Sorry, that I had to skip a day to complete this discussion on trucking businesses- and the future.

We’ve talked about why you have to consider autonomous trucking- where you aren’t needed as the driver as part of your considerations.  And, you have to develop a business plan (not the 30 to 100 page tomes you see for larger firms), but about 5 pages that lets you have a road map- and signposts to ensure you are on your way to a profitable venture.  (As discussed below, you also need this business plan to obtain your own carrier registration, to operate your own trucking entity.)

Of course, you may elect to avoid long haul trucking and deal only with local routes.  Autonomous vehicles won’t interfere in the near (say 5 to 8 years) term, so you won’t need those put-asides for autonomous retrofits until much later.  And, if you are really going to do local hauling, you may elect for a 28 foot trailer (not a straight truck), so your rig will be far more maneuverable within the towns and cities.  (You also probably need to consider adding a lift gate to your trailer, so you can handle a larger component of local customers- and get paid for that capability, to deliver to customers that don’t have loading docks. )

You also need to concern yourself with how you will acquire your loads, how you will garner your portion of the $ 700 billion a year the trucking sector generates. (The trucking sector revenue includes more than just the 3.5 million truck drivers in the USA.  And, about 1/2 of those truck drivers are the long-haul variety.)

Will you use a broker (I’m pretty sure you will)?  After all, if you don’t hire yourself out to a major carrier, you will find that acquiring loads can be a full time job.  (We had the luxury of hauling our own products via our trucking firm, which solved a lot of problems.  But, we did use brokers when we wanted to backhaul items [only occasionally, since we also brought raw materials back to our manufacturing plants]).

You are also going to have invest in technology- and I’m not talking about autonomous vehicle equipment, either.

You are going to have to track your miles, your fuel purchases, and then your accounting.  You will need to file timely fuel reports in each state of travel- and choosing  the right software and hardware will make that a snap.   Some states (New York, Oregon, and Kentucky, among others) are going to require you to file income tax returns if your end points (pick ups or deliveries) are in those states.   And, then, there’s IRS Form 2290 (Highway Heavy Use Taxes) to maintain your (required) Uniform Carrier Registration (UCR).    (By the way, the UCR requires a business plan, like we mentioned above.)

Getting your own trucking authority takes time. So, you have to put  this applicaton among your first “must do’s”.   And, that also requires you have your insurance lined up- and probably a surety bond for your operation, as well.  And, you can bet that the DOT (Department of Transportation) will be coming to audit you.  Which is why you need everything ready, your T’s crossed and your I’s dotted, to ensure you can proceed with aplomb.

Nowadays, there’s often also a protest period.  Where your name and information is published in the Federal Register and competitors can complain (or not) that you will be harming their business.  It may or may not happen- but if it does (in about 5% of the cases), you are left dangling in the wind for more weeks and months.  (Remember that cash hoard we wanted you to have, right?)

Not really a requirement, but we recommend you join OOIDA (Owners and Operators Independent Drivers Association).  They have lots of pointers you will need- as well as the  mass buying authority that will save you money.

Now, let’s go back to why I think you should form a corporation or  an LLC.  As a matter of fact,  I believe you need to form two entities.  The first one owns your tractor and trailer.  The second one is for the actual hauling business.  Besides protecting your investment (a problem with your trucking company won’t endanger your truck ownership), it provides you a means to earn two salaries- and minimize the employment taxes that you will be required to pay.

The firm that owns the truck (let’s call it Truck, Inc.) can be a flow-through (an S [small business] corporation) or a regular (C) corporation.  You could cover the truck via an LLC, but you must recognize that this is probably  going to be a disregarded entity.  [When an LLC has a single stockholder, the IRS considers it to be disregarded; instead of filing business taxes, the business information is all filed using Schedule C of the Form 1040 (the personal tax return). ]

So, Truck, Inc. gets paid enough money to cover the cost of insurance, the truck/trailer payment, plus a reasonable profit (about 30%).   That means roughly $ 60,000.  (We have amortized the truck/trailer using an  eight (8) year period , about how long the truck will last, before you want to trade it in.).  Paying out the monthly payment on the rig and insurance will leave at least $ 25K left over, of which your salary will be about $ 3K, with the rest being a dividend payment directly to you, the shareholder of Truck, Inc.

That is a reasonable salary for a firm that only has a single asset, one that is depreciating and just involves a little bit of paperwork (the loan payment can be automatically withdrawn from your bank account).  The remaining cash will be subject to income tax, but not employment taxes; from an income tax point of view, the dividend will be different because of depreciation.)  Best of all,  there will be sufficient funds for you to put aside the money to convert the rig to autonomous or semi-autonomous state in a few years.

Your trucking company (which we’ve ingeniously called Hauling, Inc.) will generate gross revenue to be somewhere between $ 1.25 and $ 1.50 a mile (more when it’s the inside delivery, which also needs a lift gate on your trailer).  (We won’t count on a fuel subsidy, given the current price of fuel.   But, if you do get loads that pay the subsidy, that just adds to your gross- and your net- profits.) Short haul deliveries could earn higher mileage rates- but will incur lower overall mileage, so it’s not clear how much more (or less) money one would gross if your business choice were to effect only local hauling.

Given the current carriage rates, we can expect our gross revenue to range from $ 70,000 (if you only eke out 60K paid miles) up to $ 175K for nearly 1800 hours of driving.   Let’s use $ 135K as a reasonable (and conservative) number for our gross revenue.

Our fuel and road tax costs will run about $ 25K, and we’ve already used $ 60 K to cover our insurance and truck costs (as well as a small payment for our efforts), leaving us $ 55K for health insurance, taxes, meals, and the like.  A reasonable net profit would be  $ 35 K, of which about $ 20K would be a reasonable salary, with the rest being paid to you as dividend (and not subject to employment taxes).  (We have used $ 0.20 to $0.25 a mile to compute your reasonable compensation.  That is the going rate for a driver, who doesn’t own his or her own rig.  And, for the purposes of Hauling, Inc., you are just the driver, renting out Truck, Inc.’s tractor/trailer.)

So, with our two companies, we’ve managed to earn some $ 25K in salary (plus employment taxes of less than $ 2000) and at least $ 15,000 in dividends (only subject to income tax).   And, if we can hit that $ 175K gross revenue mark, we’d bring our dividends up to $ 50K, plus the salary.

So, what happens should you not incorporate?   You would still have the same truck/trailer payments, the same insurance costs, the same fuel costs,  etc.  All that would be different would be the taxes paid and the salary.  Which means, out of the $ 135K gross revenue, we’d deduct our costs of $ 65K.  Which leaves us with $ 70K of employment revenue.  But, now the employment taxes would be almost $ 11,000, which leaves us $ 59K – which is still subject to income taxes.  Or, about $ 15K than the incorporating caser  less before income taxes.

The less revenue generated, the better non-incorporation appears.  Incorporating makes more sense as the revenue increases.

Keep on truckin’.