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Join NTAWritten by Wayne Schooling
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Q: I forgot when the new hour’s regulations start and what are the penalties?
A: All drivers and carriers are required to operate under the new rules effective January 4, 2003.
Drivers and/or carriers who violate the hours-of-service rules face serious penalties: 1) Drivers may be placed out-of-service (shut down) at roadside until the driver has accumulated enough off-duty time to be back in compliance; 2) State and local enforcement officials may assess fines; 3) The FMCSA may levy civil penalties on you or your carrier, ranging from $550 to $11,000 per violation depending on the severity; 4) The carrier’s safety rating can be downgraded for a pattern of violation; and 5) Federal criminal penalties can be brought against the carriers who knowingly and willfully allow or require hours-of-service violation. Don’t forget to turn in a copy of your log within 13 days to your motor carrier. Further, You, as a driver, are required to keep the duplicate copy of any day’s logs for a period of seven (7) days. During this time period, the copy must be in your possession while you are on duty.
Guarantee Yourself a Driving Spot and Make Your Business Like a Fortune 500 Company
A driver who chooses to start his own business would go at the top of any motor carrier’s list if he presents himself or herself as a corporation because this presents a strong case for independent contractor status. When possible, the motor carrier would always choose drivers that are incorporated over those that are not.
While it is technically possible for an IRS or State Auditor to reclassify an incorporated driver, in practice, that rarely happens. When presented with an incorporated driver, 99 % of the time the IRS or State auditor will not disturb independent contractor treatment so long as the motor carrier had nothing to do with the incorporation by the driver.
There are several reasons why a motor carrier would give preference to an incorporated driver over another in the slow or lean periods. 1) A corporation is a separate, 2) As a separate legal entity, a corporation operates only through its officer or officers, 3) Corporate officers are always employees of their corporation, 4) As an employee, the owner/driver will receive a W-2 Form from hos or her own corporation, 5) There is little or no reason, therefore, for an auditor to determine that the motor carrier should have issued a W-2 to the driver when the driver is already a W-2 employee of the driver’s corporation, and 6) The driver’s corporation has presumably already paid all the applicable employment taxes on the driver.
There is one thing that an incorporated driver and General Motors, Microsoft, AT&T and all other major businesses in America have in common – they are corporations.
A Corporation is a separate legal entity. Corporations function like individuals, but with some compelling advantages. Most importantly, there is no liability to an individual business owner who is incorporated. Shareholders of a corporation are generally not liable for the obligations of the corporation.
Creditors of a corporation may seek payment from the assets of a corporation, but not the assets of the shareholders. This means that business owners may engage in business without risking their homes or other personal property.
Corporations are also very flexible in their operation. It is easy to admit new owners (shareholders) by transferring shares. In addition, the corporate business structure allows you to more easily raise money from investors and gives you the choice of offering equity incentives for employees.
As always, I recommend that before forming a corporation, you should acquire the necessary facts so that you can check with your tax advisor and/or attorney. You can easily acquire this information for free by going to the NTA website and at the bottom of the home page you can click on My Corporation. Look for the “learn more” and click away.
One disadvantage of corporations can be double taxation. That is because corporations pay tax on their earnings and profits, and shareholders also pay tax on distributions received from the corporation.
However, there are many methods to reduce or eliminate the double taxation. A corporation may make a Subchapter S election which disregards the corporation as a separate taxpayer. As a result, shareholders pay tax on the corporation’s earnings, whether or not profits are distributed to the shareholders. Alternatively, corporations may pay bonuses or fringe benefits to its owners, which reduces the profits of the corporation.
Now that you have reached this point, you have to choose on where to incorporate. Delaware? Nevada? Your home state?
Few people know that the law does not require a company to incorporation its “home” state. In fact, an entity can choose from any of the 50 states or District of Columbia. Some states have a much greater number of corporate formations, which begs the question – “Why?”
Due in large part to their liberal incorporation laws and favorable tax policies, the most “incorporation friendly” states are Delaware or Nevada. Both states are very good but for different reasons. Delaware has more written legal precedent to rely upon whereas Nevada has some very good privacy statutes, further Nevada does not trade information with the IRS. Nevada allows its corporations to use bearer stock certificates, which make it virtually impossible to prove ownership of a Nevada corporation.
Delaware is generally less expensive than most other states. The initial charge for incorporating in Delaware can be as low as $89.00. There is no Delaware corporate income tax for corporations that are formed in Delaware so long as they do not transact business in Delaware.
So now you all have homework to do. Be sure to check out all the free information that is available of the NTA website at the “My Corporation” link.
Overall, incorporating is one of the best ways a business to protect his or her personal assets. Be smart with your business and incorporate.
The NorthAmerican Transportation Association is a nationwide association established to provide services, benefits and information to Private Fleets, Trucking Companies and Owner-Operators. We are the only association that provides our members with more FREE services and benefits than any other. For more information or details call (562) 279-0557 or 800 805-0040 or you can e-mail me at wayne@ntassoc.com Remember, tell those who doubt your profession, " If you've got it ….A TRUCKER BROUGHT IT ! Until next month, " Drive Safely - Drive Smart! "
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Wayne Schooling
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