Wyoming	• No franchise fees • No corporate or personal income taxes • The low sales tax rate • Increased privacy protection allowing LLC owners to remain anonymous	• Tax benefits do not carry over for out-of-state business • LLC dissolution if member dies or files for bankruptcy) • Asset protection is not guaranteed for out-of-state lawsuits
Alaska	• No state income or sales taxes • Low local tax rates • Low LLC filing fees • Various tax credit and loan opportunities	• Most credits are only available to businesses operating within Alaska • Local jurisdictions can collect taxes • Physically distant from other states
South Dakota	• No state income taxesNo corporate tax rates • No business inventory tax • Various tax advantages	• Limited life • Local registered agent required

You may also want to read:

• How To Start an LLC in Kentucky (Cheapest way!)
• How To Form an LLC in Ohio (Cheapest way!)

Best States to Form a Corporation for Trucking Company

Similar to forming an LLC, some states provide more benefits for trucking companies establishing themselves as a corporation. Some of the best states to form a corporation include:

State	PROS	CONS
Oklahoma	• Centrally located in the country • Various cash incentives, credit programs, and exemptions • The business does not close even if a shareholder dies (independent life) • Low personal state income tax • Limited liability and asset protection • Unlimited capital generation • Lower fuel taxes	• Lots of paperwork to establish • Risk of double taxation • No business confidentiality
Tennessee	• Lower fuel prices • A higher number of major highways • Low or no taxes • Pass through taxation • Independent life • Valley incentive programs	• Higher costs and extensive paperwork to establish • Potential tax liabilities
Texas	• Fewer regulations • Low fuel costs • Low tax burden • Continuous life • Easy transfer of ownership	• Higher taxes (possible double taxation) • Close government oversight • Employer-owner separation
Washington	• Multiple tax credits • Independent life • Sales use and tax exemptions • Flexible profit distribution • Washington Foreign Trade Zone	• Time-consuming to establish • Subject to double taxation • Rigid formalities and protocols
Indiana	• Strong economic climate • Lower set up costs • Various incentives • Independent life • Indiana Enterprise Zone • Tax credits and exemptions • Shareholder protection	• Subject to double taxation • More complicated business structure • Tax liabilities • Heavy regulations • No right to counsel • No protection under the Fifth Amendment

What Are The Worst States to Start Up a Trucking Company?

Not only is traffic in California horrific, but it is also one of the worst states to start a trucking company. A lot of time, gas, and money are burned trying to operate in heavily congested areas, and California's higher gas prices and taxes make everything more costly and challenging to run a business.

Other states that make owning a trucking company challenging include Ohio, New Jersey, Virginia, and Massachusetts.

How to Set Up a Trucking Company Business

Steps to set up an LLC trucking company include:

• Fill out and submit all trucking company forms
• Determine between LLC or Corporation
• If a corporation establishes partnerships, shareholders, etc.
• Select a process agent
• Purchase truck insurance
  You may want to read: How to Negotiate with Auto Insurance Cos. for a Discount and Get Results
• Buy or lease a truck
• Create an international registration plan (if trucking to Canada)

How Much Does it Cost to Set up an LLC versus a Corporation?

Several start-up costs are associated with establishing a trucking company business, including buying a truck, getting insurance, and setting up the LLC or Corporation. On average, new trucking company owners can invest between $10,000 and $20,000 to start. Filing for an LLC may cost between $50 and $800 depending upon the state, and registration for a corporation can run between $1,000 and $2,000.

How to Get LLC for a Trucking Business

Setting up an LLC seems to be the preferred business structure for trucking companies. To get an LLC for your trucking company, register it first with the home state of operations as an LLC. Once your company is established in one state, submitting an LLC registration request to other states you will be doing business in should be easy.

It is also necessary to have a registered agent for LLCs who is at the physical address during regular business hours. Having a registered agent can be challenging since truckers typically are on the road and can pose issues if obtaining LLCs from other states.

Can You Start a Trucking Company With One Truck?

Every business has to start somewhere, so creating a trucking company with only one truck is possible. Starting with one truck gives your company the means to start making money, and with the industry's high demand, there is plenty of room to grow, buy more trucks, and expand in the near future. Do not let the more prominent corporations with thousands of trucks intimidate you. Many of those companies had to start small in the beginning.

The Bottom Line

When establishing a trucking company, it is vital to determine if you want the new business to be a limited liability company or a corporation. Your decision will determine how your business operates and the requirements you must follow to set up the company and continue operations from year to year. Hopefully the above listed information helps you determine which is best - an LLC or corporation for your trucking company business.

If you are needing assistance establishing an LLC or corporation for your trucking company businesses, NorthWest Registered Agent, IncFile, and Zenbusiness are great options to help you submitting business plans and setting up your steps to launching your new trucking company. Additionally, you will also have the option to get set up with some extra business services from within your business dashboard, like bookkeeping, trademark, business License, among others, anytime you need them.

We hope you've found this guide helpful and/or useful on deciding which business structure better aligns with your needs and wish you the best and success on your new entrepreneurship.

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