H1 - how to start

Have you been planning to start your own trucking company, but do not know where to start and what you need for that? Don’t worry you are not alone and this is a step by step guide that explains the entire process as well as possible problems on the way to a successful company in a multibillion dollar transportation industry.

 

“It’s well known that the higher risk - the higher reward. So a trucking company can turn into a tremendous success that you will make you a milliner in just 2 years or it can become your nightmare. So why do ones succeed while others fail?”

This guide will help you to understand the process and to estimate required capital for the investment. Thanks to technology today everything can be completed online in a matter of days and pretty much you can do it yourself with a little bit of effort.

 Step 1: Form a legal entity

 First comes first you have to incorporate a legal entity for your business. At this point your main options will be: Corporation, Partnership or LLC. The choice will really depend on numerous factors such as a number of potential shareholders, legal liability and entity taxation. Corporations and LLCs are formed through the filling with a state. Partnership often formed by a written agreement known as a partnership agreement; there is no requirement to formally organize under a state law as compared with a corporation and LLC.

Since the filling is done under a state law for a corporation and LLC, it can be filled online with the Secretary of State. Each state has it’s own website. For example for the State of Illinois it’s  http://www.cyberdriveillinois.com/

What you will need to file:

Company name (it has to be available in that state), physical address for your business in that state (it can be your residential address, but it can’t be a PO BOX) and the incorporator (must be a natural person aged 18 years or more).

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

It’s a pretty straight forward filling, however if you feel you prefer someone to assist you with that, you can find a CPA or a tax accountant who will do it for you for $50-$300.

 

Step 2: Apply for EIN number

 

Once your Articles of Incorporation has 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 in order to open a bank account, file your tax returns and will be requested by all your customers before they will make a payment for your services.  Since it’s issued by 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.  What information you will need before you start your application: your company name and address as in the Articles of Incorporation, name and SSN of a responsible party. Responsible party is a president, CEO or a corporate officer who can legally bind the corporation.

 

Step 3: Apply for USDOT number

 

So now is time for a 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 US Department of Transportation and State Internal Revenue Services.

The major step is to apply for USDO. 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 successful completion of the application, you will instantly receive USDOT number for your trucking company. This is an easy one.

 

Step 4:  Apply for MC number (Motor Carrier number).

 

It’s filled with FMCSA and can also be done online

 

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

 

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

 

Step 5: Get insurance

 

However, 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 applied for MC number, you will have to start working on insurance quote for your trucking fleet. Well, for this purpose you will have to contact an insurance agent for trucking companies. For 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 of the general freight. Also, you will need a physical damage insurance to protect your trucks and trailer. While physical damage insurance is not required, it’s for your own protection and a piece of mind. 

So, insurance quote will depend on numerous factors, 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 drivers’ record. A lot of insurance companies don’t except drivers with less than 1 year of experience.   

Thus, from our experience if all factors are reasonably good for the first year of your operations your insurance quote 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 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 BOC-3 agent.  The BOC-3 (Designation of Process Agents) is a form filed to 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, mostly likely you will receive a phone call offering this service as soon as you submit you MC authority application (Step 4), as they will get your information from FMCSA database. Once you pay their fees, they will make a required filling with FMCSA.

 

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

 

Congratulations! At this point you have your trucking company and you are ready to rock and roll in the waves of trucking fortune and adventures!

 

Summary of fillings, fees and processing times.

 

		Fees	Processing Time
Step 1:	Form a legal entity	$50-$300	1-30 days
Step 2:	Apply for EIN number	free	Instantly
Step 3:	Apply for US DOT number	free	Instantly
Step 4:	Apply for MC number	$300	20-25 days
Step 5:	Get insurance	on average $1000 a month per truck for a new company
Step 6:	Get BOC-3 agent	$25-$30	Instantly