Without small trucking companies, the US economy would stagnate.
The logistics and transportation industry in the US offers great potential for professional truck drivers who want to escalate their business by starting their own trucking company.
That means that there is plenty of room for small trucking companies in this market even if you'd rather start a trucking company without driving.
So, if you plan to build a trucking company but you don't know where to start, I've got you covered.
Below, you'll find the necessary steps for setting up your trucking business.
Steps to building a trucking business
1. Get truck driving experience first
The competition in the trucking business is fierce. So, if you are not ready, they’ll eat you for breakfast.
In this case, the safest approach to starting a trucking company is to jump from being a company driver to being an owner-operator and then to making money by building a trucking business.
An owner-operator has more experience than a new truck driver has.
He has the experience of owning a truck and of participating in the daily activities of a fleet, which allows him to make better decisions when building a business in the trucking industry.
Experience prevents you from the mistakes that may cost you money.
Experience is what allows you to confidently start a trucking company with no money.
2. Develop a business plan
Next step to building a trucking business is developing a business plan.
At the beginning of your journey, you should be aware of what your financial goals are and how you are going to achieve them and when. All of this needs to be mentioned in the business plan.
As soon as you have a business plan ready, you have a road map to follow for the next 3 to 5 years. It helps you to stay focused on the core parts of the growing process of the business.
Starting with an organized plan increases your chances of succeeding in the trucking industry.
3. Choose a business name
Your business name is the first point of contact for the potential clients with your business. So, make sure that the business name clearly articulates the type of service that your company offers.
After you’ve come up with at least five possible versions, check if these business names are still available.
Visit the U.S. Patent and Trademark website and search the trademark database for your company’s name availability.
After that, register your business on the U.S Small Business Administration website.
4. Determine a business structure for your company
Before submitting your paperwork, you’ll want to take a look at the different types of business structure for trucking companies.
Common structures of trucking business include:
- Sole proprietorship
- Partnership
- Limited liability corporation (LLC)
- Corporation (C-corp, S-corp, etc.)
Each business entity offers various personal liability protections, taxation methods, ownership structures, and other technical differences.
If you start as a one-person self-owned trucking company, look into limited liability companies (LLC) to protect your assets.
If you establish your company with a business partner, consider creating a partnership or a corporation.
Operating your trucking company as a properly structured corporation or Limited Liability Company (LLC), for example, sets boundaries between your assets and business liabilities.
5. Open a business bank account
Apply for a business bank account and business credit card.
For tax planning and for establishing a good business credit score, keep personal funds separate from company funds.
As you start your trucking company, start building your business credit right away by using your business account to apply for a business license, permits, and insurance.
6. Obtain insurance
Insurance is one of the most significant expenses for trucking businesses.
Also, before applying for licensing with the U.S. Department of Transportation, make sure that you already have insurance.
- Primary Liability: $750,000 in primary liability coverage is required to cover damage or injury done in case of an accident where you are at fault.
- Cargo: $100,000 is the most common request to cover freight. But this will depend on what you are hauling. The insurance covers damage or theft of the freight.
- Physical Damage: Covers truck damage in accidents where you are not liable.
- Non-trucking-use (bobtail): This covers you if you are liable for an accident while you are not hauling a load for someone else. That is coverage for accidents if you haul loads for another person or company.
The most effective way to secure the best insurance offer is to contact insurance agents and ask them about the above options for your company.
7. Comply with federal and state regulations
Before you start operating in the trucking industry, your company needs to comply with the following:
- USDOT Number – The U.S. Department of Transportation (DOT) requires carriers to have a unique identification number. They and FMCSA use this number to identify, monitor, and collect safety information, inspections, crash investigations, inspections, audits, etc.
- Operating Authority (MC number) – All for-hire carriers must obtain an operating authority number from the DOT. This number dictates what type of cargo you can carry.
- Heavy Vehicle Use Tax – To fund highway programs, the federal government charges an annual tax on trucks exceeding 55,000 pounds.
- International Registration Plan (IRP) – IRP distributes registration fees based on distance traveled in each state or Canadian province. Contact your state’s transportation website to register.
- International Fuel Tax Agreement (IFTA) – IFTA is an agreement between the lower 48 U.S. states and Canadian provinces to simplify reporting of fuel use by carriers who drive in multiple states. Carriers file a quarterly fuel tax report that determines their tax and distributes it to the states.
- BOC-3 Filing – Carriers must designate a process agent to whom court papers may be served in a legal proceeding. You need to designate a process agent in each state where you maintain an office or establish contracts. Some companies offer blanket coverage that designates a process agent in every U.S. state. To find available process agents, refer to the FMCSA’s site.
- Obtain your EIN to open a bank account. Your employer identification number, or EIN, is like a social security number for your business. This nine-digit number is required to open a business bank account and must be present on all tax filings for the life of your business. Apply for an EIN number here.
- Obtain a Standard Carrier Alpha Code (SCAC) from the National Motor Freight Traffic Association (NMFTA).
- Unified Carrier Registration (UCR) - The UCR system aims to validate active insurance coverage within every state the trucking company operates. Register your company in the program using your USDOT and MC numbers. Visit this page to check if you are required to register with UCR.
- Electronic Logging Devices - As per the ELD mandate, non-exempt carriers are required to install an FMCSA-registered and compliant Electronic Logging Device.
Failure in staying compliant with these requirements may result in the revocation of your corporation or LLC existence.
8. Buy or lease a truck or a trailer
When selecting equipment for your trucking company, consider the type of equipment that your business needs and the way you'll acquire it for your fleet.
When it comes to acquiring equipment for your trucking business, you have the option of purchasing or leasing the trucks or trailers for your fleet.
Leasing a truck is a useful option because, in the beginning, it keeps the monthly expenses down. But, on the other hand, it may cost you more in the long run.
If you have the capital to make a down payment, purchasing might be a better solution for you.
Another option is to acquire used trucks. If you consider this option, calculate the possible truck repair cost to maintain the truck.
9. Hire staff
If you plan to run your company as more than an owner-operator venture, you will need to hire employees to support your company. Depending on your size and revenue goals, you might need to consider adding staff such as:
- Drivers
- Accounting or payroll managers
- Sales and marketing personnel
- Logistics coordinators
- Dispatchers
- Receptionist or administrative staff
Some trucking companies choose to outsource some of the admin, accounting, sales, and marketing strategies or wait to add staff until the volume of work requires an in-house team.
10. Identify your rate per mile
Another part of planning your trucking business is identifying the right rate per mile that you will charge.
It should be high enough for you to make a profit, cover operational expenses, and compete with the price brokers charge your shippers.
Follow these steps to determine your rate per mile:
- Choose your freight lane
- Proceed to a load board
- Look for ten loads going the same direction
- Contact the brokers and discover how much they’re paying
- Compute the average
- Add 10-15 percent to estimate the price brokers bill shippers
- Repeat the steps for loads going in the opposite direction.
11. Find loads and grow your business
When you first start a trucking company, you’ll have find freight to transport. One option for new freight companies is to use load boards to find customers.
Another option would be to start building relationships with potential customers through marketing and networking efforts. Contact local shippers directly and meet prospective customers where they do business.
Final thoughts
When you start a successful trucking business, it can be a great way to make a living. As a new operator, however, it can take time. Don’t let the initial paperwork or credit requirements stop you from owning your own business.
