How To Start A Trucking Company
Starting a trucking company is a step that many truck drivers take to grow their careers in the trucking industry. It may seem like an intimidating business operation at first, but with the help of industry experts, it doesn't need to be. Regardless of whether you have been driving a truck for years or are a brand new owner operator, starting a trucking business could be the right move for you.
To avoid making costly mistakes that will delay you starting, it is important to follow the multiple steps listed in this article. The following content provides you with detailed information on how to start a trucking company.
Develop a trucking business plan
When starting any type of business the first step is developing a business plan. Your business plan will outline everything your trucking company plans to achieve, set guidelines for its success, and explain how the trucking company will operate.
How do I write a business plan?
Executive Summary - Outline the plans and goals of the business.
Company Description - Describe the company, how it will operate, and what makes it unique in the trucking industry.
Pro Forma - Outline budgeting for the trucking company. How much cash flow and revenue will you need to operate and grow?
Services - List and describe the services of your trucking company including pricing, materials and industries.
Market Analysis - Describe the target market and an overview of the industry.
Sales and Marketing - Identify a marketing strategy, sales plan and implementation here.
Final Projections - Outlines financial goals, predict profits, cash flow, and sales forecast. Include a 5 year plan for your trucking business.
Choose a business entity for your company
It is important to decide what business entity you want to form when starting your trucking company. The two most common entities in the trucking industry are Limited Liability Companies (LLC) and Sole Proprietorships.
Limited Liability Company (LLC)
An LLC has a lot more protection for your business compared to a sole proprietorship. Since an LLC is an unincorporated business, there are no corporate taxes, and therefore all profits and losses are reported on each member's individual tax return. Members of an LLC are not liable for lawsuits if one is filled against their business. This is the biggest advantage over a sole proprietorship.
Important steps when forming an LLC:
All documents (Articles of Organization and Operating Agreement) must be filed in the state you will operate your trucking company out of.
Create an operating agreement. This is an internal document that outlines how your trucking company will run, payroll, and share of losses and profits. Some states require that you have an operating agreement, but you don't need to file it with them.
Articles of Organization is a required document from all states.
This is the most comment business structure for trucking companies as it's the easiest to create. The sole proprietor owns the business them-self and all profits and losses are treated as income and losses on the owner's personal income tax return.
The biggest concern when forming a sole proprietorship is liability. Unlike an LLC, if a lawsuit is filed against a sole proprietorship, it is filed against the owner of the company, instead of the company itself. The sole proprietorship is completely liable for the lawsuit.
Important steps when forming a sole proprietorship:
When creating a sole proprietorship under a name different from the owners, a "Doing Business As" (DBA) Certificate must be filed. DBA's are filed at the local clerk's office.
Buy or Lease a Truck
If you don't already own a truck, buying or leasing a truck is the next big decision you need to make when starting a trucking company.
Buying a truck
you'll save thousands of dollars in the long run when you purchase a commercial vehicle. However, it is not always affordable to begin with. Buying a truck requires a large down payment. Typically, the down payment will cost 10% of the purchasing price for a new truck, which would cost as much as $10,000. An advantage of buying a truck is that insurance premiums are typically lower than when you lease.
Leasing a truck
If buying a trucking isn't in the budget, then leasing a truck is for you. Since you do not own the type, you may need to abide by certain lease terms depending on who you lease from. These terms may include the truck's condition when it's returned or how many miles are driven. A big advantage of leasing the truck, other than the initial cost, is that lessors will usually pay for the maintenance if something goes wrong, which could save you a large expense.
File for your trucking authority
You cannot run your trucking company without having an active MC number. You file for your MC number with the Federal Motor Carrier Safety Administration (FMCSA). This is the most important step when starting a trucking company. Without an active operating authority, there is no trucking company.
To get your MC authority, you must do this following and not miss a step:
Register with the US Department of Transportation. This provides you with your USDOT number, which is your company's ID number.
File with the FMCSA to get your MC number - we will file this for you for free.
File a BOC-3 and insurance policy with the FMCSA.
Apply for a Unified Carrier Registration (UCR).
Pay your Heavy Vehicle Use Tax (HVUT).
Set up and International Registration Plan (IRP) and get your apportioned plates.
Create an International Fuel Tax Agreement (IFTA) account. This is an agreement between the lower 48 states and Canadian provinces to simplify reporting of fuel taxes.
It is important to note that you cannot start hauling loads for your trucking company until you've filed your BOC-3 and insurance policy with the FMCSA, and your MC number has gone active.
Make a plan to find loads and get paid
As soon as your MC authority goes active, you can start hauling loads and getting paid. It usually takes a freight broker or shipper30, 60 or 90 days to pay for a hauled load. These wait times are extremely hard for most truck drivers to pay their ongoing expenses, but especially hard to new trucking company owners.
Working with a trucking factoring company will help with consistent funding as well as finding loads.Most trucking factoring companies will provide you with 24 hour pay and set you up with their dispatching network to find top paying loads. Another option to find freight is using load boards.
Once you have registered all your licenses and permits in your home states and filed all required documents with the FMCSA, you're ready to start rolling.