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How to Start a Trucking Company
Trucking can be a rewarding business. But being a good driver is just the beginning when it comes to running your own successful trucking company. There’s a whole business side that can make or break trucking entrepreneurs. Whether you want to drive for yourself, or own a fleet, we’ve got 12 milemarkers to help you start a trucking company.
Here’s how to start a trucking company in 12 steps:
The first milemarker on the road to starting a trucking company is obtaining your Commercial Driver’s License, or CDL. You can get a copy of your state’s CDL Manual, which outlines CDL requirements, on the DMV website. Each state is a little different, but usually you will need a valid driver’s license, pay a fee, and submit a medical examination report. If you plan on driving between states, you must be at least 21 years old. Otherwise, state age minimums range from 18 to 21 years old.
After turning in your CDL application to the DMV, you will take a written test. You may retake this test if you don’t pass, but there likely will be another fee. After the written exam, most states require CDL classes and/or logging a certain number of hours with an instructor. The DMV can advise you on what training is required.
Finally, you will take the 3-Part Skills Test with sections on Vehicle Inspection, Basic Controls, and Road Test. You must pass all three parts. Unfortunately, failing one part means taking the entire exam again. Many states have limits on how many times you can take the test, and how long you must wait between tries.
Be sure to be well-prepared for your 3-Part Skills Test. If you fail a part of it, you have to take the whole test again. There may be a wait time before you can retake it, and a limit on retakes.
Whether or not your bank requires you to submit a business plan, it’s a good idea to have one to help you organize and prepare for contingencies. Trucking business plan templates – both free and paid – are available online, or you can contact the Small Business Administration. A plan should include information on:
- Your company (drivers and company history)
- What services are offered (the type of cargo you are running, when, how often, and for what type of customers)
- Market analysis (general trucking industry statistics and ones specific to your region or cargo type)
- Business strategy (how you will penetrate a specific market and what sets you apart)
- Financials (start-up costs, business operation expenses, projected costs and income)
When putting together this plan there are a few nuts-and-bolts items to consider:
- Type of equipment you need
- Whether you are buying or leasing a truck
Top 2 Reasons Trucking Companies Fail
Projecting your company’s income largely comes down to researching loads. Certain load types are seasonal, and others are year-round. It goes without saying that if you need income year-round, but only work one or two seasons, you’re going to fall short. Besides timing issues, there are also geographical questions to ask, like what type of cargo is being moved in which areas? Will your equipment be able to handle that load in that area in that season?
Start by identifying brokers and shippers who will work with new entrants. Alternatively, you can sign on with a Dispatch Company. Expect to pay your dues and prove yourself during your first months of operation. If you establish yourself as a professional with a clear record of dedicated runs, you can earn your contacts’ trust and reap the reward of a consistent income stream.
When starting your trucking company, forming a limited liability company (LLC) or incorporating your business (Inc.) will protect your assets and limit your liabilities. An attorney or accountant can help you decide which structure is right for your situation, and guide you in setting it up. Establishing these structures is a multi-step process that involves filing with agencies, drafting and maintaining business documents, opening bank accounts, and paying relevant fees. Trying to do this without the help of a professional may mean missing deadlines and improperly forming the company, which puts you at risk. There are also scammers out who may send you notices for fees you do not have to pay.
In short, it may be a good idea to work with a business formation professional. Yes, they will charge a fee, but it’s potentially much less than losses connected to lack of protection against liabilities. These professionals frequently do the work over phone and mail.
Commercial trucks come in all shapes and sizes. Do research on which type and size you need for the type of cargo you’ll be hauling and the routes you’ll be running. You will also need to determine if you want a new or used vehicle.
The five most popular commercial trailers are:
- Flatbed - These versatile trucks are comparatively easy and quick to load and unload. Since the cargo is not protected against the elements, flatbed cargo is typically heavy, non-delicate goods.
- Dry Van - These encased vehicles are loaded from the back, usually via a loading dock. Often dry vans, or enclosed trailers, haul cargo that needs protection from the weather, like non-perishable foods and clothing.
- Refrigerated Trailer - Sometimes called a reefer truck, a refrigerated trailer is temperature-controlled. Reefers transport chilled or frozen products, like perishable food.
- Step-deck - Also known as drop decks, a step-deck is a type of flatbed trailer with two deck levels, one higher and one lower. The difference in deck heights allow for taller cargo to be hauled while meeting height restrictions.
- RGN - Removable Gooseneck Trailers have a detachable front portion that can create a ramp. RGNs can carry some serious weight and the number of axles can be adjusted to accommodate loads. Their versatility makes them good for long and tall freights.
Similarly, there are many types of truck models and makes out there. Generally you can break out truck types as:
- Heavy Trucks, including models made by Peterbilt, Freightliner, MAC, and Volvo
- Medium Trucks, including Ford F-series, box trucks, and vans
Before you can legally drive your vehicle, you will need to file specific insurance and legal process agent documents with the Federal Motor Carrier Safety Administration (FMCSA). The agency will not issue authorities without this documentation. The FMCSA website lists the specific requirements.
