Starting a trucking company is a big decision. Becoming a business owner operator is, without a doubt, a huge responsibility, and taking the first steps can feel overwhelming.
Take a deep breath. The trucking industry is growing and you’re taking advantage of that growth. With truckers moving over 70% of the nation’s freight each year, you’ve made a smart choice. Arguably, the hardest part (deciding to start a trucking company) is over.
We’ll help get you through the rest. Here’s a breakdown of how to start a trucking company with just one truck:
- Legally establish your company.
The first step to starting your own trucking company is forming an LLC. Operating as an LLC will protect your personal property as a business owner and offer several tax advantages. There are different structures, so be sure to understand which is the best fit for you moving forward.
When you form an LLC, most states require that you appoint a registered agent. A registered agent accepts and sends legal documents on your behalf. They’ll also receive compliance and tax information, and be the direct point of contact with the state.
You’ll also need to obtain an EIN for your LLC. Getting an EIN, or employer identification number, is a critical step in starting a trucking business, as this number is unique to your business and required for many aspects of operation. It is essentially the social security number of your owner operator trucking company. You also need your EIN to open a business bank account.
- Paperwork, paperwork and more paperwork.
The most time-consuming part of starting your own trucking company is the paperwork, but thankfully, it’s not difficult to complete.
First, if you aren’t already driving, you’ll need a CDL (commercial driver’s license) and some driving experience. There are classes you can take to acquire this. Many owner-operators begin as company drivers, so this step in the process of starting a trucking business may already be complete for you.
Once that’s out of the way, you’ll need to obtain the necessary business licenses and permits. These include:
- USDOT Number: used to identify your company during inspections and audits.
- MC (Motor Carrier Operating Authority) Number: dictates the type of operation a company may run and the cargo it may carry.
- IRP (International Registration Plan) credentials and IFTA (International Fuel Tax Agreement) decal: required for companies offering services in or across multiple states.
When starting a trucking company, be sure to determine if all of these licenses and permits are required for your purposes. Depending on the services you provide and where you operate, you may be able to disregard certain forms and save yourself some time.
- Buy or lease a truck.
Of course, you’ll need a truck. Consider your needs before buying or leasing a truck. Owner-operator trucking services vary in purpose. Also, consider what your finances look like. While starting your own trucking company can definitely pay off, you may not currently have the immediate funds to buy a truck with a large down payment or inhibiting monthly payment.
Most importantly, you need to understand your unique situation and goals.
Leasing a truck is useful for keeping monthly costs down. Some places even offer lease-to-own programs. On the other hand, purchasing may save you money upfront, but cost you more later. If you have the capital to make a down payment, you may find that purchasing is the better solution.
Also, keep in mind that used trucks are an option. If you’re considering this option, do careful research, and consider potential truck repair costs and determine the likelihood of technical issues.
Compare dealers and take your time before making a decision.
- Get insurance.
Owner operator trucking requires that you obtain business insurance when you start a trucking company.
You’ll need to have insurance before you can be licensed by the U.S. Department of Transportation. The DOT requires between $750,000 and $5,000,000 in general liability and cargo insurance.
You’ll want to shop around before choosing an insurance provider. Again, be sure to consider your company’s needs and usage before settling on an option.
- Track expenses, stay tax compliant and avoid cash flow issues.
Being an owner operator requires constant attentiveness. Stay updated on filing requirements and renewals. Remember, decals expire.
Missing deadlines or expiration dates can cause you to lose good standing and acquire significant penalties. You could even have your LLC authorization revoked.
Another aspect of owner-operator trucking that remains important after initially starting your trucking company is tracking expenses. Trucking is reliant on cash flow. Money evaporates quickly through fuel purchases, truck payments, and more. It’s important that you find a way to replace that money quickly.
Factoring solves any potential financing issues caused by the discrepancy between the time it takes to receive money and how quickly it gets used. Without factoring, shippers and brokers might wait to pay invoices for as long as 45 days. That’s a big delay.
With factoring, you’ll receive up to 98% of your unpaid invoices within 24 hours. Because of the quick turnaround, you can get back on the road and keep going. Stop turning down loads. Keep moving your trucking business forward.
So how exactly does factoring work? Essentially, owner-operators can sell their unpaid invoices to a factoring company at a slight discount.
Factoring services, like eCapital, make the process simple. Just send your paperwork, including invoice, rate confirmation, and bill of lading, to eCapital. We’ll verify load delivery, buy your invoice, and pay you up to 98% of your invoice within 24 hours. This paid amount is known as the advance.
Then, when the customer pays the invoice, you’ll receive the reserve, which is the unpaid remainder of the invoice, minus a small fee.
Factoring frees you up to handle more loads, and keeps you from owing debt. It’s an important tool that you may want to utilize when you start a trucking company.
Consider each of these steps within the realm of your individual business. Understand your goals and finances. Starting a trucking company is a huge responsibility, but we’re right here with you to help you get it right.
Another big responsibility you’ll face once you start a trucking company is truck taxes. Now that you’ve decided to purchase your first truck, take the next step. Create your free TruckLogics account to handle all of your trucking needs and file your annual 2290 Form.
About The Author
Carlie Kerechanin is a Content Writer for SPAN Enterprises, parent company to TruckLogics, an All-In-One Business Management program for small to mid-size trucking companies to securely manage their entire business with one cloud-based tool.