Should We Incorporate?

As long as Diane and her husband cover plenty of liability insurance on the trucks they own, they don't need the hassle of setting up a corporation.

QUESTION: Diane and her husband own a small trucking company as a sole proprietorship, but they are thinking of incorporating.  Should they do that?

ANSWER: You shouldn’t incorporate if you and your husband are just owner-operators of this trucking company.  Just carry plenty of liability insurance on your trucks.  Make sure other truckers with your company are insured for multiple-millions of dollars. 

There is no tax advantage to incorporating.  The only thing it will do for you is it will create a stand-alone entity that is liable for its own actions.  The only reasons you’d want to do that are:
if you can’t insure through your own sole proprietorship,
you have substantial assets back home that you want to insure,
or if the business reaches a good size.

You would want to do a sub-chapter S corporation so that any loss or gain with the company shows up only on your tax return – just like it does with the sole proprietorship. 

To incorporate, you would move the ownership of your trucks as well as the liability insurance to the corporation.  That way if someone sues you for an accident related to one of your trucks, they can’t come after you.  They can only come after your company and the most they’ll get are your trucks.