How to start a trucking company?

Have you been planning to start your own trucking company? Not sure where to start and what you need to get it going? 🤔

Don’t worry you are not alone, and this is a step-by-step guide that explains the entire process. You’ll also learn about possible problems and how to solve them on your way to starting a successful company in the multibillion-dollar transportation industry. 

“It’s well known that the higher risk - the higher reward. So a trucking company can become a tremendous success and make you a Millionaire in just 2 years. Or, if you don’t know what to do it can become a nightmare. So why does one succeed while others fail?”

This guide will help you understand the process and how to estimate the required capital for this type of investment. Thanks to technology everything can be completed online in a matter of days. It’s something you can do yourself with a little bit of effort. 

First comes first. You have to form a legal entity for your business. At this point your main options will be: Corporation, Partnership or LLC. The choice depends on a number of factors. You have to consider the number of potential shareholders, legal liability and the tax implications for each entity. Corporations and LLCs are formed through a filing with the state. Partnerships often are formed by a written agreement known as a partnership agreement. In a partnership, there is no requirement to formally organize under state law as compared with a corporation and an LLC. 

Since the filing is done under state law for Corporations and LLCs, it can be done online with the Secretary of State. Each state has its own website. For example for the State of Illinois it’s http://www.cyberdriveillinois.com/.

What you will need to file 👇

1. Company name (it has to be available in that particular state),

2. Physical address for your business (it can be your residential address, but it can’t be a PO BOX) and

3. The incorporator (must be a naturalized person aged 18 years or more).

The filing fee and the processing time is different in each state. It generally ranges from $50-$300. For example, in Illinois, you can choose between two options for completion: $175 for 10 business days and $275 for 24 hours. 

It’s a pretty straight forward filing. However, if you feel you’d rather have someone assist you, find a CPA or tax accountant who will do it for you for $50-$300.

Once your Articles of Incorporation have been approved by the State, you will need to get FEIN (also called EIN) for your company. EIN (An employer identification number) is a nine-digit number assigned by the IRS. It's used to identify the tax accounts of employers. You will need this number to open a bank account, file your tax returns and it will be requested by all your customers before they make a payment for your services.

Since it’s issued by the IRS, you can apply for it online on their website: https://sa.www4.irs.gov/modiein/individual/index.jsp. It will take you no more than 5 minutes to complete, it’s free and if everything is OK your company will be instantly assigned this number.

Here’s the information you will need before you start your application👇 1. Your company name and address as in the Articles of Incorporation,

2. Company name and

3. SSN of a responsible party (responsible party is a President, CEO or a Corporate Officer who can legally bind the corporation).

Now it’s time for the fun part. At this point you have your company, it’s a legit business, but it’s not a trucking company yet. In order to operate as a trucking company you need a few licenses, registrations and permits from the US Department of Transportation and State Internal Revenue Services. The next, all important, step is to apply to the USDOT. Registration for this license is filled with FMCSA and can be done online.  

https://www.fmcsa.dot.gov/registration/do-i-need-usdot-number

This application is free, and you can follow their step-by-step guide. After the successful completion of the application, you will quickly receive a USDOT number for your trucking company. This is an easy one. 

It’s filed with FMCSA and can also be done online:

https://www.fmcsa.dot.gov/registration/get-mc-number-authority-operate

This one is a little bit tricky. It will take you about 30 minutes to complete, but you have to be careful to make proper selections for your operation type. The fee is $300. Once you complete the application, it might take about 20-25 days for FMCSA to review it.

The tricky part is that in order for FMCSA to approve your MC license they will have to receive an insurance certificate for your company directly from an insurance agent. Thus, as soon as you apply for an MC number, you have to start working on an insurance quote for your trucking fleet. For this purpose, you should contact an insurance agent that specializes in trucking companies. For an MC number, you are only required to have liability insurance for a minimum of $750k. However, in order for anyone to hire you to haul cargo, you will also need cargo insurance as well. Industry standard is to have cargo insurance for $100k, this should be sufficient for your company to haul most general freight. Also, you will need physical damage insurance to protect your trucks and trailer. While physical damage insurance is not required, it’s for your own protection and peace of mind. 

So, your insurance quote will require various pieces of information, however, the most important ones are VIN numbers of your trucks and your drivers’ records. To get the best insurance quote your goal is to hire drivers with CDL experience and clean driving records. A lot of insurance companies don’t accept drivers with less than 1 year of experience. 

From our experience, if all factors are reasonably good, the insurance quote for the first year of your operation will be approximately $12,000 per year per truck, which is around $1000 per month per truck. However, most of the insurance companies will ask 20% down payment to bind a policy for you. Thus, you will be required to make a down payment of $2,400 per truck. Once you have purchased insurance, they will submit your insurance certificate to FMCSA. 

Step 6 👉 Get BOC-3 agent

This is the last and very easy step, which can be done in minutes. FMCSA requires you to get a BOC-3 agent.  The BOC-3 (Designation of Process Agents) is a form filed with the FMCSA that designates a process agent in every state in the United States.  So, you can just google “BOC-3 agents” and follow the first link you find. You will pay approximately $25-$30 to get this done. Also, most likely you will receive a phone call offering this service as soon as you submit your MC authority application (Step 4), as they will get your information from the FMCSA database. Once you pay their fees, they will make a required filing with FMCSA.

At this point, you have completed all Department of Transportation requirements. Once FMCSA has approved your MC authority, they will mail you a letter with your MC Certificate.

Congratulations!

You have your trucking company and you are ready to rock and roll on the highway of trucking fortune and adventure!

Summary of fillings, fees and processing times.