Are you dreaming of a career that offers freedom, adventure, and endless opportunities? Whether you're tired of sitting behind a desk or simply seeking a new challenge, starting your own trucking company might just be your ticket to an exhilarating future.
Our comprehensive guide is here to take you on an informative ride through everything you need to know to get your trucking dream off the ground. This industry is heavily regulated and knowing the ins and outs can save you a lot of time and headaches.
As a DOT carrier ourselves, we know a thing or two and a couple of the pitfalls new authorities run into, so buckle up for a journey into the world of starting your trucking company – from navigating licensing requirements to discovering exactly how to get paid, we have all the details covered.
Set up your business
When starting a trucking business, one of the first decisions you'll need to make is choosing a business structure. The most common options for trucking companies are sole proprietorship, partnership, corporation, and LLC.
As a sole proprietor, you retain full control but have unlimited liability. Partnerships allow you to share ownership with others, but also come with joint and several liability. If limiting liability is your priority, incorporating as an LLC or corporation better shields your personal assets.
Corporations require more formalities like board meetings and annual filings, while LLCs provide flexibility along with liability protection. The business structure also impacts taxes, ability to raise investment capital, and your personal level of control.
You will want to consult with an accountant and/or attorney to determine if LLC, corporation, partnership or sole proprietorship is the right fit based on your business goals, personal protection, and tax considerations.
After you have your structure set up you can apply for an EIN (Employee Identification Number) with the IRS. This will give your company a number (not associated with you personally). They will also be able to help you with that.
Determine the type of equipment you want and are able to purchase. Remember you will want to first start at determining your needs. Will you be tractor only or do you need a trailer? If you’re going to purchase a trailer are you going to only be a dry van or are you interested in running refrigerated goods?
Choose your equipment
Determine your needs
Determine the type of equipment you want and are able to purchase. Remember you will want to first start at determining your needs. Will you be tractor only or do you need a trailer? If you’re going to purchase a trailer are you going to only be a dry van or are you interested in running refrigerated goods?
Don’t forget that with each piece of equipment your maintenance requirements and costs will increase.
Set a budget
One of the biggest investments when launching a trucking company will be purchasing your equipment. Setting a clear budget for these major purchases is very important for several reasons.
First, it forces you to determine exactly what you can afford based on available capital and financing options. Sticking to a budget prevents you from overspending and taking on too much debt when buying your truck, trailer, and gear. It’s advisable to have your accountant help you draft numbers to what you can afford to meet your needs.
Inspect the equipment
After you’ve found your equipment you’ll want to inspect the equipment and take it for a test drive. If you have any issues whatsoever you will definitely want to ask and possibly have a mechanic look at it.
Maintenance records
It’s incredibly important to go over the maintenance records to ensure you are getting the equipment in the appropriate condition advertised. You will also want to keep this in mind as you run your business as record keeping is a major part of the trucking industry.
Choose insurance for your company and equipment
After you have your truck, it’s now time to focus on insurance for your company.
The FMCSA (Federal Motor Carrier Safety Administration) regulates the trucking industry and requires specific insurance coverage. Commercial auto liability insurance is a primary requirement, with coverage amounts varying based on the type of goods transported.
- Non-Hazardous Cargo: $750,000
- Hazardous Cargo: $1,000,000
- Portable Tanks: $5,000,000
Cargo insurance is mandatory for working with brokers and shippers.
Various forms must be submitted to the FMCSA through the insurance company to obtain an MC number, such as:
- BMC-91 - public liability insurance.
- BOC-3 - processing agents.
- MCS-90 - endorsement that creates an obligation to pay any judgment resulting from negligence of operations.
Understanding and complying with FMCSA truck insurance requirements is important for legal and safe operation in the trucking industry. You read more about optional insurance coverages you will likely need in our latest article.
Register with industry agencies
Next you will register your company with multiple agencies in the trucking industry.
We have a breakdown of the following:
DOT - Department of Transportation
In the trucking industry, DOT typically refers to regulations and requirements set forth by the Federal Motor Carrier Safety Administration (FMCSA), a branch of the DOT.
FMCSA's mission is to promote safety in motor carrier operations and reduce crashes, injuries, and fatalities involving commercial motor vehicles. DOT regulations cover a wide range of aspects, including vehicle safety, driver qualifications, hours of service, hazardous materials transportation, and more.
A DOT number is a unique identifier assigned by the FMCSA to motor carriers, including trucking companies, bus operators, and individual commercial vehicles, engaged in interstate commerce. The DOT number serves several purposes:
- Safety Oversight: It allows the FMCSA to track and monitor the safety performance of commercial motor carriers and drivers, ensuring compliance with safety regulations.
- Enforcement: Law enforcement agencies, as well as government authorities, use DOT numbers to verify the legitimacy and compliance of motor carriers and drivers during inspections and roadside checks.
