Legal entity registration and some other thoughts on FedEx Contractor Business

[Alex Davidoff]

Without any further ado I need first hand confirmation on the legal entity registration options for contractors. Since S-Corp is the obvious choice, my question is can it be incorporated in a state (tax friendly) other than the state the business operates in? Reasons for doing it? All employees (including owners) do not pay state income taxes on salaries and dividends when distributed are only taxed on federal level. Note, I'm talking about registering the Corp in one state and only file Certificate of Authority for Foreign Corporation with the state the business will operate in, and not the scenario where a separate legal entity of the same company is registered in the state of operation. Since you all seem to share the general notion that drivers are underpaid, here's a way to offset it. I doubt FedEx could have any legal way to prevent this.

I come from corporate business and found the financial terminology used in the FedEx contractor business to be extremely fast&loose. That adds a lot of confusion and repeated questions.It took me a while to wrap my brains around the fact that brokers list "cash flow" as a single figure (cash flow not viewed over a period of time is useless number) while actually mean "gross profit" which everyone seems to call "net" which is equally incorrect. And because this is a very simple business in terms of structure it's very easy to itemize and use the simplest possible formula: Revenue - Cost of Service/Operating Expenses - Gross Profit - Net Profit. Just a thought...

Finally, any advice or thoughts on doing the business in the state of Georgia?

Thank you for your comments in advance!

 

[It will be fine]

Without any further ado I need first hand confirmation on the legal entity registration options for contractors. Since S-Corp is the obvious choice, my question is can it be incorporated in a state (tax friendly) other than the state the business operates in? Reasons for doing it? All employees (including owners) do not pay state income taxes on salaries and dividends when distributed are only taxed on federal level. Note, I'm talking about registering the Corp in one state and only file Certificate of Authority for Foreign Corporation with the state the business will operate in, and not the scenario where a separate legal entity of the same company is registered in the state of operation. Since you all seem to share the general notion that drivers are underpaid, here's a way to offset it. I doubt FedEx could have any legal way to prevent this.

I come from corporate business and found the financial terminology used in the FedEx contractor business to be extremely fast&loose. That adds a lot of confusion and repeated questions.It took me a while to wrap my brains around the fact that brokers list "cash flow" as a single figure (cash flow not viewed over a period of time is useless number) while actually mean "gross profit" which everyone seems to call "net" which is equally incorrect. And because this is a very simple business in terms of structure it's very easy to itemize and use the simplest possible formula: Revenue - Cost of Service/Operating Expenses - Gross Profit - Net Profit. Just a thought...

Finally, any advice or thoughts on doing the business in the state of Georgia?

Thank you for your comments in advance!

If that's your real name you should change it.
You have to incorporate in the state you do business in according to the Fedex agreement.

 

[Alex Davidoff]

If that's your real name you should change it.
You have to incorporate in the state you do business in according to the Fedex agreement.

Thanks for clarification. Then I'll have to employ some other "money saving" tactics I've used successfully in the past which I cannot discuss here which might be of interest to IRS as your comment of using my real name could be of interest to FedEx themselves. No worries, it's not...

 

[burrheadd]

Do you make cigars

 

[bacha29]

Without any further ado I need first hand confirmation on the legal entity registration options for contractors. Since S-Corp is the obvious choice, my question is can it be incorporated in a state (tax friendly) other than the state the business operates in? Reasons for doing it? All employees (including owners) do not pay state income taxes on salaries and dividends when distributed are only taxed on federal level. Note, I'm talking about registering the Corp in one state and only file Certificate of Authority for Foreign Corporation with the state the business will operate in, and not the scenario where a separate legal entity of the same company is registered in the state of operation. Since you all seem to share the general notion that drivers are underpaid, here's a way to offset it. I doubt FedEx could have any legal way to prevent this.

