How to Start a Trucking Company in 2016

Are you looking to start a trucking company within the next year?

With the New Year coming just around the corner, making sure you take the right steps to start your trucking company is essential to your success in this dynamic industry.  According to the ATA, by 2016 trucking companies are expected to create up to 115,000 jobs for truck drivers each year.  This is staying consistent with the US Department of Labor’s 21% expected increase in demand from 2010 through 2020.  With that being said, rising competition coupled with the shortage of drivers makes it tough to start a new business. In order to succeed in this industry, we have developed the following guide to help you hit the ground running.

Disclaimer: Starting a truck business isn’t easy. You need trucks, capital, knowledge of the industry, good drivers, etc…. There are a lot of risks involved, especially in relation to compliance, safety and cash flow. All these risks should be clearly understood and reviewed prior to starting your trucking business. 

Capital Requirements:

To start your trucking company off on the right foot, you should have 90-120 days of operating capital in the bank before hand.  This is to ensure that you have enough for truck payments, registration, insurance, and fuel expenses.  Furthermore, a shipper or broker will generally pay you 30-90 days after hauling a load; because of this, it is essential to have enough money in the bank to keep your business operating while you wait for your first checks when starting out your business.

What type of trucking business are you interested in?

Do you know whether you plan to run short-haul or long-haul trucking operations?  Both types of operations have their advantages and disadvantages.  Short-haul trucking is generally when you or your driver is driving within a 150-mile radius.  On the other hand, long-haul trucking is when you or your driver is driving in a 250-mile or more radius.  You might want to consider a few of the following items before deciding which type of business you are interested in:

  • Long-haul drivers have to make more personal sacrifices and tend to stay away from their families more often in comparison to short-haul drivers who see their families regularly.
  • You will require more skillful drivers if you choose to go with short-haul business as they will most likely spend more time driving on smaller streets with hard turns and tricky loading docks.
  • Generally long-haul drivers get paid more than short-haul drivers; however, there are greater expenses for long-haul than short-haul.  Long-haul drivers have to pay for showers and meals while using their cabin for lodging; on the other hand, short-haul drivers tend to make it home every night and can bring their meals with them.

Requirements needed to start your trucking company:

Before getting into requirements that are specific to the trucking industry, you should decide how you would like to structure your business.  There is some great information on Choosing a Business Structure provided by the U.S Small Business Administration that we highly recommend you look over. Furthermore, long-haul drivers typically get paid a fixed amount per mile whereas short-haul drivers can be paid on a per load basis or hourly rate.

In addition to figuring out whether you would like to run short-haul or long-haul loads, you should decide whether you are interested in interstate or intrastate commerce:

  • Interstate commerce is when motor vehicle is driven:
    • From one state to another, or to a foreign country;
    • Between two places within a state, but the route takes the vehicle through another state or foreign country; or
    • Between two places within a state, but your cargo came from or will be delivered to another state or foreign country.
  • Intrastate commerce is when motor vehicle is driven only within one state and does not meet any of the requirements for interstate listed above.
  • If you operate in both intrastate and interstate commerce, you must choose interstate commerce.

If you plan to operate your trucking business from home, it is often recommended that you set up a limited liability company, or LLC.  This limits your personal liability and removes more of the formalities of running your company. You must decide which company structure works best for your situation.

While some of the requirements specific to the trucking industry depend upon how you plan to operate your business, these steps may help point you in the right direction:

*Note: Requirements 5, 7, and 11 are only for trucking companies that require a DOT number.

  1. Decide the legal entity for your company (sole proprietorship, LLC, c-corp, s-corp, etc…) and set up accordingly to your state’s requirements.
  2. Obtain federal and state tax ID #s. For federal, form SS-4.
  3. Determine your insurance requirements based on the type of registration and fill/submit the appropriate liability and cargo insurance forms to the FMCSA). Motor carriers are required to fill form BMC-91 or BMC-91X. Typically there are third party businesses that strictly help with insurance for trucking companies. Get multiple quotes and shop around.
  4. Determine if you need to register with the FMCSA and obtain a USDOT Number:
    1. If you plan on hauling commercial cargo in interstate commerce OR hauling hazardous materials as defined by Secretary of Transportation in intrastate commerce:
      • Register with the FMCSA (Federal Motor Carrier Safety Administration)
      • Obtain a USDOT Number (Forms MCS-150, MCS150B)
      • Obtain Operating Authority or MC number (Forms OP-1, OP1-(P) or OP1-(FF)) – Only needed if operating as for-hire carriers (for a fee or other compensatIon). See if you need a MC number here. Usually filed after you have insurance and registered agent in process (BOC-3; see below). Takes 2-6 weeks depending on how busy they are.
      • Unified Carrier Registration is required to for registering and collecting fees from the operators of vehicles engaged in interstate travel. This filing is required annually.
    2. In select states, all registrants of commercial motor vehicles, even intrastate and non-motor carrier registrants, are required to obtain a USDOT Number. See list.
  5. File BOC-3 with the FMCSA (Designate a Process Agent). Here are companies that FMCSA lists that can help with this. This requirement is for interstate only.
  6. International Registration Plan (IRP) tag which is a registration reciprocity agreement among states, District of Columbia and provinces of Canada. It legally allows you to engage in interstate commerce. These can be done via third party companies along with BOC-3, IFTA, and Insurance.
  7. Setup International Fuel Tax Agreement (IFTA); done thru your home state and the tax is filed quarterly. Learn more
  8. Some states require additional permits and taxes if you plan on traveling in them. They are but limited to Kansas, Kentucky, Oregon, New Mexico and New York.
  9. Intrastate authority – There are a few states that require intrastate authority if you pick up and deliver the same load within their state. About 11 states require intrastate authority (i.e. CA and TX). Check with your state if intrastate authority is required if you plan to pickup and deliver in that state.
  10. Heavy Highway Vehicle Use Tax (IRS Form 2290) is required to comply with tax regulations.
  11. Remember to adhere to all FMCSA and DOT Safety regulations such as creating a safety program, drug testing program, safety background screening, DOT physical, etc….

Depending on what kind of trucking company you plan to start will determine the specific paperwork, licenses, permits, and forms you will be required to fill out.

Tools and Efficiencies:

There are some tools you can use to gain a competitive advantage over your competitors.  Some are a little too expensive for a trucking company that is still trying to get established, but there are free trials for inexpensive software that will help you run your business efficiently.

Subscribe to our blog for an upcoming article about tools you can use for your trucking company!

6 thoughts on “How to Start a Trucking Company in 2016

  1. Hello,

    Trying to start a trucking company, and would really appreciate the help. I would like to also say this article was very helpful.

    Kind regards

    1. We are glad that this article was helpful for you! Let us know if there is anything in particular you would like to see us write about in the future. Be sure to subscribe to our blog for future articles :).

      Thanks!

  2. Great tips for those who are looking forward in doing a business in the trucking industry. These post is very much recommended to everyone who thinks that their success is in the field of the trucking.

  3. This article is so helpful. You need to consider lots of things to start a trucking business. You need to choose what kind of service and what kind of goods to deliver. Not to mention the amount of money needed to start the business. Hoping a positive result to future truckers who wants to pursue the trucking industry.

    1. Thank you for the feedback and glad you found this helpful! Anything in particular you would like to see us write about A-1 Freight System?

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