Are you looking to start a trucking company? Maybe you need more information for you to begin the process. We are here to give you more insight into the business. The trucking industry transports 70% of all freight in the United States, generating nearly $700 billion in revenue.
In this article, we offer you an easy-to-understand guide to opening and operating your first trucking company. We will guide you on what paperwork you need and the type of insurance you should buy. Our tips make it simple to decide on issues like financing for your business. Read on and get a step closer to realizing your dream of starting a trucking company.
1. Get a Commercial Driver’s License (CDL)
If you are planning to be an owner-operator, the first thing that you will need to do is to get a commercial driver’s license. There are a couple of options available to you:
- Attend a truck driving school which lasts about three weeks.
- Go to a community college, which lasts about six weeks.
You must have your papers in order. Documents that you will need to get your CDL to include:
- Valid non-commercial driver’s license.
- Social security card or social security number.
- Birth certificate or valid U.S. passport.
- Green card (if you are not an American citizen).
After you have got your paperwork in order, it is time to consider the fitness assessment. To become a truck driver, it is a requirement to pass a DOT physical examination mandated by Federal Motor Carrier Safety Administration (FMCSA). The DOT physical exam is valid for up to 24 months.
After completing some training and studying the material, you will have to pass an online knowledge exam based on the CDL manual. The exam consists of three parts:
- Vehicle inspection
- Basic controls
- A road test
2. Come Up With Your Best Business Plan
This step is super important. Drafting a business plan should be fun. A well drafted business plan will help your success because it comes in handy when you make small business loan applications. When you want to raise capital, investors will require that you have a good business plan. It is also a good way to come up with a strategy for your operations. Things that you need to keep in mind include:
- What is the reason why you are starting your trucking company?
- How much money do you need to start the business?
- Make financial projections on business costs and profits.
Make sure that your business plan is thorough. There are essential items that you should include in the draft. These are:
- An executive summary: This should include an overview of your company (history, management, location, mission statement, legal status).
- Description of your company: This should be more detailed. Use this part to describe what sets you apart. Talk about your management team and your background.
- Statement of your business goals: Create your company’s mission statement.
- Description of the services that you offer: Talk about the type of business you will be doing in the trucking industry. You should also mention your various price points.
- Outline your sales and marketing plan: Describe how you plan to advertise your business. You could be making cold calls or using paid ads on social media platforms. Detail your sales and marketing strategies.
- Financial Projections: Sales forecasts should be included in this part. Show how your company is projected to perform financially.
Remember to proofread and edit your business plan. You do not want to distract potential lenders with spelling and grammatical errors.
3. Choose the Type of Entity Your Company Will Be and Register It
In this step you will decide on a company type. If you choose not to create a company, the state will consider your business a sole proprietorship. Taking this route might work for some but consider the disadvantages:
- No liability protection
- It is harder to get financing and business credit
- Unlimited liability – debt collectors can access business owner’s assets
- Selling your business will be difficult
Creating a business entity protects your assets while taking advantage of tax savings. Options for company types are:
- Limited Liability Company (LLC)
The majority of small trucking companies register as LLCs. This is because they offer protection of personal assets in case your company faces financial difficulties in the future.
4. Get Your EIN
If your company is going to be an LLC with employees, you must have an Employer Identification Number (EIN). The Internal Revenue Service (IRS) issues this 9-digit identifier. The service is free; you can get your EIN immediately by applying online. The EIN is used on all tax filings. You will also need it when you want to open a bank account. Which leads us to our next step.
5. Open a Company Business Account
Now that you have your EIN, you can open a business account for your company. This is a perfect way to separate your business from your personal life. When the time comes for you to do your taxes, it will be easy to keep track of your business transactions. Documents that you will need to open your business account include:
- A valid ID
- Employment Identification Number
- Articles of Incorporation
Some banks offer credit lines. You will have access to these credit lines if you have an account with the lending bank.
6. Get a Department of Transport Number (DOT)
All trucking companies that operate commercial vehicles over 10,000 lbs. to haul freight must obtain a USDOT number.
The majority of carriers fill out MCS-150 forms for the application. The registration process is free, but you must supply your credit card number to verify your identity.
Here are some things you should know to help you with your application:
- Your company operation
- Operation classification
- Cargo classification
- Number of vehicles you plan to operate
- Type of vehicles
- Whether you own or lease
- Whether you intend to work intrastate or interstate
7. Get Insurance
To complete step # 6, you must send proof of insurance to FMSCA to receive an MC number. You have three options for obtaining insurance:
- Through insurance brokers
- Online marketplace
- Contacting individual providers directly
While shopping around for coverage, here are a few points that will help you determine your coverage needs:
- Type of truck
- The cargo you transport
- Whether you will be doing long haul or short haul
FMSCA requires that a minimum amount of insurance covers you in the event of an accident. The coverage minimum for non-hazardous freight over 10,000 lbs is $75,000. However, you should get $100,000 cargo insurance to be able to work with most freight brokers. When you choose your policy, you must consider these factors:
- Monthly premium
- Policy limit
8. Work on Getting Transport Authority
Before you begin operating, you need permission from the government to work across state lines. There are several benefits to having trucking authority. They include:
- Freedom over your time, finances and equipment.
- You decide what loads you take on.
- You choose when you work and when you take time off.
- You are not bound by a fixed per-mile rate or revenue share.
- You keep all of your profits.
The FMSCA issues Transport Authority. It is often identified as a Motor Carrier Number. Two ways which you can apply are:
- Unified Registration System – for first-time applicants who have not registered before and have not been issued a DOT number.
- FMCSA legacy registration system– for applicants who have a DOT number. An application can be made online with a credit card.
New applications through URS may take 20-25 business days. Applications made by existing carriers may take 45-60 days. The application fee is $300.
9. Obtain a Truck
After going through all the steps, you are ready to go to the next level. It is time for you to get a truck. The price of a new truck begins at $100,000 and can go all the way to $200,000. There is an option to lease, which ranges around $2,500/month.
Funding options are available if you do your research. Some of these include:
- Small Business Administration Loans – This is a general-purpose loan with a cap of $5 million offered by the SBA.
- Commercial Truck Financing – funding from banks and alternative lenders
Another option available to you is purchasing a truck from a lease-purchase company. This is perfect for owner-operators. You will drive the truck for the company while making lease payments. At the end of your lease, you will own the vehicle. Take note: you will be responsible for the maintenance of the truck. Here is a list of some lease-purchase companies:
10. Look for Loads to Haul
You have come a long way. Now it is time to start generating some business. Once you have your truck, the next step is finding freight. Subscribing to a load board is going to be the best way for you to get business.
The freight industry is heavily dependent on relationship building. You will connect with brokers and shippers on load boards, and your company will thrive. You can use free ones or boards for which you pay a monthly subscription. Here is a list of some of the best load boards:
Your brilliant idea has finally come to fruition. Company registration and the other necessary paperwork is out of the way. All your licenses are ready and you have trucking authority. You are now the proud owner of a trucking company. The trucking industry offers many opportunities; the sky is the limit if you take care of your customers.
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