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Blackwster00
Returning Member

Sub contractor or LLC ?

Hi there

I'm a 1099 company professional Class A driver, every year I file schedule C (expenses & meal ) deductible, I start new job as class A driver and my employer asking me to start LLC with no responsibility,  I'll driver their truck, maintenance,  fuel they will pay. I did not understand why they asking for LLC ?

Thanks in advance.

8 Replies
Bsch4477
Level 15

Sub contractor or LLC ?

An LLC limits your liability to your business and protects your personal assets. You could ask the business that you work for what the advantage is to them. 

Critter-3
Level 15

Sub contractor or LLC ?

As a single member LLC you are taxed as a sole prop on a Sch C so for you nothing will change if you get an EIN for an LLC ... as to why they require it ... probably so that they can avoid the IRS employee rules and thus avoid paying you as an employee... this is an end run around the rules :  https://www.irs.gov/taxtopics/tc762

 

Since they will have you drive their truck and they will pay for all the truck expenses you are technically an employee and should be paid as such.  They should be paying 1/2 the SE taxes, pay workman's comp, a per diem  and provide  you with health insurance.   

 

 

 

 

Blackwster00
Returning Member

Sub contractor or LLC ?

On 1099 their no benefit no overtime, no health nothing, just flat hourly rate. My employer said I'll safe on taxes, I don't understand how ? Without the necessary over the road expenses.

Not clear answer from them , looks like they are hiding something.

Mike9241
Level 15

Sub contractor or LLC ?

I agree with Critter-3. this looks like an end-run to avoid treating you as an employee. as an employee, they would have to offer you the same fringe benefits they provide other employees once you work for them for the required period of time. they avoid having to take payroll taxes out of your paycheck and also pay their share of the Fica and Medicare taxes as well as Unemployment Compensations taxes. as an Independent contractor, you are not covered by their workmen's compensation insurance. so if you get injured on the job then paying the medical expenses becomes your problem and you don't get compensated for injuries sustained.

hopefully, you are never in an at-fault vehicle accident using their truck.  whether they could sue you so you have to pay for damages rather than file a claim with their insurance is a question for your insurance agent and a lawyer. The LLC may not protect you.

 

Critter-3
Level 15

Sub contractor or LLC ?

YOU won't save on taxes instead  they save money by not having to treat you as an employee ...  which is why they are using the "LLC" trick to do an end run around the IRS employee rules.   Read the link I posted.     Then you will need to figure out if you want to play their game or not based on the info you have to consider.  

Blackwster00
Returning Member

Sub contractor or LLC ?

I read the article, as I mentioned earlier as 1099 sub contractor we are not under employee category, Mike is right if it's on fault accident so everything goes to my LLC, beside their insurance and thousands dollars claim, and keep their good record, but again the question is If have no truck than why I need the insurance ?

And I have no investment or business capital beside pay check what they will get sue to my LLC ?

Critter-3
Level 15

Sub contractor or LLC ?

If you drive their truck and get in an accident the injured party can go after you as well as the truck's insurance company ... please talk to a labor attorney before doing anything you may regret later.  

 

And you don't get a "paycheck" if you are not an employee and that is the issue.   If you were an employee then their insurance would cover you driving their truck but as an independent contractor you are also liable for any accidents ... you would need to have a good insurance policy of your own so aside from that expense you would also not be eligible for any other employee benefits including health insurance ,  paid time off and workman's comp ins.   so weigh all your options carefully.  

tagteam
Level 15

Sub contractor or LLC ?


@Critter-3 wrote:

If you drive their truck and get in an accident the injured party can go after you as well as the truck's insurance company ... please talk to a labor attorney ....  


The quoted statement by @Critter-3 is absolutely correct in both respects; you need to consult with local legal counsel, @Blackwster00.

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