I come from corporate business and found the financial terminology used in the FedEx contractor business to be extremely fast&loose. That adds a lot of confusion and repeated questions.It took me a while to wrap my brains around the fact that brokers list "cash flow" as a single figure (cash flow not viewed over a period of time is useless number) while actually mean "gross profit" which everyone seems to call "net" which is equally incorrect. And because this is a very simple business in terms of structure it's very easy to itemize and use the simplest possible formula: Revenue - Cost of Service/Operating Expenses - Gross Profit - Net Profit. Just a thought...

Finally, any advice or thoughts on doing the business in the state of Georgia?

Thank you for your comments in advance!

Even if you could do it and as IWBF says you can't, would it even be worth it? Secondly if you are about to become or have recently become a ISP contractor you're articles of incorporation will be the least of your concerns. There will be no shortage of experiences that you can add to your list of suicide quality miseries.

 

[dvalleyjim]

bacha29's got it right. You are stupid if you think your going to get over on FX. Find another scam. This one has left the building in 2008!

 

[STFXG]

Just set up a 501c3 and move your money through it. Alex knows what I'm talkin bout.

 

[Alex Davidoff]

Even if you could do it and as IWBF says you can't, would it even be worth it? Secondly if you are about to become or have recently become a ISP contractor you're articles of incorporation will be the least of your concerns. There will be no shortage of experiences that you can add to your list of suicide quality miseries.

I asked a specific question regarding the company's incorporation and got an answer. That's all I needed. End of story. If it can't be set certain way that's fine. I don't know your level of business acumen but anyone who asks if saving 6% state tax (Georgia) on your (and your employees') income is worth it, they shouldn't be in any kind of business let alone giving business advice. Yes, it's legal, yes, I've done it multiple times across multiple corporations I've owned and yes, every time a dollar was more then zero dollars. For the rest of your statement I'll reserve the right to worry about it on my own terms...

 

[Alex Davidoff]

bacha29's got it right. You are stupid if you think your going to get over on FX. Find another scam. This one has left the building in 2008!

This is not a scam, it's called legislation. If you don't know how to do it I'm not giving you free tax advice. My other two businesses are currently incorporated in South Dakota but operate exclusively in Georgia. Do you know the amount of money this adds to my bottom line? Enough to afford buying 5 FedEx routes on the side. I guess other things have left the building long time ago...

 

[Alex Davidoff]

Just set up a 501c3 and move your money through it. Alex knows what I'm talkin bout.

I do. And a few other. It's just amazing how most people bitch about their contracts with FedEx not giving them enough to support the business but be totally ignorant and oblivious to strictly legal ways to improve their bottom line at the same time. From what I've gathered so far looks like to me most troubles for the contractors come from lack of solid business background and experience. The contractor business is very simple as a structure, the heavy lifting is already done by somebody else, most regular business fundamentals are omitted (sales, marketing, market research, competition, business development, accounting, investment, expansion etc.) due to the format and it looks like anyone with some free cash can jump on board. Then the crying starts...

 

[UpstateNYUPSer(Ret)]

This would be why most credit card companies set up shop in either South Dakota or Delaware.

 

[bacha29]

This is not a scam, it's called legislation. If you don't know how to do it I'm not giving you free tax advice. My other two businesses are currently incorporated in South Dakota but operate exclusively in Georgia. Do you know the amount of money this adds to my bottom line? Enough to afford buying 5 FedEx routes on the side. I guess other things have left the building long time ago...

I was a Day 1 contractor for 23 years going back to the early years of Roadway Package System. You can game the tax code all you want but you still have come to back to the real world of trucking when you go into the terminal in the morning and what do you find? Flat tires, dead batteries, busted springs, the floor covered with engine oil, transmission oil, anti freeze, busted windshields, cracked heads, holes on radiators etc. Oh and that guy who is supposed to be there to drive the truck? Well, he's off sick too hung over to drive or he got in a bar fight and is in the ER with a busted jaw and teeth knocked out or he's in jail for selling for selling drugs on the side, receiving stolen property or for beating up his old lady the night before or he gets called in some morning for a random and he fails it.So what do you do? Well, that's your so called manager's job to figure that out. But wait, he quit two days ago. Now your standard UPS driver gets $34 an hour full benefits including an employer paid healthcare plan and a defined benefit pension. Yet you are completely confident that you will always have a fully trained and route familiar person there every day who you will demand that he not just match what that UPS driver does in a day but to exceed it and do it for a small fraction of what the UPS driver gets in wages and zero benefits. Why because that UPS drivers daily compensation will exceed what that entire route of yours will GROSS in a day.You can game the tax code all you want but your precious little bottom line still comes down to your ability to find people who will go out there and deliver top of the scale performance for bottom of the scale money and do it on a consistent daily basis for an extended period of time. If you expect them to be perceived as professionals perform as professionals, behave as professionals, project an image as professionals then they will EXPECT TO BE PAID AS PROFESSIONALS not like fast food workers. If you refuse to do that because your bottom line is all that matters then if this endeavor turns out to be a nightmare you will have nobody to blame but yourself.

