How to Start a Trucking Business
Carrier Start-Up Guide
One question the DAT Solutions customer support team is often asked is, “How do I start a trucking business?”. This guide provides a brief overview of the requirements to become a motor carrier and the tools needed to succeed.
Steps to start a trucking business
1. Get driving experience
First, you’ll need to obtain a commercial drivers license (CDL). You can attend a private truck driving school or, some trucking companies have their own training programs or may sponsor you to attend a CDL school. Many drivers who eventually become owner-operators will cut their teeth in the business by serving as a company driver for a few years.
2. Develop a business plan
Before you start your business, make sure you have a business plan. It should clearly show what your revenue and expenses will be. Remember, your expenses need to include the money that you will pay yourself for living expenses. You may want to hire a business advisor to help you determine the plan that makes the most sense for you.
3. Determine how your business will be structured
Common structures of trucking business include:
- Sole proprietorship
- Limited liability corporation (LLC)
- Corporation (C-corp, S-corp, etc.)
Each structure has advantages and disadvantages based mostly on liability and taxes, and it varies with each state. You might want to meet with an accountant to find out which structure best suits your business.
4. Save up money to cover start-up expenses
Starting a trucking business requires a big investment up front to purchase a tractor and trailer(s), plus licensing requirements and registration. Identify sources and terms for financing and secure a line of credit. Experts recommend having enough money saved up to cover your first six months of operation, including your lease payments.
5. Plan your business operations
Plan out how your business will operate, down to the small but important issues like:
- Operations: Where will you park the truck/equipment? Who will maintain it?
- Sales: How will you find loads?
- Back Office: How will invoicing, accounting, payroll and taxes be handled?
6. Comply with federal and state government regulations
Before you start operating, your company needs to comply with the following:
- USDOT Number – The U.S. Department of Transportation (DOT) requires carriers to have a unique identifier that is used to collect and monitor safety information, inspections, crash investigations, etc.
- Operating Authority – All for-hire carriers must receive operating authority from the DOT. This 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.
- Drug Testing and FMCSA Clearinghouse – Whether it is complying with government regulations or customer contracts, it’s important to stay legal by managing your drug testing program and registering all drivers with the FMCSA Clearinghouse.
There are other federal and state regulations, including size and weight standards, EPA/air quality regulations, and safety rules. The U.S. Small Business Administration provides a list of links to the regulations and compliance standards for the trucking industry. If you want someone else to handle the paperwork for you, DAT Authority can help you get your authority, handle your IFTA tax reporting, and assist with other compliance requirements.
7. Obtain insurance
Insurance is a significant expense for trucking businesses. Types of insurance required for transporting freight include:
- 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. Many shippers or brokers require $1 million in primary liability coverage.
- Cargo: $100,000 is the most common request to cover cargo, but this will depend on what you are hauling. This covers damage to the freight and/or theft.
- 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.
- Per-Load Insurance: Cut your annualized insurance costs and quickly cover specialty loads with fast and cost-effective all-risk smart coverage in fewer than 40 seconds.
8. Buy or lease a truck and trailer
As is the case with vehicles, you have the option to either purchase or lease equipment. Either way, you must first decide what type of freight you plan to carry. Do you plan on only running day trips, or will you need a sleeper cabin? Will your first trailer be a van, a refrigerated trailer, or a flatbed trailer? Below are some common types of leases:
- Operating (Full-Service) Lease: With this lease, you take care of maintenance, taxes and permits, and at the end of the lease term you walk away.
- Terminal Rental Adjustment Clause (TRAC) Lease: With this lease you make a small down payment and at the end of the lease you purchase the truck for its residual value, or you can opt for the leasing company to sell the truck.
- If the leasing company makes money on the sale, you receive the profit, if it loses money, you pay the difference.
- Lease Purchase Plans: Lease-purchase plans are primarily for truckers who don’t have enough for a down payment or have bad credit. Experts say you typically pay more in such arrangements versus traditional financing.
9. Build Your Business
DAT Solutions can help you every step of the way in starting and growing your trucking business. Click below to find out more about any of these services.
- DAT Authority – Let DAT take the hassles out of getting your operating authority and complying with governmental regulations.
- DAT Load Boards – Searching for freight to haul? DAT Solutions operates the biggest and best load boards in North America. Search for loads nationwide—or post your truck so that freight brokers will call you.
- Freight Rates – Not sure how much to charge? Select a DAT load board package that includes current market rates on more than 68,000 lanes.
- DAT Fuel Card – Save on fuel costs at more than 1,900 truck stops nationwide.
- Freight Factoring – This financing tool allows you to increase cash flow without the use of debt. DAT has partnered with OTR Capital to provide this service.
- Drug Testing – Get fast and reliable drug testing, plus experts to navigate the complicated regulatory system and help you maintain a safe, compliant business.
- ATBS – Save time and money with bookkeeping, accounting services, and tax services to grow your business
- Mobile App – DAT Trucker is a free mobile app for your smart phone that will help you find the nearest truck stop, rest stop, service station, Walmart store, or trucker-friendly hotel. You can also use it to find loads available near your current location.
- Carrier TMS – Axele TMS helps you manage your operations, including ELDs, Load Boards, and Accounting, all from one system giving you total control at the click of a button.
- Insurance – Cut your annualized insurance costs and quickly cover specialty loads with fast and cost-effective all-risk smart coverage in fewer than 40 seconds.