How to set up an owner-operator business to file as an S Corp and save on self-employment tax

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Updated Feb 1, 2024
U.S. Tax Return for an S Corporation Form 1120-S with an image of a vehicle carrier and semi-truck
Establishing an LLC and electing to be taxed as an S Corporation begins to make sense, ATBS advises, when an owner-op business is making $70K or higher on a routine basis.

Owner-operator average income, according to business services firm ATBS, has topped $70K annualized, based on earnings analyzed at mid-year 2021 and reaching back to the final six months of 2020. $70K also happens to be a figure ATBS President Todd Amen and other ATBS reps routinely cite as a point at which an individual owner-operator is likely to be able to justify the cost of filing as an S Corporation – a so-called "passthrough" method of business tax filing. Business income in such a structure still flows through the owner's personal tax return. 

"We've set up a lot of S Corps this year," said Todd Amen, speaking during Overdrive's October 21, 2021, Partners in Business live webcast charting owner-operator income performance through 2021. 

Side benefits of the S Corp structure include that its necessary treatment of an owner-operator's annual salary as a business expense allows for better analysis of true business profit separate from personal income. That's among the practices that Amen sees as hallmarks of high earners among ATBS' one-truck clientele.

"When we talk about the top 10%" of high earners and how they separate themselves from others, "this is what they do," he said. Amen referenced personal and business budgeting. On the personal side, top performers take the time to figure out what it costs them to live, determine an amount to pay themselves accordingly to cover that cost, then analyze what's left as the business income. "That's a real businessperson paying themselves as an employee and treating it like a true business." 

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Overdrive editors and ATBS present the industry’s best manual for prospective and committed owner-operators. You’ll find exceptional depth on many issues in the Partners in Business book, updated annually.
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