
When becoming a FedEx Linehaul contractor, one of the critical decisions you'll face is how to structure your corporation. All contractors operate as independent contractors to FedEx Linehaul, requiring them to form their own corporation. This is a FedEx requirement at the inception of the business, i.e. contracting FedEx Linehaul runs. FedEx Ground does not contract with LLCs, a new TSP (Transportation Security Provider) must be a Corporation.
FedEx Linehaul exclusively contracts with businesses established under state law as for-profit corporations, meaning LLCs, LLPs, sole proprietorships, partnerships, or limited partnerships (LTDs) are not accepted. As a FedEx Linehaul contractor, you have two corporate structure options: an S Corporation (S Corp) or a C Corporation (C Corp). While both offer distinct benefits, most contractors prefer the S Corp for its simplicity and tax advantages. Here's a breakdown of each structure to help you make an informed decision.
S Corporation (S Corp): The Popular Choice of FedEx Linehaul Contractors for Simplicity and Tax Efficiency
The vast majority of FedEx Linehaul contractors choose to set up their business as an S Corp, and with good reason. This option is the easiest to implement and allows you to get started quickly without the added complexity that can come with a C Corp.
Key Benefits of an S Corp:
Pass-through taxation: Unlike C Corps, S Corps do not pay federal taxes at the corporate level. Instead, any income the corporation earns "passes through" directly to your personal tax return. This means you avoid the double taxation that C Corps face, which can be especially beneficial for independent contractors like those working with FedEx Linehaul.
The example below demonstrates significant tax savings for trucking companies opting for S-corporation status.
Tax advantages for depreciation: Depreciation allows FedEx Linehaul contractors to recover the cost of assets, like trucks, over time by deducting a portion each year. This is especially important in the trucking industry, where equipment is vital and equally expensive.
For an S Corp, depreciation deductions flow directly to your personal tax return, reducing your taxable income more efficiently. Unlike a C Corp, which faces double taxation (at both corporate and individual levels), S Corp owners benefit from immediate tax savings, making it a more advantageous choice when applying depreciation.. Potential bonus depreciation in 2024 allows for even quicker upfront savings on new and used assets.
These benefits make the S Corp the go-to option for most contractors seeking a straightforward and efficient way to manage their business and taxes. However, while it offers the same liability protections as a C Corp, an S Corp limits the number of shareholders to a maximum of 100, all of whom must be U.S. citizens or residents.
C Corporation (C Corp): The Strategic Choice for Long-Term Holders and Unique Financing Needs
While not as commonly chosen as the S Corp, the C Corp still has its advantages—particularly for those looking to maximize long-term financial strategies or utilize retirement funds for financing. Additionally, unlike the S Corp, the C Corp allows for a larger number of shareholders, making it a better option if you're considering going public.
Key Benefits of a C Corp:
Rollover as Business Startup (ROBS): One of the main reasons why a FedEx Linehaul contractor opt for a C Corp is to take advantage of the ROBS program. This allows you to use your retirement funds, such as a 401(k), to finance the purchase of your business without incurring penalties or taxes. For some, this can be an attractive option if they are looking to invest their retirement savings into their FedEx Linehaul contractor business.

Capital gains tax benefits: As a new FedEx linehaul contractor, you might eventually consider selling your business down the road. If you plan to hold onto it for at least five years, forming your business as a C Corp can provide a significant tax benefit when you sell. This relates to capital gains tax, which is the tax imposed on the profit earned from the sale of an asset.
Here’s how it works: Normally, when you sell a business, the profit from that sale is subject to capital gains tax. However, with a C Corp, if you meet certain conditions (such as holding the stock for more than five years and investing in qualified small businesses), you may be eligible for a tax break that allows you to exclude a large portion of those capital gains from taxes.
This could be important to you because, as your FedEx linehaul operation grows, it may increase in value. When the time comes to sell, instead of paying a hefty tax on your profits, you could save a substantial amount in taxes. This makes C Corp status a smart consideration for long-term business planning if you intend to grow and sell your business in the future.
The Downside of a C Corp:
The most significant disadvantage of a C Corp is the issue of double taxation:
Corporate taxes: The C Corp is taxed at the corporate level, typically at a rate of 20% or higher.
Dividends: Any dividends paid to shareholders, along with retained profits and their distributions, are subject to double taxation—C Corps must pay taxes first at the corporate level on the company's profits and then again at the individual level when shareholders receive those payments.
While the C Corp offers some strategic financial advantages, this double taxation is a significant drawback for many contractors. Below calculation highlights how double taxation in C Corp affects contractors’ take home pay.

Incorporate Your Business With Experts
For new FedEx Linehaul contractors, navigating the incorporation process can be complex. Engaging with experienced professionals can significantly simplify the experience.
While there are various options available, Northwest is among the top choices among FedEx Linehaul contractors. Its reputation for efficient service and ongoing resources makes it a solid option for busy entrepreneurs looking to manage their incorporation effectively.
It is important to note that both S Corps and C Corps are tax designations that you need to file with the IRS, and while Northwest can assist in the incorporation process, your CPA will usually handle filing tax designations on your behalf.. By seeking the right support, you can ensure that your business is set up correctly, allowing you to focus on growth while remaining compliant with state regulations.
Choosing between an S Corp and a C Corp as a FedEx Linehaul contractor depends on your financial goals, tax preferences, and future business plans. The simplicity and tax efficiency of the S Corp make it the top choice for most contractors, while the C Corp is appealing for those with long-term plans who want to strategically benefit from unique financing and tax breaks. Be sure to consult with financial professionals to decide which structure best fits your needs before taking the next step in your FedEx Linehaul journey.
Ready to Take the Next Step in Your FedEx Linehaul Journey?
Incorporating your FedEx Linehaul business is a significant milestone, and having expert support can make all the difference. If you’re looking for reliable accounting services to support your financial decisions and keep your business on track, contact Linehaul Central today!
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