- Data Collection: DOT numbers facilitate the collection of safety data, which is used to analyze trends and improve safety regulations within the industry.
Apply for a DOT Number: (free)
Here's a simplified explanation of the process to apply for a DOT number:
- Access the FMCSA Portal: Visit the FMCSA's online Unified Registration System (URS) at https://www.fmcsa.dot.gov/registration.
- Create an Account: Sign in or create an account on the URS system.
- Complete the Application: Fill out the online application, providing detailed information about your business, including its structure, ownership, and contact details.
- Submit Application: Once all information is provided, submit your application through the URS.
- Waiting Period: The FMCSA will review your application, conduct necessary checks, and assign you a DOT number if everything is in order.
- Compliance: Ensure that you comply with all DOT regulations, including safety requirements, vehicle inspections, driver qualifications, and hours of service regulations.
FMCSA - Federal Motor Carrier Safety Administration
The Federal Motor Carrier Safety Administration (FMCSA) is a branch of the United States Department of Transportation (DOT) responsible for regulating and ensuring the safety of commercial motor carriers and drivers on U.S. roadways. It is through FMCSA that you will gain your authority to operate.
Apply for an MC number: ($300 fee)
Identify Your Business Type: Decide whether you'll operate as a sole proprietorship, partnership, corporation, LLC, or other legal entity. Your business structure affects the application process.
Have your USDOT Number: In most cases, you'll need a USDOT (United States Department of Transportation) number before applying for an MC number. You can obtain a USDOT number through the FMCSA registration system.
Visit the FMCSA Portal: Go to the FMCSA's online registration portal at https://www.fmcsa.dot.gov/registration/get-mc-number-authority-operate
Start Registration: Sign in or create an account on the URS. Complete the online application, providing accurate and detailed information about your business, including its structure, ownership, and contact information.
Payment: Be prepared to pay the required fees for MC number registration. The fee is $300 for permanent authority. If your authority lapses you will need to pay $80 to reinstate it.
Submit Application: Once you've filled out all necessary information and paid the fees, submit your application through the URS.
Wait for Processing: FMCSA will review your application, conduct necessary checks, and assign you an MC number if everything is in order.
Compliance: Ensure that you comply with all FMCSA regulations and safety requirements relevant to your operation. This includes maintaining proper insurance coverage, conducting safety audits, and adhering to Hours of Service (HOS) regulations.
IFTA - International Fuel Tax Agreement
IFTA is like a one-stop shop for fuel taxes. Instead of having to keep track of fuel purchases and mileage in each state or province you travel through, IFTA allows you to report all of this information on a single tax return. Here's how it works:
Fuel Records: Keep detailed records of fuel purchases and usage for each trip. This includes information such as the date, location, gallons purchased, and the vehicle's mileage at the beginning and end of the trip.
Quarterly Reporting: IFTA requires you to file quarterly fuel tax returns. These reports summarize your total mileage and fuel consumption in each state or province you traveled through.
Calculating Taxes: Using the data you've collected, calculate the amount of fuel taxes owed to each jurisdiction. This is typically based on miles traveled in each jurisdiction and the fuel consumed there.
Submitting Payments: Pay the total amount of fuel taxes owed for all jurisdictions on your IFTA tax return. You'll send this payment to your base jurisdiction, which is typically the state or province where your business is based.
Renew Your IFTA License: Ensure that you renew your IFTA license annually to stay compliant.
Record Keeping: Maintain detailed records for at least four years, as you may be subject to audits to verify the accuracy of your IFTA tax returns.
To apply for the IFTA fuel tax you will need to register through your state’s website or at your local clerk.
IRP - International Registration Plan
The IRP is an agreement between US states and Canadian provinces. It simplifies the process of apportioning and distributing registration fees and taxes for motor carriers operating in multiple jurisdictions.
Under the IRP, commercial motor carriers are required to register their vehicles in their base jurisdiction (the jurisdiction where they have an established place of business). This base jurisdiction then apportions the registration fees among the jurisdictions in which the carrier operates.
To apply, you need to fill out Schedule A/E and B, depending on the state the specifics may vary but will include:
- Federal Employer Identification Number (FEIN): Input the unique identification number assigned to your business by the Internal Revenue Service (IRS) or your social security number.
- Vehicle Identification Number (VIN): Located on the Manufacturer's Certificate of Origin or title for your truck.
- Unladen Weight: Refers to the weight of your truck when it is not carrying any cargo.
- Gross Combined Weight Rating (GCWR): Indicates the maximum allowable weight of your semi-tractor and trailer when fully loaded, as specified by the tractor manufacturer. You can typically find this information on your truck's VIN plate.
- Axle Count: Denotes the number of axles on your tractor unit alone. A standard truck tractor typically features three axles.
