How to Start a Trucking Company in 6 Steps
Opening a business is no easy feat, especially in the trucking industry. The transportation industry is highly competitive and continues to grow. If you are interested in starting a trucking business, there are a few things you need to be aware of. Before you can get your freight on the road making deliveries, several government requirements must be met. Our checklist on how to start a trucking company will help you navigate the necessary steps to get your trucking business launched. In order to succeed, it is important to set up your business correctly and be informed of the federal and state regulations that apply to your company.
1. Make a Business Plan
The first step in starting a trucking business is to make a plan for how your business will operate. Consider things like financing, partners, the potential size of your company, and how you will handle issues that may arise. Don’t let the concept of a business plan scare you, it is simply to guide you through the process of starting your company and serve as a road map for where you would like things to go.
If you want to go the extra mile, consider performing market research to gain a better understanding of your competition and the businesses you will serve. The more information and details you include in your business plan, the better prepared you will be to speak to investors and start your business.
2. Set Up an LLC
Once you’re ready with your business plan, the next recommended step is to set up an LLC with the Secretary of State in your home state. Once you’ve established your LLC, you’ll be able to get an Employer Identification Number, which will be required for federal tax filing and reporting purposes. You can learn more at irs.gov/businesses.
3. Make a Plan to Obtain Insurance
Any trucking company operating in the United States is required to obtain liability and cargo insurance. Providing proof of insurance is required to receive many of the licenses and permits that you will need in the next steps, so it’s recommended that you have a plan for your insurance before moving on. Visit the FMCSA for specific information on the insurance requirements and how to file and submit proof of insurance.
4. Apply for Licenses, Permits, and Registrations
Before you can start operating your business you will need to obtain the required permits and licenses.
The permit or license you need depends on the service you operate and where your trucking business will be located.
• Designate Process Agents
In each state that you will be operating, it’s required that you designate a process agent that can manage any legal paperwork that may be served in the state they manage. Each process agent must file a BOC-3 Form on behalf of the trucking company. After filing, one copy of each state’s form must be kept at the trucking company’s place of business. More information on process agents can be found at https://www.fmcsa.dot.gov/registration/process-agents.
• Get a Commercial Driver’s License (CDL)
Before operating any commercial vehicle, you (or your drivers) will need to get a commercial driver’s license. The process to get a commercial driver’s license consists of a background check, training, a written permit exam, and a driving test. In addition to having the correct license to operate commercial vehicles, drivers will also need to maintain a clean driving record and pass drug screenings. There are different classes of CDL, so you should first decide what freight transportation you plan to drive. This is important because specific types of cargo you transport will require certain CDL endorsements. To get information about your state’s requirements, visit your state licensing office or the Federal Motor Carrier Safety Administration (FMCSA).
• Apply for Federal DOT and Motor Carrier Authority Number
In order to operate freight transportation in the United States, you need to apply for a Federal DOT number and a motor carrier authority number. These numbers are unique identifiers assigned to your trucking business. The USDOT number is used to track your company’s compliance with rules and regulations, and to track your company safety records. The Motor Carrier (MC) authority is used to show what type of trucking business you run and the types of things that your business is allowed to transport.
The FMCSA is one of the places where you have to provide proof of insurance; the FMCSA must receive proof of liability and/or cargo insurance within 90 days of filing your MC authority.
• Unified Carrier Registration (UCR)
For freight trucks that travel between multiple states or for international commerce, the Department of Transport (DOT) requires that you apply and register with the federal Unified Carrier Registration Agreement (UCR). UCR fees are based on the size of your fleet and must be renewed annually. To register you must use your Federal DOT number and your Motor Carrier (MC) Authority number. For more information about Unified Carrier Registration (UCR) visit the Department of Transportation website for your home state.
• International Registration Plan (IRP)
An International Registration Plan (IRP) is a license plate issued by your home state. This license plate allows you to operate your truck in other states. The license plate requires an annual fee. You can find more information here, or visit the Department of Transportation website in your home state.
