How to Get Your Own Trucking Authority
To get your own trucking authority, you will need to complete several steps including establishing your business entity, getting a USDOT number, and getting a MC number. Don’t worry if you don’t know what all this mean. We’re here to help you understand each step of the process and to get you on your way to being your own boss.
What is Trucking Authority?
Trucking authority, also known as operating authority, is the permission given by the Federal Motor Carrier Safety Administration (FMCSA) to transport freight as a motor carrier. Having your trucking authority is necessary to transport freight across state lines. By having trucking authority you’re able to choose your own loads and figure out your own routes and schedules. In other words, it gives you complete freedom on how you want to operate as a trucker.
So getting trucking authority is an absolute must if you want to be an owner-operator. But where should you start? Getting a motor carrier authority may seem daunting, but in reality it’s about following a few steps.
What are the steps to getting your own trucking authority?
Here’s what you need to do in order to get your own trucking authority in 7 simple steps.
1. Establish Your Business Entity
Becoming an owner-operator is the same as becoming a business owner. Just like any other business, you have to set up the business structure. What makes this complicated is that there are many ways to establish your business entity. It may be difficult to figure out the type of business entity or structure that you should use for your trucking business. Don’t fear, TBS is here to help demystify the entire process.
There are several different ways to establish your business entity, including incorporating, setting up a LLC, etc. Here is a list of all the different ways to establish your trucking business:
- Sole Proprietorship - This is the easiest way to establish a business entity and a good choice for new owner-operators. There’s no formal set up for establishing a sole proprietorship - basically the moment you get a load and hit the road you’re a sole proprietor. However, one of the downsides of being a sole proprietor is that you can be held liable for any lawsuits or damages that occurred during operations. Because of the liability, it is important to be properly insured to avoid losing personal assets.
- Partnership - This is the same thing as a sole proprietorship but the trucking company has multiple owners. Similar to starting a sole proprietorship, creating a partnership doesn’t require any formal documents or setup either. Why set up a partnership? Because there are some unique benefits you can only have when partnering with someone. For example, you’ll have more collateral when sharing the company with two or more people. Another benefit is that you’ll have another driver that you can take turns with so you can cover more miles. However, a word of caution: make sure you have a good relationship with this person because you will be spending A LOT of time together whether it’s on the road or in the back office. Try to find a partner that compliments your skills and talents. For example, maybe you’re good at managing the books and maybe your partner is good wrenching the truck.
- Corporation - Corporations are different than a sole proprietorship in that the business is treated as a completely different entity from the owners, shareholders, and employees. Incorporating is not a preferred method for owner-operators for a lot reasons. One reason is that setting up a corporation is much more time consuming and complex than starting as a sole proprietor/partnership or even forming an LLC. You’re also required to hold yearly meetings with shareholders/stakeholders. Bottomline, it is best to steer away from corporations especially if you’re just starting out.
- Limited Liability Corporation - A Limited Liability Corporation or LLC is another viable option for prospective owner-operators. You need to jump through a few more hoops compared to a sole proprietorship, but starting an LLC offers unique benefits. Similar to sole proprietorship, there’s no separation between you and the business entity so you don’t need to file a personal and business taxes separately. At the same time, it provides some separation between you and the business in case there are any lawsuits or debts.
- Limited Liability Partnership - This option is way too complicated and we recommend just staying away from this option.
2. Get a USDOT Number
The next thing you’ll need is a US Department of Transportation number or USDOT number. To obtain this you will need to file one of the three forms from the FMCSA to get your authority. Getting a USDOT number is relatively straightforward: go to the FMCSA website and fill out the following form. And the best part about getting a USDOT number? It’s totally free!
3. Get a MC Number
What is a MC number? Motor carrier number or MC number is what allows the government to keep track of carriers and freight brokers and it’s what will grant you the ability to cross state lines. There are different types of authorities you can get. For freight carriers, there are two that apply:
- Motor Carrier of Property (except Household Goods) - this grants you the authority to transport non-household goods.
- Motor Carrier of Household Goods (Moving Companies) - this grants you the authority to transport household goods (basically any personal commodity that can be used in the home).
4. BOC-3: Designate a Process Agent
A BOC-3 designates process agents in every state that can represent the carrier if there are any legal proceedings or if there is a court order served from any given US state. Why do you need this? Basically, the BOC-3 designates that there will be someone that a plaintiff can serve lawsuits or any legal proceedings to any area where you are not based. For example, say you have a fuel tax issue with the state of New York, but you’re based out Arizona. The process agent will represent you in the state of New York. Definitely not the funnest form to fill out, but you have to set this up if you want your trucking authority. The processing price is about $125 and it costs around $100 per year to retain process agents.
5. Get Trucking Insurance
Of course, like any other vehicle, your truck will need insurance in case anything goes wrong. Just like regular car insurance, trucking insurance will cover both property damage and bodily injury in the case of an accident. In addition to that, it covers other aspects of your trucking operation. For instance, motor truck cargo coverage - this covers any damages done to the cargo you’re carrying. Insurance also comes with general liability insurance, which covers injury or damage related to the non-driving business activities of your operation. General liability is similar to what a lot of non-trucking businesses have and covers you in the case that employees or customers get hurt on your business property or if the wrong product was delivered to your clients.
When getting insurance, it’s very important to shop around because the rate is highly variable - especially for new owner-operators. Rates vary widely from as low as $8,000 to $16,000 annually. Although insurance is pricey, over time the rates will go down as you become more established as an owner-operator.
6. Complete the UCR
The Unified Carrier Registration or UCR is an annual fee for all trucking companies that haul loads across state or international borders. The annual UCR fee is determined by the size of the company’s fleet. In the case of first time owner-operators with a single truck, the fee would be lower compared to carriers with a lot of trucks in their fleet.
You will need to complete the UCR within your state. However, there are some states that are not participating in the UCR. These states are: Arizona, Florida, Hawaii, Maryland, Nevada, New Jersey, Oregon, Vermont, Wyoming and the District of Columbia. If you are in any of those states, you’re not off the hook! You will need to complete the UCR in a neighboring state.
7. Sweet Signage
Once everything squared away and you have your authority, the last thing left to do is to put some decals on your truck. You need the following two pieces of signage on your truck:
- The legal name of the motor carrier operating the truck. This is the legal name as stated on the MCS-150 form.
- The DOT number issued by the FMCSA preceded with the letters: “USDOT”
The signage must be highly visible, so choose contrasting colors to make the signage stand out. If you want to include your own name on the side (if it’s different from the motor carrier name), you can do it as long as it’s preceded by: “Operated by”
Ready to Get Started?
If you think you’re ready, we have some good news for you: at TBS, you can get your authority for free! No catch, no gimmick. Go to our website Truckers Bookkeeping Service and all you have do is fill out a quick form.