When obtaining insurance, it’s a good idea to work with professionals who specialize in Trucking Insurance. Someone in this niche market can avoid delays in FMCSA authority issuance and inadequate coverage. Driving without authorities or not having enough insurance coverage in the event of an accident opens you up to major liabilities. Trucking Insurance specialists like TBS Factoring Service even have plans that defer insurance down payments up to 50%, giving you more operating cash.
Work with a party that specializes in Trucking Insurance. They are your best bet for protecting your assets and securing competitive rates with a trucker’s needs in mind.
If you plan to haul cargo between states (interstate commerce), you must be registered with FMCSA. You must also apply for an Operating Authority (MC #) and a Department of Transportation Number (USDOT #) when starting a trucking company. Your MC # and USDOT # can be obtained on your own, or you can use third party vendors to obtain your authority conveniently. In either case, remember you will need insurance first. Many states, like Texas and Oklahoma, require a separate Intrastate Authority if you pick-up and deliver a load within their borders. If you need help, you can go to truckersbookkeepingservice.com to apply for your trucking authority.
Upon completing the registrations, you will be enrolled in FMCSA’s New Entrant Program. This 18-month program monitors how new operators comply with safety requirements. As a New Entrant, you will need to complete and pass a Safety Audit, which is reviewed in Step 12 below.
If you plan on carrying cargo through more than one state, you will need to get an International Registration Plan (IRP). This allows you to haul loads through the contiguous 48 states and Canada with a single registration. You will receive an apportioned license plate. The registration fee is usually $1,500-$2,000, and varies by state and vehicle weight. Here is the state list with links to each jurisdiction.
If your vehicle weighs more than 26,001 lbs. you will also need an International Fuel Tax Agreement (IFTA) license. The IFTA tax matrix lists rates by jurisdiction and fuel type each fiscal quarter. After each quarter, you will complete a fuel tax report with your your IFTA jurisdiction office. This report will include all the miles you have travelled and gallons of fuel purchased. Any fuel taxes paid when purchasing fuel are credited to your account. You must file a return even if you traveled no miles and used no taxable fuel during the quarter.
Don’t Forget: You must file a fuel tax report every quarter if you operate an IFTA-qualified truck. You have to file even if you traveled zero miles and used zero taxable fuel that period.
The Unified Carrier Registration (UCR) is a federal system of registering and collecting fees from operators of vehicles participating in interstate commerce. It replaced the the Single State Registration System (SSRS) in 2007. Fees are based on the size of your fleet, even if it’s just a fleet of you. In 2018, a fleet of 0-2 trucks was $69. There is no certification sent to registrants, but your registration will be in a database that can be accessed by law enforcement.
Most drivers and carriers are required by federal law to have an ELD. This piece of hardware is attached to the vehicle engine and records the driver’s time behind the wheel. The ELD mandate was adopted in 2017 to create a safer work environment for drivers. It also reduces paperwork, updates dispatchers to driver status, and makes load planning easier. Some operators are exempted from the rule. You can lean more at the FMCSA’s ELD website.
Will You Be Operating in KY, NY, NM, or OR?
If you operate in Kentucky, New York, New Mexico, or Oregon, or if you plan on hauling through these states, you will likely need to register for weight distance permits. Check out the specific state provisions below:
Kentucky Highway Use Tax (KYU): If your declared vehicle weight is 60,000 pounds or more, you will need to register for the KYU. You can apply online by creating an account and then file your quarterly taxes online.
New York Highway Use Tax (HUT): Carriers with a gross vehicle weight of 18,000 pounds or more are required to register for a HUT certificate and decal. You can register online, and file returns and make payments online.
New Mexico Weight Distance Tax: If your declared gross vehicle weight is equal to or greater than 26,000, you will need to file and pay for this quarterly tax. The New Mexico Weight Distance Tax can be filed electronically.
Oregon Weight Receipt and Tax Identified Receipt: When hauling through Oregon, a combined weight exceeding 26,000 pounds means you will need to apply for your Oregon Weight Receipt and Tax Identifier Receipt. You may also need to file a bond, and pay mileage tax monthly. More information about trucking permits can be found at Truckers Bookkeeping Service website.
As a member of FMCSA’s New Entrant Program, you must pass a Safety Audit within 12 months of operations. This audit is to verify that you are in compliance with Federal Motor Carrier Safety Regulations (FMCSRs) and Hazardous Materials Regulations (HMRs) with regard to safety protocols and recording requirements.
You may have an audit performed by an FMCSA-certified auditor at your business, or file electronically, and submit relevant documents to FMCSA online. Be prepared to submit documents relating to drivers and vehicles, general operating procedures, and record-keeping.
Give Yourself a Pat on the Back!
After passing your audit and getting through the 18-month New Entrant period, you are now a permanent motor carrier. Congrats on becoming the boss of your own trucking company!
By now, you should know how to start a trucking company. It’s not easy, but don’t give up! Starting any business is hard work, but with proper preparation and tenacity, you will be your own boss in no time.
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