Last Updated August 12, 2025
Choosing a business structure is one of the first decisions you’ll have to make as a new owner-operator. LLCs and sole proprietorships are the most common business structures for owner-operators, but an S-Corp is also an option. Each structure has its own pros and cons that you’ll need to consider.
So, which is the best business structure for owner-operators? It partly depends on how you plan to run your business. Let’s compare each option to help you find the right fit.
Why Is Choosing the Right Business Structure Important?
The right business structure will have a significant impact on how you run your trucking business. Each business structure has its own level of liability protection and tax obligations (for both the business and the individual). Some are more complex than others, with more extensive reporting requirements. Your business structure can even influence how others perceive your work as an owner-operator.
Ultimately, it’s important to make the right decision as it will allow you to run your business in a way that most closely aligns with your goals.
Different Types of Business Structures for Owner-Operators
Do you prefer the ease and simplicity of a sole proprietorship—or do you want the liability protection of an owner-operator LLC or S-Corp? Here’s a closer look at how different types of business structures compare.
LLC
An LLC (or limited liability company) is usually recommended for newer trucking companies, mainly because of the liability protection it offers. With an LLC, your personal assets (like your home and personal bank account) are protected from business debts and lawsuits. If your trucking business went bankrupt, your personal finances wouldn’t be at risk.
At the same time, LLCs allow for pass-through taxation, meaning you can file taxes on your personal tax return, which is easier and simpler than an S-Corp. Trucking business LLCs also generally lead to more credibility with potential clients by helping you look more professional.
An LLC does require more paperwork than operating as a sole proprietor. While filing fees are relatively straightforward and inexpensive, some states also require LLCs to file an annual report and pay annual report fees.
S-Corp
An S-Corp is the most complex business structure available to owner-operators. Usually, it’s only recommended once your income reaches a certain level and only if you’re focused on growing your business. Incorporating as an S-Corp requires selecting a board of directors, holding regular meetings, and keeping corporate records. There are much higher fees and ongoing expenses associated with an S-Corp.
By forming as an S-Corp, the owner-operator is essentially treated like an employee of the business. This means that you would pay yourself a reasonable salary from the corporation and then receive additional distributions in the form of corporate profits. This can help you save money on self-employment taxes, as your distributions and salary would be taxed at the personal level. If you have high enough net income, the tax savings can outweigh the extra costs of forming an S-Corp.
While an S-Corp also offers limited liability protection, owners must be careful to follow all S-Corp requirements regarding paying themselves, maintaining separate business accounts, holding regular meetings, and so on. The documentation needed to remain compliant can be time-consuming and complex, and if you don’t follow the rules and regulations, you could be held personally liable for the business’s debts and activities.
Sole Proprietorship
A sole proprietorship is the simplest business structure for owner-operators, with the least amount of paperwork and legal requirements. In some states, sole proprietors don’t even need to file paperwork or obtain a business license to begin operations. However, in trucking, all businesses must be licensed.
Sole proprietors have complete control over their business decisions, unlike S-Corps which involves a board of directors.
While a sole proprietorship is easy to set up and manage, it does have some drawbacks for owner-operators. Like an LLC, sole proprietors must pay self-employment tax, which is higher than the W-2 tax rate. Sole proprietorship doesn’t offer liability protection, meaning your personal assets could be at risk if you faced a lawsuit or business debt.
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Which Is the Best Business Structure for Owner-Operators?
As you create your trucking business plan, you’ll need to consider whether an LLC, sole proprietorship, or S-Corp structure is right for you. While there’s no one-size-fits-all answer to the best business structure for owner-operators, a good rule of thumb is to establish an LLC as a new trucking business and consider an S-Corp if you’re focused on growing your business.
For most owner-operators, meeting with a tax expert or legal advisor is an important step in deciding which business structure is right for them. By doing your due diligence to understand the pros and cons of each option, as well as how they apply to your business’s existing needs, you can choose the right structure for you.
Michael McCareins is the Content Marketing Associate at altLINE, where he is dedicated to creating and managing optimal content for readers. Following a brief career in media relations, Michael has discovered a passion for content marketing through developing unique, informative content to help audiences better understand ideas and topics such as invoice factoring and A/R financing.
