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Starting a Trucking Company

Updated: Sep 14, 2020

How do I start a trucking company?

Starting a trucking company may be your next big business move. If you've been working as a leased-on truck driver, you may be taking this step to become an owner operator to work for yourself, or if you're new to the trucking industry, you may be wanting to get your trucking authority to start a new venture. Either way, starting a trucking company can be a beneficial move for you.

There are numerous steps that need to be followed and completed correctly when starting a trucking business. The process takes a few weeks to complete all together. The key is to start a few weeks prior to when you want to start working under your own authority. Below we have outlines the important steps on what business entity you should form, how to get your trucking authority, and why trucking factoring is the right move for your new company.

Truck company driver hauling interstate freight

Sole Proprietorship or Limited Liability Company?

Once you have developed your business plan and decided how your trucking company will operate, you need to decide what business entity you want to form. This is an extremely important step. The two most common entities that we will outline in this article are sole proprietorship and limited liability company, otherwise known as an LLC.

Sole Proprietorship

A sole proprietorship is the easiest to create, therefore making it the most common. If you form this entity, you will own the business yourself. All the profits and losses the company makes, will be treated as income and losses on your own, personal income tax return.

Liability is the biggest concern with the sole proprietorship. If you're in the situation where there is a lawsuit filed against your company, it is essentially being filed against you and not the trucking company itself. This makes you, the owner, completely liable for the lawsuit.

If you plan to form your trucking business under a name other than your own, you have to file a "Doing Business As" (DBA) Certificate at your home state's local clerk's office.

Limited Liability Company (LLC)

This type of business entity has a lot more protection to the owner. Profits and losses of the trucking company are reported on all individual member's income tax returns like with a sole proprietorship, but members are not liable with an LLC. If a lawsuit is filed against an LLC trucking company, all members are protected. This is the biggest advantage of a limited liability company over a sole proprietorship.

When forming an LLC, all documents must be filed within the state you plan to operate your trucking business out of. The paperwork that you need to file includes Articles of Organization and an Operating Agreement. Articles of Organization is a required document from your state. An Operating Agreement is a document that outlines how your trucking company will run, including payroll and share of profits and losses. Not all states require you to file your operating agreement with them, but require you to have one.

Get your trucking authority

You must have an active trucking authority to operate your business. You apply for your MC number and other licenses and permits with the Federal Motor Carrier Safety Administration (FMCSA). Your MC number, also know as your trucking authority or operating authority, is how you participate in interstate commerce with your trucking company.

First you need to register your company with the US Department of Transportation and get your USDOT number. A USDOT number is your company's ID that provides all information regarding your vehicle type, cargo, safety score, and compliance for freight brokers and shippers to access. This number must be renewed every two years or whenever your business information is updated or changed.

Next, file your MC number with the FMCSA. You get your MC number immediately after you file, but it is not active until two to three weeks later. During this time, you have 20 days to complete your BOC-3 and get an insurance policy for your trucking company. Once you have filed both of these with the FMCSA, your trucking authority will become active two to three weeks later. You cannot legally haul any loads until you've completed your BOC-3, filed an insurance policy, and your MC number has gone active.

You must pay your Heavy Vehicle Use Tax (HVUT) and then set up your International Registration Plan (IRP). An HVUT is an annual tax for all heavy vehicles operating on the highway and an IRP is to report all miles driven in multiple jurisdictions to pay taxes on them. Once you have registered for your IRP and paid the fee, you will get your apportioned plates.

An International Fuel Tax Agreement (IFTA) is an agreement with the lower 48 US states and Canadian provinces to simplify fuel tax reporting. An IFTA fuel tax report must be completed each fiscal quarter to include all miles traveled in participating jurisdictions and all fuel purchases made along the way. Once you've set up your account, you'll receive your IFTA license and two decals for each commercial vehicle registered.

Lastly, complete your Unified Carrier Registration (UCR) and enroll in a drug and alcohol consortium. A UCR verifies that you have an active insurance policy and all trucking companies must register all their vehicles in their operating state. All truck drivers must register with a drug and alcohol clearinghouse and have a negative drug screen before they can drive themselves or hire carriers.

Is trucking factoring the right move for your company?

When you start a new trucking company you may need help with business operations. Trucking factoring provides businesses with consistent cash flow to stay on top of expenses. Especially when you're new to the industry, cash flow may be tight. Instead of waiting 30 to 90 days for a freight broker or shipper to pay, a freight factor will advance you the money within 24 hours for a small fee.

As well as providing you with access to cash, the best freight factoring companies like Porter Billing, also provide you with additional services. Porter's clients have access to a database of dispatchers with 250+ broker options to find the best paying loads before they hit the load boards. Porter also provides free fuel cards, the best insurance rates from partners, and compliance assistance.

For more information on how we can provide your trucking company with consistent cash flow call us today at (205) 397-0934 or apply now.

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