How to Start a Trucking Company
A full guide to getting your trucking company up and running efficiently and effectively
So you are looking to start a trucking company and possibly obtain your own authority with the FMCSA (Federal Motor Carriers Safety Administration) and DOT (Dept. of Transportation).
Here are some frequently asked questions that this article will help you to answer:
- How do I get a DOT & MC Number (Motor Carrier) number for my trucking company?
- What insurance do I need for my start up trucking company, and what is the best agency to work with?
- How do I hire an experienced licensed CDL (Commercial Driver’s License) driver for my trucking company?
- What is Truck Receivable Factoring, and how does it work?
- What is the best fuel card program for my new trucking company?
- What is the best corporate structure for my trucking company?
- Who can I get my trucking equipment from? And how can I finance this equipment?
- What government and state regulations does my company need to comply with?
- Where do I get access to the best loads available?
There certainly is a lot to know, and below is a detailed step-by-step guide and explanation to help you start your trucking company off correctly:
1. Build a business plan. This will help you to create a roadmap or strategy for your businesses future. Staying on track will be critical to the success of your business within the first year. There are simply too many details to remember and having a solid business plan will keep you on the right path. Here are some common questions to answer in your business plan.
- What type of Services will your company provide?
- Will you be running Interstate or Intrastate?
- What will my startup costs be?
- What legal company structure do I need and why?
- What State should I incorporate my company in and why?
- Who are my current competitors and what are their strengths & weaknesses?
- What will give my company a leg up on the competition?
- What is the current and projected state of the industry?
- What will your new hire and driver requirements be?
- What brokers will you use to obtain the best loads?
- What will the expenses be in the 1st year of the business and beyond?
- What are some key goals to accomplish (Short term and Long term)?
2. Work with a trusted advisor or mentor. Whether this is a professional firm, another business owner or a trusted friend, make sure that your trusted advisor has past and current experience within the industry and has been successful as well. Bouncing ideas and sharing the “Business Plan” with your advisor will help you in your journey. There are many companies that will help you get started and be your trusted advisor in your early years. These companies can be a great investment as they will help you save time and reduce costly mistakes along the way.
3. Set up your Legal Business Entity and register it within your state. Choosing the correct legal entity for your specific state and type of trucking business will vary. We suggest you speak directly with your advisor or CPA to determine what the best structure will be for your unique business. Below are some common types of company structures we see on a regular basis:
- Limited Liability Corporation (LLC) (Most Common)
- Sole Proprietorship
- Partnership
- Corporation (C-corp, S-Corp, etc)
4. Register and Apply for the following federal, state and trucking specific licenses, and general requirements. Keep in mind there are companies that offer services in order to help you through the entire setup / startup process. Do your research to work with a trusted adviser or mentor who can help you with the following:
- EIN Number – Your business entity will need an Employee Identification Number (EIN). This is a unique ID number registered to your business. Obtaining this EIN is free and a simple process.
- USDOT Number – the United States Department of Transportation (DOT) requires all trucking companies to have a unique identifying number. These numbers are used to report things like vehicle and driver inspections, safety information, accident reports and more.
- Motor Carrier Number (MC) – If you are setting up your company as an “Interstate Carrier” meaning you will be hauling freight across state lines, you will need to register your business and obtain a Motor Carrier Number (MC Number). The MC number is also needed if your business will be operating under its own authority.
- BOC-3 Filing – The trucking company must choose a process agent to submit this form (BOC-3 Filing) on behalf of the trucking company. A Process agent can receive and be served various court papers and documents in all of the states in which you do business. There are many good process agents, make sure you choose one that works in all of the states you are in as well. Reach out today to Corporate Creations who is a trusted nationwide processing agent.
- Heavy Vehicle Use Tax (HVUT) – This is a fee that is assessed annually on heavy vehicles operation on public highways. Vehicles 55,000 lbs. and higher will pay this fee. There are some vehicle exemptions mostly for low mileage being traveled.
- Unified Carrier Registration (UCR) – This is a registration for all trucking carriers, brokers and freight forwarders who operate within Interstate commerce. The cost in inexpensive and is based on the number of trucks you have in your company.
- International Fuel Tax Agreement (IFTA) – You will need to register your company to submit quarterly fuel tax reports. This provides trucking companies with an easier and more streamlined way of reporting fuel use through all of the lower 48 U.S. states including Canada. The correct taxes will be charged and distributed to the correct states.
- International Registration Plan (IRP) – This registration is an agreement for companies with trucks traveling between two or more member jurisdictions. IRP and apportioned plates are essentially the same thing, apportioned meaning you will pay a portion depending on the miles traveled within each state.
