Tax Tips
Having what it takes to be an owner-operator

By Howard Abrams, PBS Tax & Bookkeeping

Q. I have been a company driver for four years now and have decided to switch gears and become an owner-operator. I have a wife and a 2-year-old. How should I approach this?

A. We like your approach in seeking help. Obviously, you are in a more difficult situation than if you were single because of your responsibility to your family. Before moving forward you should consider the following questions:

  1. Are you a responsible individual, organized and dedicated?
  2. Are you willing to take risks to reach your goals? You are taking a much bigger risk running your own business than being a company driver; however, the rewards are greater.
  3. Are you going to be able to make the tough decisions necessary in running a business?
  4. Are you willing to give up possible benefits of being a company driver such as health care, 401(k), guaranteed vacations and sick pay?
  5. Are you willing to put in the extra hours that go along with running your own business?
  6. Are you sales oriented? Will you be able to bring in the needed business if you choose to obtain your own authority as opposed to becoming a contract driver in a lease or purchase program?
  7. Are you capable of handling paperwork and record keeping? If not, are you willing to hire someone to do it?
  8. Are you willing to do the research, ask questions, compile and compare your results?

Q. I need help in figuring out how much money I will make.

A.  First, you will need to know how much money you need to live on. Then compare that with how much you are taking home as a company driver. Keep in mind the many benefits such as health care, vacations, unemployment benefits and job security, which are offered to employees, are not available as a self-employed individual. You will need to provide your own benefits.

When making your financial and benefits comparisons don’t forget to consider the effect of income taxes on your profit. Project what you will be taking home from your own business, taking into account taxes and the cost of providing your own benefits. Let a trucking tax expert help with your projections.

Q. OK, let’s assume I do all that you have told me about and I’m now convinced I’m going to proceed. Do I want to lease onto one company or do I want to get my own authority?

A. That’s the next big question – to take the seemingly less risky route and hook up with a company as a contract driver or to proceed directly to getting your own authority. You’re going to have to do your own footwork on that one.

If getting your own authority is your desire, make sure you have enough business lined up and then you can expand from there. You should prepare a business plan. There are some very good companies who can provide you with a fairly secure and profitable position as a contract driver. Compare those with the business plan and projections you developed for obtaining your own authority. Then consult with your trucking financial advisers. LL

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 visit their website at pbstax.com.

This column is the opinion of the writer and does not necessarily reflect the opinions of Land Line Magazine or its publisher. Please remember that 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.