Incorporation – Is There Any Value?
Hello Again! A question I get asked continually is whether an owner/operator should incorporate or stay as a proprietor. In general I would answer the question with a Yes but the reasons are subtle and it isn’t bad or wrong not to.
Some of the benefits are included in the following list:
Separate Entity – A corporation is a totally separate entity from you the trucker. The company can own assets, hire people, pay taxes, accept responsibility and go broke. All of these are independent of you the shareholder.
Limited Liability – There is some shareholder protection from certain liabilities entered into by the corporation. If for some reason the corporation should run into financial difficulty, debts owed by the corporation do not fall on the shareholder, providing the shareholder has not given their personal guarantee.
Tax Benefits – Corporations are taxed at a lower rate than individuals. Ultimately, the tax paid by the individual will be similar but paying a lower tax in the corporation and then declaring a dividend later on can help when tax planning. Also, if a company has a loss in one year this can be used to offset a profit in other years.
Growth Potential – If you plan on buying additional trucks or hiring drivers or growing the business in some other way a corporation is a better structure than operating a proprietorship. The corporation also allows you the option of selling shares in the company for a tax free gain if you have created value and there is someone willing to purchase it.
Work – Some carriers will require that you are incorporated in order for them to do business with you. Enough said.
If you want to get incorporated or just get caught up on your taxes we are always here to help you manage your numbers. Cheers, Joh