hey i bought a truck was put in my name.the question is when i form my llc do i have to retitle truck in the company name.and change insurance in the llc name also.

 

If you're going to go LLC, then yes. Whether or not going LLC is worth it is the question.

 

Not true at all. Just lease yourself and your truck to your LLC. Write up a simple O/O lease agreement leasing you to your LLC and you're good to go.

 

And the benefit of that would be what? Under that scenario, the bulk of the expenses related to the truck must be accounted for on the individual's tax return. Plus, such "lease backs" are one of the IRS red flags. The tax filings for the complete operation now become much more complicated and the benefit is what? Saving a couple hundred bucks for a title transfer and registration. Of course, it does reinforce the fact that an LLC is virtually pointless in this situation. Stick to a sole proprietor.

 

Assuming that this is a single member LLC (or SMLLC as the IRS refers to it) you simply file the LLC's revenue and expenses on your personal Form 1040 with Schedule C. It is one of the biggest reasons why many people choose a sole proprietor LLC instead of an S-corp... simplicity of paperwork and tax filings is a wonderful thing. If it is a multi-member LLC, then you’d need to file Form 1065 (U.S. Return of Partnership Income) and Schedule K-1 (Partner's Share of Income, Credits, Deductions, etc. (For Partner's Use Only).

It makes sense to have the LLC for a variety of reasons, especially if you ever plan on expanding your business to include more than just you driving your one truck. I’ve never heard of leasing yourself and your truck to your own LLC being a red flag to the IRS. I would think it is pretty common practice actually. I owned my truck long before I ever formed an LLC and got my own Authority. I plan on expanding when the opportunity presents itself. It made sense for me to avoid the hassle of retitling and re-plating my truck by leasing it on. Many corporate officers lease land or buildings to companies they are the head of. How is me leasing my truck to my LLC any different?

 

And that's exactly how a sole proprietor's taxes are filed, so we can agree that there is no simplification there. Yes, it is simpler than an s-corp but that begs the question, why would this person be filing as an s-corp in the first place? There is no liability protection offered to the one-truck operator and if his/her income was less than $60,000 there would be no tax advantage. If income exceeded that amount, than he would be leaving money on the table by NOT filing as an s-corp. So really, the only scenario where it might make some sense is what you describe; possible future growth. Even then, the only benefit you're trying to capture is establishing credit history and in reality, that's not really an issue if handled properly. Simply converting your business when the time comes can be just as effective, so long as proper care is taken along the way.

Not entirely true. A multi-member LLC can also choose to be taxed as either a corporation or an s-corp. The LLC is a state construct; it is not recognized by the IRS as a tax entity. Therefore, it must fit into one of the entities that the IRS does recognize. The beauty of the LLC is that the IRS allows any of the entities to be chosen, providing that certain conditions are met. Partnership taxation is generally one of the least advantageous of those available. It does make sense at lower income thresholds where the partners are in the same household.
It is a red flag because it's easily manipulated. It's common practice among unscrupulous filers to manipulate the lease payments in such an arrangement based on the individual's and business' respective tax situation. Of course, being a red flag does not mean that everyone gets audited. When looking at total audit numbers, there will still be many more who don't get audited than do. The home office deduction is one of the biggest red flags for the self-employed. Yet most are never audited. It does however increase your risk so that has to be weighed against the benefit. I just don't see avoiding retitling as a benefit so it fails the risk/reward analysis.

 

I would not worry too much about being audited. Take your deductions, keep records to support them and don 't worry about an audit. I would never fail to take a deduction based upon the threat of an audit. I keep an office at home and will continue to take the deduction. I have gone through a couple of audits and have never had them question the home office deduction. It is very easy for me to prove that I use that portion of my home as an office. I have a desk, file cabinets and other things associated with running an office. I will take any and all deductions that I am entitled. If they were to question it then they can come to the house and I will show them my office. I have nearly always had an office at home.

 

That wasn't my point. The point was a strategy being commonly utilized and being a red flag are not mutually exclusive. Of course you should take a legitimate deduction, even if it is more closely scrutinized. For that matter, given the low audit rate, you might as well take illegitimate deductions as well. However, it doesn't make sense to take such action when the benefit is minimal.

We're talking about a new title and registration and a clerical change on insurance. Really, what are we talking? A couple hundred bucks and an hour's time? And to avoid that we're talking about adding needless layers to taxation, insurance, and liability? For what?

 

I would lease the truck to your LLC or corporation, if you decide that is the way you want to go. Having a formal structure for your company is a great way to keep business and personal separate. When you have a proprietorship it can blur the lines of distinction.