- FMCSA Registered Drug & Alcohol Testing / Consortium – FMCSA requires drivers to be able to pass a drug test. It is a good idea to register and participate in a licensed and registered drug testing consortium. There are many consortiums that are accepted.
- State Filings and other State registrations – Check with your states office and tell them about your specific plans to start a trucking company and what you will be doing. Some states will require weight distance tax permits, bridge permits, and other state cargo filings to be submitted.
5. Finding the Right Equipment – There are many licensed equipment dealerships across the country selling and leasing semi-trucks and semi-trailers. Make sure you search around online and compare multiple equipment ad listings at a variety of dealerships before going to view the equipment in person. Unless you are buying a new piece of equipment it is always a good idea to hire a mechanic to go and inspect the equipment at the dealership location. If they don’t allow this, then that is a red flag. It is ok to trust, but always verify before making a purchase. Most dealerships will offer internal financing or put you in touch directly with a broker who can get you the most competitive loan for your business. Companies like Nationwide Equipment Finance can help you obtain a competitive trucking loan anywhere in the country. Working with commercial loan experts that specialize in the trucking industry is always the best bet and can save thousands of dollars in interest over the life of the loan.
6. Finding the Right CDL Drivers – This is consistently stated as the “Make or Break” stage/step in the process. Your CDL driver is the one who is representing your company on the road and at your vendors and customer’s location. They are typically one of the largest expenses or investments you will make in your company. Make sure to always hire drivers with good experience and a clean Motor Vehicle Record (MVR). An experienced driver will cost more but also will save you a ton in the long run.
Here are some ways to find CDL Drivers:
- Driver Recruitment firms
- Zip Recruiter
- Indeed
- Craig’s List
7. Trucking Insurance – Outside of the driver of the vehicle, the most important thing for your company to obtain correctly is the commercial trucking insurance package. It is always best to work with an agency who specializes in trucking insurance in your state. Road Ready Insurance Agency is licensed in all 48 states and specializes and focuses solely in trucking insurance. Road Ready will help you understand the coverages and advise you of what you need. Don’t put your trust in a “General Agent”. Go with a trucking insurance specialist who can help you get the right coverage and save you thousands of dollars per year.
Here are some of the basic trucking insurance coverages your trucking company will need to obtain: For a breakdown of more detailed coverages click here.
- Commercial Auto Liability (Trucking Liability): 1,000,000 combined single limit coverage.
- Motor Truck Cargo (Cargo Liability): 100,000 standard cargo coverage with 1,000 or 2,500 deductible
- Physical Damage (Comprehensive & Collision): Determined based on the Actual Cash Value (ACV) of your equipment.
- Trailer Interchange: Allows you to pull non-owned trailers for a stated value with an interchange agreement.
- Non-Trucking Insurance – (Bobtail): This provides you with 1,000,000 in liability coverage when you are operating your truck while NOT under dispatch.
8. Factoring Services – As a startup trucking company, most of the shippers and brokers will not pay you right away. They typically take a minimum of 30 days, and sometimes 60-90 days to pay on a load once it is successfully delivered. This can cause some major cash flow problems for companies without a lot of free capital. There are a variety of factoring services that can provide you with cash right away for a small fee. This is called factoring your trucking receivables and typically will not cost you anything upfront to set up. Most companies will require you to have a factoring agreement or contract on file with them.
9. Fuel Discount Card – There are many fuel discount cards that act as credit cards or pre-paid fuel cards. The one that has consistently seen the highest fuel savings in the country through a network of fuel providers like TA, Petro, TA Express, Fuel City and more is the TCS Fuel Card. This is a free fuel card which you can apply here.
10. Load Boards & Brokers – Getting set up with a variety of brokers and load boards will need to be done in order to maximize the chances of getting the best paying loads on the road. Make sure to interview multiple brokers and ensure they are transparent in their fee or pricing model. Most brokers will take around 10-15% of the load as a service fee for booking it for your company. Some brokers will also offer dispatching services as well for your company as you grow.
Here is a list of the top 5 load boards in the trucking industry:
Final Thoughts
Just like any business, knowledge is power. The more you can understand about your new venture the better. Spend the first few weeks or even months reading and learning the ins and outs of the industry. Remember some of the most important things are going to be developing a solid support team around you who will support your business and treat it like their own. A trusted advisor or mentor, specialized insurance and finance agent, trustworthy and reputable driver, and a fair freight broker will get you started on the path to success.