- Purchase Price: The amount you paid to acquire the vehicle.
- Manufacturer's Base Price: Represents the original, manufacturer-listed price of the fully equipped vehicle when it was brand new.
To find a list of contact information for each IRP jurisdiction you can visit: https://www.irponline.org/search/custom.asp?id=5283
UCR - Unified Carrier Registration
UCR stands for Unified Carrier Registration, and it is a federal program that mandates motor carriers, including trucking companies, to register and pay annual fees based on the size of their fleet. The UCR program is designed to support the safety and administrative costs associated with motor carrier oversight and enforcement activities.
Why is it necessary to register for UCR?
Federal Requirement: UCR is a federal requirement enforced by the U.S. government. It is mandatory for all motor carriers operating in interstate or international commerce in the United States.
Supports Safety: The fees collected through UCR registration go toward funding essential safety programs, including the enforcement of motor carrier safety regulations. These programs help ensure the safe operation of commercial vehicles on U.S. roadways.
Simplifies Compliance: The UCR program streamlines the registration process by consolidating the registration requirements into a single system. Instead of dealing with separate registration processes in each state, motor carriers only need to register once through UCR.
Avoid Penalties: Non-compliance with UCR can lead to penalties and fines. Registering and paying the required fees on time helps motor carriers avoid legal issues and disruptions to their operations.
The fee starts at $37 (total) for up to 2 trucks. If you have a question about if you are required to register, you can visit UCR’s compliance helper.
After all these have been completed then you can register for plates for your truck.
Register for your plates
Once you have filed your IFTA and IRP you’ll now want to register with your state for plates. Once you file and register you will receive your Cab Card for your tractor which will give you authority to drive your vehicle in other states (with the exception of a couple).
You will need to have a way to keep record of your miles in each state for reporting purposes. Each year your plates will need to be renewed and costs will vary based on the percentage of miles driven in IRP jurisdiction.
An example of how your filing would look if you operated in 4 states during the year:
Factoring and invoicing: how will you get paid?
When it comes to just starting out and getting paid you will need to figure out how to get paid.
Understanding factoring
Factoring allows you to sell your unpaid invoices to a factoring company at a discounted rate, giving you immediate access to cash.
The process is simple: once you deliver goods or services and generate an invoice, instead of waiting for weeks or even months for the payment, you can send the invoice to a factoring company. They will verify its authenticity and legitimacy before offering you a percentage of the invoice's value upfront, within 24-48 hours, while charging between 2.5% to 5% as a fee.
Factoring provides several benefits for trucking companies beyond just improving cash flow. It eliminates time spent on chasing down late payments and handling collections efforts.
Additionally, it minimizes risk by transferring creditworthiness responsibility onto the factoring company who evaluates the payment history of potential clients before accepting their invoices for funding. This is why a lot of trucking companies use factoring as an effective financial tool in managing their operations efficiently despite payment delays from their customers' end.
Benefits of factoring
One of the major benefits of factoring in trucking is improved cash flow. With factoring, you don't have to wait 30, 60 or even 90 days for customers to pay their bills. Instead, you can get paid as soon as you deliver the load and submit your invoice.
This instant access to funds allows you to pay drivers, cover fuel costs, and handle day-to-day expenses more efficiently - ultimately reducing stress and improving your overall operations.
Invoicing best practices
If you prefer not to use factoring, there are alternative ways to ensure timely and efficient invoicing. One option is to implement a digital invoicing system that allows you to easily generate and send invoices electronically. This eliminates the need for manual paperwork and streamlines the entire process.
Another strategy is to establish clear payment terms with your clients upfront. By including specific payment due dates on your invoices and clearly communicating these expectations with your customers, you can avoid delays in receiving payment.
You can also offer incentives such as early payment discounts or penalties for late payments that can help encourage prompt remittance.
Ultimately, the key to successful invoicing without using factoring in trucking lies in adopting efficient tools and being organized. By leveraging digital solutions and knowing when you should be receiving payments, you can streamline your invoicing process while maintaining some control over your cash flow.
It’s not advisable to invoice directly when you start out but if you do choose to go this route, we have put together a trucking invoice template for you to use. You can customize it to your liking and then use it to invoice your customers.
Final thoughts on preparing your new trucking business
In conclusion, becoming a new trucking carrier can be a challenging yet rewarding endeavor. By following the steps outlined in this article, including obtaining necessary licenses and permits, securing insurance, and establishing your authority, you can set yourself up for success in the industry.
Remember to stay informed about regulatory changes and industry trends to adapt and grow your business. With determination and perseverance, you have the potential to build a thriving trucking company that gives you the freedom you want while providing a valuable service to customers. Now is the time to take action and with TrueNorth at your side, you can count on making every mile optimized for success.