LANDLINE

NOVEMBER 2009

 

 

STARTING A TRUCKING BUSINESS

 

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

 

Since so many people have lost their jobs, a good number of them are considering starting a business of their own.  There have been many questions on how to start and run a business so we will discuss a few.

 

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

 

Answer. 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 is that according to a recent study of the seven (7) most overrated businesses, trucking was not among them.

 

Question: What businesses were listed a most overrated?

 

Answer: 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.

 

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

 

Starting a successful business requires a great deal of preparation. Sometimes just 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 of making

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 start-up requirements, equipment purchase and business entity selection. 

 

Financial needs are all too often underestimated. Start-up 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 at least for three (3) years out.

 

Questions: Should I operate as a sole-proprietor or a corporation?

 

Answer: This refers to what we mentioned above regarding 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.

 

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

 

Answer: Keep Separate Bank Account for Business

If you don’t already use a separate bank account for business income and expenses it’s time to start. Keeping business and personal finances separated is not a requirement if you’re operating as a sole proprietor but it is the smart thing to do. 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 (more complicated for an S Corporation). Having a separate business account makes things much easier from a bookkeeping standpoint as well as making review and analysis of operations much easier. Tip: Request a month end closing date on your business bank statements. The type of entity and size of operation will dictate the type of bookkeeping required. 

 

This article has been presented by PBS Tax & Bookkeeping Services, a company that has been providing income tax and bookkeeping services to the trucking industry for over a quarter century.  If you would like further information, please contact us at 800-697-5153.   .

 

Please remember 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 or accounting professional.