• Register for the Standard Carrier Alpha Code (SCAC)
The Standard Carrier Alpha Code (SCAC) is a code that identifies what transport carriers are authorized to haul. Having this code helps create a system of trust for all stakeholders. If you are transporting any of the goods listed here you should apply and register for the SCAC with the National Motor Freight Traffic Association (NMFTA). The goods that require SCAC registration include:
• Military
• Government
• International
• Intermodal
• Railyard cargo
• Chemicals/hazardous materials
• Port cargo
5. Purchase the Necessary Equipment
A key part of this process includes acquiring the trucks and other necessary equipment. Based on your business plan, you should have an idea of what cargo or freight you want to haul and the different areas you will serve. From this, you can determine the quantity, weight limit, cab style, and weather resistance it will take to get the job done.
Beyond trucks, you will also need other equipment such as electronic logging devices to keep track of your vehicle’s whereabouts and mileage.
6. Finance Your Business
Now that you have your business plan and an idea of the startup costs, you might be adding numbers up in your head and stressing out. Don’t panic. There are plenty of ways to gain access to the capital needed to start your business.
TAB Bank offers equipment financing and invoice factoring for trucking companies. These are dynamic financing options that will cater to your needs as your business grows and changes. Whether you plan to start with a few trucks or a full-fledged fleet, TAB is ready to help your company’s needs become a reality.
Other ways to access capital include pursuing small business term loans or lines of credit.
Other Things to Keep in Mind
Here are some other things to consider while you’re working through this checklist for starting a trucking business
• Learn about Heavy Highway Vehicle Tax
For trucks that are heavier than 55,000 pounds, your business will need to pay a heavy highway vehicle tax. This tax is paid annually and you are required to file a 2290 tax form with the IRS.
• International Fuel Tax Agreement (IFTA)
The International Fuel Tax Agreement (IFTA) is a decal that helps with the reporting of fuel consumed by trucks operating in the United States. This decal gives your trucking business a single fuel license and, from there, you are required to file fuel usage tax returns each quarter with the state where you are registered. For additional information on the International Fuel Tax Agreement (IFTA), visit your state’s website for the Department of Transportation.
• New Entrant Safety Audit
As a new trucking company, you will be required to complete a new entrant safety audit within the first 12 months of operation with the DOT. There are many service providers that can help you prepare for the audit, but you should be prepared with all paperwork and fees required well in advance of the audit.
• Continued Compliance
You should also remember that many of these federal regulations are not a one-stop-shop. They require constant compliance and some require additional testing monthly or yearly. For your business to be successful, be sure that you are staying up-to-date with current regulations and frequently checking that your company is still meeting all of the standards and regulations.
• Additional Business Insurance
While the legal side of setting up your business is critical, there are additional things you should keep in mind as well. In addition to the required equipment and cargo insurance required to start your business, consider additional general business insurance. Starting and operating any type of business is a risk, so you should ensure that you have the proper insurance and financial security in place to take that risk so your business is covered in case of emergency.
Conclusion
Starting a trucking business has many steps to consider and, even after establishing it, there are dates and filing requirements that you may still need to be aware of. As you begin your venture, you may want to refer back to this trucking business checklist to ensure you are not missing any crucial steps along the way.
At TAB Bank, we have experience working with and financing the trucking industry for over 25 years. We offer financial solutions for both large and small fleet trucking companies and individual owner-operators. If you are trying to start a trucking company, check out TAB’s business banking services—built with you and your business’s unique needs in mind.
Frequently Asked Questions
How much cash do you need to start a trucking company?
New trucking companies can expect to invest $10,000-$20,000, though the exact costs of starting a trucking company vary from state to state. Startup costs also depend on your business plans such as how many trucks you’d like to use, routes, and cargo.
Is it hard to open a trucking company?
Opening a trucking company is not too difficult to start, it just takes proactive planning and researching the necessary licenses and state regulations, such as acquiring a CDL.
How do I start a trucking company and get loads?
There are a handful of ways to start picking up freight. A few options include cold calling manufacturers to see if they need help transporting their items, working with freight brokers who will connect you to shippers in search of transportation, and searching for jobs through online load boards.
Disclaimer: The content provided does not constitute legal advice and should be used for informational purposes only. Readers should consult with their attorney regarding any applicable legal matter.