Best Tips: How To Start A Trucking Company
Updated: 7 days ago
Starting a trucking company can be a intimidating business operation. But with help from trucking industry experts, it doesn't need to be. Whether you have been a company truck driver or are a new owner operator, starting a trucking business can be a beneficial move.
There are multiple steps that need to be followed in order to start a successful trucking business and avoid mistakes that will cost you. The following content will provide detailed information on how to start a trucking company.
Develop a Business Plan
When starting a trucking company the first thing that must be done is developing a plan for your business. For both large and small businesses, a business plan must be made. This plan outlines everything that the trucking company wants to accomplish. A clear plan will explain how the trucking company will operate and will set guidelines for success.
How to write a business plan:
Executive Summary - This section sets the plans and goals of the business.
Company Description - Describe the company in detail, how it will operate, and why it is unique compared to competitors within the trucking industry.
Pro Forma - This section is a financial statement that sets our preliminary budgeting for the trucking company. It is imperative to determine what amounts of cash flow and revenue are needed for the business to compete and grow.
Services - Outline the services of the business including pricing, materials, and industries.
Market Analysis - Go into details here about the target market, including size, customer base, and geographical region. Also be sure to include an entire overview of the industry.
Sales and Marketing - Identify a strategy of how to gain market share. Include a sales plan and implementation in this section as well.
Final Projections - Present financial goals and predict profits, cash flow, and sales forecast. Also include a 5 year plan of business growth.
Good companies become great companies by adapting to the market, using comparative advantages, and positioning themselves with customers who have similar characteristics and cultures.
Choose a Business Entity: Sole Proprietorship or Limited Liability Company
It's a good idea to decide what business entity to form at the beginning of the process. The two most common entity's in the transportation industry are Sole Proprietorship and Limited Liability Companies (LLC).
This is the most common business structure as it's the easiest one to create. Under this entity, the sole proprietor owns the business himself. All profits and losses of the trucking company are treated as income and losses of the owner on their income tax return.
The biggest concern of a sole proprietorship is liability. If a lawsuit is filed against a sole proprietorship, it is essentially being filed against the owner of the company and not the business itself. The owner is completely liable for the lawsuit.
Steps to help when forming a sole proprietorship:
When forming a sole proprietorship under a name other than the owner's name, a "Doing Business As" (DBA) Certificate must be filed. DBAs are filed at the local clerk's office where the trucking company will operate.
Start the business. There is no additional paperwork that needs to be filed - it's a quick and easy set up.
Limited Liability Company
A Limited Liability Company (LLC) has a lot more protection than a Sole Proprietorship, but is also an unincorporated business. Since there is also no corporate tax for an LLC, all profits and losses are reported on each member's individual tax return. An LLC is not completely separate from its members, but the members are not liable for lawsuits that are filed against the business. This is the biggest advantage compared to a sole proprietorship.
Steps to help form an LLC:
All documents must be filed within the state that the trucking company will be operating in. Documents that need to be filled include Articles of Organization and an Operating Agreement.
Create an Operating Agreement. This works as an internal document that outlines how your business will run, the business you decide to operate, payroll and share of profit and losses. Some states require you to have an operating agreement, but you don't need to file it with them. Articles of Organization is a required document from all states.
Start the trucking company!
Buying or Leasing a truck
Some truck drivers may already own a truck before starting their own businesses, but that is not always the case. Deciding whether to buy or lease a truck is the next big decision that needs to be made. This decision will come down to personal preference and financial situation.
Buying a Truck
From a long term perspective, purchasing a truck is a great option and you'll save thousands of dollars in the long run. A big advantage with an owned truck is the trucking insurance premiums will be lower than with a leased truck.
However, buying a truck required a large
down payment. Usually, the down payment for a new truck is 10% of the purchasing price and 25% for a used truck. So, for a $100,000 new truck, the down payment would cost $10,000. If buying a truck isn't in the budget, then leasing one is the next best option.
Leasing a Truck
When you lease a truck you are not building equity on it like when you buy, but at the end of your lease term there may be a buyout price to own it. Since you do not own the truck, you may have to agree to certain lease terms. These terms could include keeping the truck in good condition for when it's returned, minus the wear and tear. Lessors also have restrictions on mileages and may be charged for going over.
A big advantage of leasing a truck is that the lessor will usually pay for the maintenance of it and the monthly payments can be considerably cheaper than when you buy, with little to no down payment.
How to file for your trucking authority
You cannot run your trucking business without having an active trucking authority. There are different authorities for different cargo types and an MC number is issued through the FMCSA. Getting your own authority is a huge move as it allows you to get paid as your own trucking company for hauling a load. When owning your own trucking company you can make the decision to hire carriers or work independently.
In order for you to have an active trucking authority and start hauling loads you must do the following:
Register with the US Department of Transportation and get your USDOT number.
Apply for your MC number.
File a BOC-3.
Get an insurance policy.
Apply for your Unified Carrier Registration (UCR).
Pay your Heavy Vehicle Use Tax (HVUT).
Set up your 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 US states and Canadian provinces.
Sign up for a drug and alcohol consortium.
It is important to remember that with an active authority you cannot run your trucking company. Once you apple for your MC authority, it takes about two to three weeks to become active. In this time period, you must file your BOC-3 and insurance policy with the FMCSA.
Get Paid and Find Loads
Once your trucking authority goes active, you are ready to start hauling loads and getting paid. Typically in the trucking industry it takes a freight broker or shipper 30, 60 or 90 days to pay on a load. These pay terms can be extremely difficult for a trucking company to afford to pay their expenses.
Working with a trucking factoring company can be very beneficial for new trucking companies especially. They provide trucking companies with consistent cash flow by paying them in 24 hours after they drop off a load. A trucking factoring company will also help its clients find the best paying loads.
If you're looking to start your own trucking company or need help getting paid quickly, get in touch with us today. We are a leading freight factoring company that provides you with 24 hour pay on all invoices. Call us today at (205) 397-0934 or fill out this form and a factoring specialist will be in touch.