For people interested in starting a trucking business, things are more complicated than they seem. Many people who lease or run under other companies and want to move out on their own don’t realize how complicated or expensive starting your trucking company is. This primer is dedicated to giving you the information you need to understand the process and make a good decision on starting your own company.
The Prerequisites for Starting a Trucking Company:
Some things need to be taken care of before you can even start applying for your own trucking company. The following steps are general business items that should be done before anything else and that will provide a firm foundation for your new business.
Registering as a Business
When starting a trucking company, you need to create a business entity so that you have liability protection for your personal assets. You need to form either a corporation or a limited liability company (LLC) to get the protection you need. If you register either of these types of a company, it will prevent anyone from pursuing your personal assets in order to satisfy a claim against your company. For an inexpensive but good company to incorporate or form a limited liability company in just ten minutes at a lower cost than most attorneys, see the link above. Although both an LLC and a corporation can help protect a business owner from liability, many business owners choose an LLC to conduct their business.
Getting an Employer Identification Number (EIN)
The application for your Federal Identification Number, or your EIN, can be done online, at the irs.gov. website. According to IRS.gov, you may apply for an EIN online if your principal business is located in the United States or U.S. Territories, which applies to almost all of us. Whoever is applying online must have a valid Taxpayer Identification Number (SSN, ITIN). Some other important points are that: 1) You must complete this application in one session, as you will not be able to save and return at a later time. 2) Your session will expire after 15 minutes of inactivity, and you will need to start over. Once you’ve completed the application, and after all validations are done, then you will get your EIN immediately upon completion. You can then download, save, and print your EIN confirmation notice.
A Commercial Driver’s License (CDL)
If you are driving a vehicle over 26,000 lbs. You will need to make sure you have a CDL to run legally.
Regulatory Requirements and Trucking Paperwork:
When starting a trucking company, there is a lot of paperwork that is required. For those who do not wish to navigate the swamp of forms and regulations, we highly recommend a company like Authority Express LLC for an easy and efficient way to accomplish this paperwork. For those of you who wish to go it alone, here is what you are going to need, in no particular order:
International Fuel Tax Agreement, or IFTA
IFTA is an agreement among all states (except Alaska and Hawaii) and Canadian provinces (except Northwestern Territories, Nunavut and Yukon) to simplify the reporting of fuel used by motor carriers operating in more than one jurisdiction. Persons who operate “qualified motor vehicles” over 26,000 lbs. are subject to IFTA licensing, reporting and record-keeping requirements unless the vehicle is exempt or a trip permit is obtained.
Proof of Insurance
Before the Federal Motor Carrier Safety Administration (FMCSA) will approve your authority, you will need to submit proof of liability insurance. All carriers are required to have a minimum of $750,000 in liability insurance for general freight, or $1 million for hazmat. The price for your insurance greatly depends upon your driving record, the state you live in, and the states you plan to do business in. Many times, new carriers are often charged a higher premium, with the price typically dropping once the business is more firmly established.
Companies that operate commercial vehicles transporting passengers or hauling cargo in inter or intrastate commerce must be registered with the FMCSA and must have a USDOT Number. Also, commercial intrastate hazardous materials carriers who haul types and quantities requiring a safety permit must register for a USDOT Number.
The BOC-3 is the form used by the FMCSA to identify the “process agent” or “registered agent” that is used by a company in a state. When you have a process agent in every state, this is known as “Blanket Coverage.” Simply put, a company cannot obtain its Certificate of Authority unless it has filed a BOC-3 with the FMSCA.
Created by the Unified Carrier Registration Act of 2005, it replaces the former system for registering and collecting fees from the operators of vehicles that are engaged in interstate travel – the Single State Registration System (SSRS).
Operating Authority (MC Number)
In general, companies that do the following are required to have interstate Operating Authority (MC number) in addition to a DOT number: 1) Operate as for-hire carriers (for a fee or other compensation) 2) Transport passengers in interstate commerce. 3) Transport federally-regulated commodities or arranging for their transport, in interstate commerce.
The International Registration Plan (IRP) is an agreement among states of the US, the District of Columbia and provinces of Canada providing for payment of commercial motor carrier registration fees.
You must file form 2290 with the Internal Revenue Service. This form is called the Heavy Highway Vehicle Use Tax Return. This form contains directions for computing your federal taxes for your trucks.
Drug and alcohol testing
As part of the regulatory requirements already listed, you will need to remember that your new company must enroll in a drug and alcohol testing program in order to meet some of the requirements associated with the trucking paperwork, and anyone in the company holding a CDL must pass a screening.
In order to speed this process along, as noted, we recommend a company like Authority Express LLC. For a minimal fee, they make the headache of this process much easier to work through.
A Timeline for Getting On The Road
It has been said, “There is no time like the present to start doing something good.” Starting a trucking company is something good, however, it isn’t something that is finished quickly. Below is a general timeline for how long you can expect things to take getting set up.
1. Before anything can happen, you will need your Federal ID Number, or your EIN. This is usually done in conjunction with making your company a corporation or an LLC. Once this is done, you need to get your company registered in your state of residence. Most of the time this can be done in as little as one day in some states, but sometimes up to several weeks in others.
2. Start the process for FMCSA Authority. Get an MC Number and USDOT Number and start the application for IFTA fuel permits. You get your MC Number immediately, but it is not activated for 21 business days. Once it is activated, the FMCSA will mail you an MC Certificate, which usually takes 10 days to arrive.
3. Send information off to get the proper Insurance filed with FMCSA and any state that may require a filing. You need to apply for process agents to go with MC Number (BOC-3).
4. 14 days after you file your insurance, be sure to verify that your insurance is on file.
5. If nothing has gone amiss after the 21 business days, you will be notified that your FMCSA Authority has been granted and then you can now apply for and get the Unified Carrier Registration Number (UCR). By this point, the IFTA fuel permits should have already come back and been applied to the truck, the tag will be on the truck. The truck will have been lettered and your trucking company is ready to go!
Costs Involved with Starting a Trucking Company:
Obviously, when discussing costs, there are thousands of variables that can affect your out-of-pocket costs. So, please understand that this is to give you a general idea, not an exact one.
MC Number – The FMCSA charges $300 to apply for your MC Number.
Insurance – Most insurance for a new driver clocks in somewhere between $5,000-$6,000 a year.
IRP – Depends on state, you should expect the cost to be between $1,300 and $3,500 a year.
2290 – Depends on weight, but at standard 18-wheeler weights, you are looking at $550 a year. This cost is generally prorated.
UCR – Depends on number of trucks. 1-2 trucks cost $89 a year.
IFTA License – Depends on state, anywhere between $0-$15.
BOC-3 – Costs $15 to file.
Please note that these costs are for someone who self-files. If you use a filing service for these, your costs will be different. Also, nothing was included about the costs of purchasing, buying, or leasing a truck due to the huge cost differences from one situation to the other.