Bottome Line
Tax Tips
Going it on your own

By Howard Abrams
PBS Tax & Bookeeping

 

In last month’s article, we talked about revenues and costs – how to compute them and how to compute potential profits from certain hauls. Since then, we have received calls about starting new businesses.

With unemployment so high, many people are considering starting a business of their own. We will discuss a few of the questions we’ve received on how to start and run a business.

Q: Is the trucking business a good business to get into?

A: Like any business, trucking has its good and bad points. A lot of truckers have gone out of business this past year. The good news: A recent study did not include trucking among the seven most overrated businesses.

Q: What businesses were listed as most overrated?

A: Restaurants, direct sales from your home, online retail selling, high-end retail, consulting, creating your own social networking Web sites and, much to my surprise, franchise ownership.

Q: How would I go about getting into the trucking business?

A: Starting a successful business requires a great deal of preparation. Sometimes a little research can make all the difference. The keys to success are experience, knowledge, a business plan, professional advice and financing.

Experience and knowledge of your industry is crucial. If you don’t have any experience, consider working with a successful owner-operator for at least six months. Do as much research as possible. The time you spend gathering accurate information is going to be well worth the effort. The more information you have, the less likely you are to make poor business choices and costly mistakes.

Seek professional advice from both an accountant and an attorney. You may want to have an attorney look over any contracts or purchase/lease agreements you’re considering signing. An accountant can be a great source of information about tax and bookkeeping requirements and also consult on important business issues like startup requirements, equipment purchase and business entity selection.

Financial needs are all too often underestimated. Startup costs and cash-flow requirements should be determined in advance plus plan on starting with a cash reserve to handle the unforeseen.

You will need projections showing your estimated income and expenses for at least three years out.

Q: Should I operate as a sole proprietor or a corporation?

A: This refers to what we mentioned above regarding business entity selection.

  • Sole Proprietorship
    A sole proprietorship is the simplest way to operate a business.
  • S Corporations
    S Corporations can lead to possible tax savings.
  • Limited Liability Company (LLC)
    Limited Liability Companies can operate as a sole proprietorship or a partnership.

Each type of business entity offers advantages and disadvantages. Corporations must adhere to much stricter guidelines than other business entities. Consult with an attorney as to possible liability protection.

Q: What kind of records do I need to keep?

A: Keep a separate bank account for your business. If you don’t already use a separate bank account for business income and expenses, it’s time to start. You would be wise to keep business and personal finances separated, although it is not a requirement if you’re operating as a sole proprietor.

Maintaining a separate account for business is not complicated. Simply deposit all business income into your business account and pay all business expenses out of the same account. When you need money for personal expenses, write yourself a check from the business account and deposit to the personal account (this is more complicated for an S Corporation).

Having a separate business account makes things much easier from a bookkeeping standpoint and makes review and analysis of operations much easier. LL


Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax professional.

This article is written by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter-century. If you would like further information, please contact PBS at 800-697-5153 or see their Web site at
www.pbstax.com.

Aug/Sept Digital Edition