 

[dvalleyjim]

I too was an original Roadway contractor and did it for 20 years. I think Alex may be new to this. What to do to avoid taxes is one thing. Probably what I would consider the easiest part of the job. Running the day to day operation with multiple drivers and trucks is another. Plus the profit margins of what your actually getting paid compared to your risk doesn't make sense.

 

[bacha29]

I too was an original Roadway contractor and did it for 20 years. I think Alex may be new to this. What to do to avoid taxes is one thing. Probably what I would consider the easiest part of the job. Running the day to day operation with multiple drivers and trucks is another. Plus the profit margins of what your actually getting paid compared to your risk doesn't make sense.

No question about it DVJ. Alex appears to be a member of the investor class whose sole concern is the bottom line when he needs to be focused on what's running out the bottom of the truck. All 3 of us original day 1 contractors had the chance to take on extra routes as they were created. None of us did. The very modest returns wasn't worth the aggravation made even worse by the depressed rural area we covered. Several other s who came afterward tried but didn't last long and the contractors who remain are multi route only because they have to be . And recently when some more routes became available at very attractive prices none would bite on it even though they had been servicing those routes not by choice but because they had been defaulted on by the contractor who owned them.So they had to go outside the building to find someone who only took them because his goal is to acquire line haul routes.

 

[dvalleyjim]

No question about it DVJ. Alex appears to be a member of the investor class whose sole concern is the bottom line when he needs to be focused on what's running out the bottom of the truck. All 3 of us original day 1 contractors had the chance to take on extra routes as they were created. None of us did. The very modest returns wasn't worth the aggravation made even worse by the depressed rural area we covered. Several other s who came afterward tried but didn't last long and the contractors who remain are multi route only because they have to be . And recently when some more routes became available at very attractive prices none would bite on it even though they had been servicing those routes not by choice but because they had been defaulted on by the contractor who owned them.So they had to go outside the building to find someone who only took them because his goal is to acquire line haul routes.

I agree with you, but I was offered another route after one year of contracting. The TM said: "you want another route?'" I said: 'I don't want to buy one." He said: "We'll give you one, just put 2300 down on a truck and you gotta another route." I added a route a year ever since then. When I got to four I'd sell a route and truck. They didn't like multi-van contractors to have more that 2 at the time so I always ran 3-4 and kept selling the excess. It was sweet! I never had a manager. That was me! Know I see these investor ISP types and they don't know anything. They couldn't tell you what to do if you held a gun to their head. I see them talking about taxes, and business stuff. Big deal. That's the easy part. I had an accountant you wouldn't believe. She saved me thousands of dollars. "Inc. in another state" no S Sherlock.

 

[bacha29]

I agree with you, but I was offered another route after one year of contracting. The TM said: "you want another route?'" I said: 'I don't want to buy one." He said: "We'll give you one, just put 2300 down on a truck and you gotta another route." I added a route a year ever since then. When I got to four I'd sell a route and truck. They didn't like multi-van contractors to have more that 2 at the time so I always ran 3-4 and kept selling the excess. It was sweet! I never had a manager. That was me! Know I see these investor ISP types and they don't know anything. They couldn't tell you what to do if you held a gun to their head. I see them talking about taxes, and business stuff. Big deal. That's the easy part. I had an accountant you wouldn't believe. She saved me thousands of dollars. "Inc. in another state" no S Sherlock.

