Last Updated: February 16, 2024, 1:53 pm by TRUiC Team


Should I Start an LLC for My Trucking Company?

Starting a limited liability company (LLC) for your trucking company can provide several benefits. 

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a trucking company, lawsuits can arise from things like lost inventory (such as after a truck containing customers’ belongings is stolen), or personal injury or property damage that occurs due to the truck driver’s negligence.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your trucking company seem more credible. 

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Trucking Company?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Trucking Company

By starting an LLC for your trucking company, you can:

  • Protect your savings, car, and house with limited liability protection
  • Have more tax benefits and options
  • Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Trucking companies will benefit from liability protection because of the risk of a personal injury lawsuit if a truck driver is hurt on the job or accidentally injures someone. There is also the risk of damage to someone else’s property. 

Example 1: One of your trucks is stolen, along with the load it was carrying. The client is suing you over the lost inventory. Your personal assets could not be taken in the settlement since they are protected with limited liability as an LLC.

Example 2: While on a job, one of your trucks is in an accident. The other motorist demands your company pays for the repairs. Limited liability from being an LLC would protect your personal assets from being used to pay for this.

Example 3: A pedestrian is hit by one of your trucks while it is backing up. The pedestrian asks you to pay for their medical expenses. Since your business is an LLC, limited liability would protect your personal assets so they could not be used for the expenses.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Trucking Company

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return. 

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform. 

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a trucking company owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Trucking companies rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loansgrants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

  • You can hire a professional LLC formation service to set up your LLC for a small fee
  • Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Being on the road in expensive machinery can lead to damage and accidents. If your company has insurance, your rigs will be protected so if they are damaged or in an accident you can receive help with the cost of repairs. Insurance can also cover costs associated with lawsuits and legal fees.

Common Situations Business Insurance May Cover for a Trucking Company

Example 1: A customer visits your establishment in order to finalize a contract but slips and falls while there. A general liability policy should cover their medical expenses and any potential legal fees.

Example 2: During a merchandise offload, an employee damages a customer’s building with the forklift. Your general liability should pay for the repairs to the building.

Example 3: To ward off thieves, you use a guard dog to protect the premises at night. While on patrol, the dog catches a person trying to climb a fence and bites them. Your general liability policy should be able to provide coverage for a lawsuit or any potential medical expenses.

Other Types of Coverage Trucking Companies Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all trucking companies should obtain.

Commercial Auto Insurance

Since driving is the primary service your business offers, you will need to carry at least the minimum levels of commercial auto insurance, as mandated by the state. This covers business-owned vehicles when driven on public roadways.

It is recommended that trucking companies carry a policy with higher limits than what is mandated by the state. Additionally, pay careful attention to what exactly this coverage extends to. Most insurers require a separate policy for the trailer and cargo.

Commercial auto insurance can often be purchased as part of a business owner’s policy (BOP).

Cargo Insurance

Trucking companies are charged with ensuring that their clients’ property reaches its destination safely and on time. Cargo insurance covers loss or damage to freight while in transit.

This type of policy often comes with a number of coverage exclusions. To avoid any surprises, carefully review all policy exclusions prior to purchasing your cargo insurance.

Workers' Compensation Insurance

Your state will likely require the business to carry workers’ compensation for each employee. It covers work-related accidents and illnesses, along with resulting medical bills, lost wages, and any resulting settlements.

Workers’ compensation is purchased as a standalone policy.

Commercial Umbrella Insurance

Working on roadways and in vehicles puts your business at greater risk than other types of businesses, and expenses stemming from a covered liability loss can also be greater. A commercial umbrella liability policy extends coverage above and beyond your general liability coverage policy’s limits.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

The average cost for starting a small trucking company is $200,000. A medium-sized trucking operation can cost up to $1 million and a large-scale operation can cost up to $5 million to start.

In general, expect to pay roughly $2,500 for liability insurance, permits, and licensing.

A seven year old used semi truck can cost between $30,000 and $40,000. A near-new truck may cost up to $100,000. If you start with a small fleet, it may cost you around $600,000 to $1,000,000.

Visit our How to Start a Trucking Company guide to learn more about the costs of starting and maintaining this business.

Fuel, salaries, and vehicle maintenance constitute the bulk of a trucking company’s ongoing expenses.

Learn more about running a trucking company.

A trucking company makes money by contracting with clients to ship their goods. Shipping charges can be calculated by actual weight or volume, or a flat fee based on estimated weight or volume.

Learn more about starting a trucking company.

The average profit margin for a trucking company is about 6%.

Companies that hire truckers as employees can produce higher profits and greater employee loyalty. However, hiring truckers directly costs more in terms of overhead. Hiring independent contractors may have a reduced initial cost but see lower returns. A trucking company owner will have to weigh the costs and benefits of the two hiring models to decide which one makes the most sense for them.

Learn more about starting a trucking company.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations

IRS: EIN

SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business