Incorporate Trucking Business: Everything You Need to Know
Before you can incorporate a trucking business, you must get your trucking company started.3 min read
Before you can incorporate a trucking business, you must get your trucking company started. The trucking industry is a competitive field, even though it may not appear that way to outsiders. The marketplace is growing substantially, and this means it is increasingly important to transport goods to different cities, states, or countries. This means that truck drivers and trucking services are in high demand.
Steps to Start a Trucking Business
Here are some of the things you need to do before you can get your trucking company started:
- Write a business plan. This will help you set goals and organize your plans.
- Set up the legal structure of your company. This will help limit risks to your personal assets and may offer many other advantages.
- Obtain your Employer Identification Number. Your EIN is a nine-digit number that must be present on tax filings and will be needed when opening a bank account for the business.
- Acquire other licenses and permits. Different requirements may be necessary depending on the county or state the business is located in.
- Apply for a commercial driver's license, which is required by federal law and can be obtained through a state licensing agency.
- Request a U.S. Department of Transportation number from the Federal Motor Carrier Safety Administration. The USDOT number is used to identify a trucking company when conducting investigations, inspections, or audits.
- Obtain a Motor Carrier Operating Authority number, also known as an MC number.
- Request International Registration Plan credentials and an International Fuel Tax Agreement decal, both of which are required for trucking companies operating across multiple states.
- Purchase or rent equipment needed to operate the business. Having the right equipment is vital to the company's success.
- Select insurance coverage. There are several types of insurance coverage that will be needed for the company, and it's best to contact an agent to assist with determining the right selections.
Why You Should Establish a Trucking Business as a Corporation
One of the most important reasons to incorporate a trucking business is to protect the personal assets of the trucker and/or owner. If the trucking company becomes the target of a lawsuit, the corporation serves as a barrier between the business and the personal assets of the owner.
Some other benefits of incorporating the business include:
- Attracting new investors
- Reducing liability
- Tax deductions
- The ability to obtain credit for the business
Tips to Follow When Establishing a Corporation
There are different legal structures to consider, so do your research and choose the best fit for your company. For a small trucking company, you should incorporate your business in your home state to reduce confusion. Completely separating business finances from your personal finances is also important. Prepare an operating agreement, which should include all details of the business in writing. This may include regular business practices, financial details, company goals, business relationships, and other important company information.
Utilizing Section 179 For Depreciation
Section 179 utilizes first-year expensing. This allows you to receive the entire depreciation deduction for an asset in a single year, as opposed to typical methods which break down the amount to figure the per-year value for the lifetime of the asset's expected use.
Examples of assets that can be depreciated using Section 179 include property that is primarily used for the business, which is more than 50 percent of the time. This type of property includes business equipment, machines, vehicles, and computers, just to name a few. The deduction is not allowed for assets that are purchased solely for personal use, or for assets used to produce income outside the realm of the business. It's important to maintain business records to properly document the details regarding the use of the assets.
Another thing to consider is that an asset previously purchased for personal use is not allowed to be converted for business use and claimed under Section 179. In addition, there is a limit on the amount of asset expenses that can be claimed under Section 179. This limit is subject to change each year and should be researched accordingly.
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