Yep, that's trucking for you. When it comes to route trucking it still comes down to the man/woman in the truck who gets to the same place at the same time everyday is satisfied with the work he/she is doing and what they're being paid and has the type of personality that will gain the acceptance of the people at that particular stop. The number crunchers who don't know anything about how machines and the people who operate them work or understand the culture of trucking are in for a tough time especially if they talk down to or look down on the people they are counting on to make them rich.

 

[dvalleyjim]

I'm retiring in 3 yrs. I drive for a corporation that has 2 owners that couldn't deliver a pkg if they had to and one manager that totally takes advantage of their operational ignorance. They have to have him or there screwed if someone doesn't come to work. The only people who run this operation are the drivers. The trucks gets fixed when they break down. I take mine to my own mechanic. I told the owner I don't have time for breakdowns. The manager just makes sure he's only there 3 hrs. a day. Just shake my head and am glad it's not mine!

 

[bacha29]

I'm retiring in 3 yrs. I drive for a corporation that has 2 owners that couldn't deliver a pkg if they had to and one manager that totally takes advantage of their operational ignorance. They have to have him or there screwed if someone doesn't come to work. The only people who run this operation are the drivers. The trucks gets fixed when they break down. I take mine to my own mechanic. I told the owner I don't have time for breakdowns. The manager just makes sure he's only there 3 hrs. a day. Just shake my head and am glad it's not mine!

It's simply amazing. I got out in the late spring of 2015. Two reasons. First I knew that ISP was going to go nationwide based on comments in the annual report and figured that it would be later that year (August).. I wasn't about to get into a bidding war for the few routes that might come available beside at age 62 and coming up for duel hip joint replacements and a kid the at the terminal who was thinking along the same lines wanted it. His Dad was the VP of the local bank but even the kid's own bank wouldn't lend him any money. Had to finance at 100% for him. He's making his payments on time plus above current rate interest but he wastes a lot of money. I sold him a very good condition van but one of his guys and they just don't care as long as they get done in the shortest time possible busted the spring carriage. Instead of sending it out for a rather simple repair he let it sit there for months paying out his keister for a rental. Two weeks ago I saw his driver again running a rental. I asked him why. Now understand he bought a very good shape van with nearly new tires but let them bald down so low they wouldn't let him take it out anymore. So he had to fork over mucho buckarinos for a 15 foot budget and still had to take it for tires. Rest assured when he gets a belly full of that "negotiated" rate he won't have money to waste like this especially in a depressed rural area like this one.

 

[12yearsaslave]

Without any further ado I need first hand confirmation on the legal entity registration options for contractors. Since S-Corp is the obvious choice, my question is can it be incorporated in a state (tax friendly) other than the state the business operates in? Reasons for doing it? All employees (including owners) do not pay state income taxes on salaries and dividends when distributed are only taxed on federal level. Note, I'm talking about registering the Corp in one state and only file Certificate of Authority for Foreign Corporation with the state the business will operate in, and not the scenario where a separate legal entity of the same company is registered in the state of operation. Since you all seem to share the general notion that drivers are underpaid, here's a way to offset it. I doubt FedEx could have any legal way to prevent this.

I come from corporate business and found the financial terminology used in the FedEx contractor business to be extremely fast&loose. That adds a lot of confusion and repeated questions.It took me a while to wrap my brains around the fact that brokers list "cash flow" as a single figure (cash flow not viewed over a period of time is useless number) while actually mean "gross profit" which everyone seems to call "net" which is equally incorrect. And because this is a very simple business in terms of structure it's very easy to itemize and use the simplest possible formula: Revenue - Cost of Service/Operating Expenses - Gross Profit - Net Profit. Just a thought...

Finally, any advice or thoughts on doing the business in the state of Georgia?

Thank you for your comments in advance!

Disregarding the Fedex side of things, normally the state will go after you eventually anyways, unless you can show your business operates in a different state, which in our business is impossible.