The trucking industry has an immense impact on
the U.S. economy. According to American Trucking Associations, 71 percent of
the freight tonnage moved in the United States goes on trucks. If you’ve been
thinking about how to start a trucking company so that you can become a part of
this booming industry, you may also be wondering, “Where do I begin?”
Whether you’ve been a driver for another
company and desire to start a trucking business as an owner-operator. Or, if
you’re an owner-operator and want to grow your business, this article will
offer insights that can help you work toward achieving your goals.
Starting a Trucking Business Checklist
There are many administrative, legal,
financial, and operational considerations when starting a trucking business. Many
variables, such as the type of trucking company you want to run, where your
base operations will be located, the size of your fleet, and other factors will
affect what you need to do.
Entrepreneurs who are starting a trucking
business should ask for guidance from licensed professionals (e.g., attorney,
accountant, tax advisor, etc.) that can provide expertise and ensure all the
critical compliance bases are covered.
To help you grasp what you might need to think
about and tasks you might need to tackle, let’s explore some of the
considerations. Everything that I share below is meant to give you an overview
and basic understanding but is not intended as legal, accounting, or tax
Ready to dig in and learn more about how to
start a trucking business? I thought you’d never ask!
1. Choose the business structure for your trucking company.
Whether a business owner chooses to operate as
a sole proprietor, partnership, LLC (Limited Liability Company), corporation,
or some other form of entity type, it will affect personal liability, tax
obligations, and other aspects of the trucking business.
For many business owners, the issue of
personal liability is a significant factor. With sole proprietorships and
partnerships, no legal or financial separation exists between the owners and
the business. Therefore, the business owners are personally liable for the
debts and legal issues of their business. With statutory entities such as LLCs
and corporations, however, the company is its own entity. Therefore, the
owner’s personal property and finances are not at risk of being taken in the
event of a lawsuit filed against the business (unless the owner was personally
responsible) or if the company runs into financial hardships.
How income taxes are applied also often
influences the decision of which business structure is best. Sole
proprietorships, partnerships, LLCs, and C Corporations that file for S Corp
tax treatment get pass-through taxation—in other words, profits from the
business flow through to the owners (or shareholders) of the company and get
reported on the owners’ individual income tax returns and taxed at the
applicable individual tax rates. Corporations that do not opt to be taxed as an
S Corp are taxed at the corporate income tax rate and undergo something known
as “double taxation.” Double taxation refers to the fact that a corporation’s
profits are first taxed at the corporate rate and reported on the corporation’s
tax return. Then, if the corporation distributes dividends to shareholders,
those distributions are taxed again on each shareholder’s personal tax
Other details to think about include:
- Future financing needs – Some lenders
and investors will want a business to be formally registered as an LLC or
corporation before they’ll consider funding a company.
- Compliance complexity – C
Corporations have more formation requirements (such as establishing a board of
directors and adopting bylaws) and ongoing filings to complete and submit than
other entity types.
CorpNet’s Business Structure Wizard can help narrow down what options might be the best fit, and I recommend
talking with an attorney and tax advisor, too. Something for anyone interested
in starting a trucking company should know is that there are laws that prevent
registering a trucking company outside of where its primary home is. Some
entrepreneurs opt to form their companies in a state other than their home
state due to more favorable business laws or tax rates, but trucking businesses
may not. According to the Federal Motor Carrier Safety Administration’s Application
for USDOT Number, “Principal
Place of Business — Enter the physical address of where the company is engaged
in business operations related to the transportation of persons or property and
where safety records are regularly maintained. This address will be used by
FMCSA for on-site visits to Motor Carriers for the purpose of conducting safety
audits, investigations, and other activities. A P.O. Box is not acceptable as a
Principal Place of Business, nor is the address of a consultant, service agent,
or attorney of a Motor Carrier unless the Motor Carrier engages in operations
related to the transportation of persons or property at that location.”
2. Select a name for your trucking business.
After business owners have brainstormed some
names for their trucking business, CorpNet’s free business name search tool
will help in checking if the desired name is already in use in the state. If a
sole proprietor or partnership wants to use a business name that doesn’t
include the owners’ first and last names, they must file a
DBA (doing business as). Also known as a “fictitious
name,” a DBA registers the name with the state and puts the ownership on
the public record. This is a way to provide transparency and ensure consumers
know who owns and operates a business.
Entrepreneurs who envision eventually
expanding their company (for example, opening an office in another state), may
also want to do a trademark search to see if the name is available
throughout the United States.
3. Write a business plan.
A business plan serves as a roadmap of sorts.
It captures information about who the trucking business will serve, services it
will provide, how it will be managed, ways it will be marketed, what its
expenses will be, what its expected financial outlook is, and more.
of the details to sort through as you’re building your business plan include:
- Operational and administrative details – Who
will manage your business? Who will handle your customer service, billing, and
sales and marketing tasks? Do you need to hire employees or find independent
contractors to assist you?
- Start-up expenses –The costs to start a trucking company will vary. They will depend
on how what business entity the company will operate as, the state where the
business will be registered, whether the company will be hauling freight
intrastate or across state lines, trucks and equipment that need to be
purchased, and more.
- Ongoing expenses – Of course, trucking
companies incur costs to stay in operation, too. Examples of some of the
possible expenses that come with owning a trucking business include truck and
trailer lease payments, plate fees, fuel, inspections, maintenance, repairs,
various licenses and registrations, insurance, staff, filing fees, and legal
and accounting services.
- Sales and revenue projections – Just as
getting a handle on the costs of running a trucking business, entrepreneurs
also need to assess their earnings potential to ensure they can become
profitable in a reasonable amount of time.
Business plans can range from very simple to
more complex depending on the size and scope of a business. Bplans.com is a good
resource for business plan templates that give trucking company business owners
a head start in creating one tailored to their
4. Designate a registered agent.
LLCs and corporations, no matter in which
state they’re located, must designate a registered agent to accept service of
process (official government notices and legal paperwork) on their behalf.
Although some states will allow business owners to serve as their own
registered agent, it’s usually beneficial to contract a third party for those
services. A registered agent must be available at their registered address from
the hours of 8 a.m. to 5 p.m. from Monday through Friday. Also, because a
registered agent’s address becomes public record, having a third-party
registered agent helps protect a business owner’s privacy. Entrepreneurs that
anticipate expanding their business can benefit from having a registered agent that can offer their services in all
5. Register your business.
Trucking businesses that will operate as an
LLC or a C Corporation must file registration paperwork with the state. An LLC must submit Articles of Organization,
and a C Corporation must file Articles of Incorporation.
The state might require other forms, as well. To file for S Corp election, a C Corp must also submit
IRS Form 2553. Note that LLCs can also opt for S Corp tax treatment, and would
need to submit IRS Form 8832 followed by Form 2553.
Although many people believe that they need an
attorney to file their business formation paperwork, that’s often not
necessary. A reputable online business filing service like CorpNet can handle
completing and submitting registration forms and other applications in all 50
6. Obtain an EIN.
Most banks will require an EIN (Employer Identification Number) from the IRS
before they will open a business bank account for a company. Also, trucking
businesses that will hire employees will need to have an EIN. An EIN is a nine-digit number that a business
uses on its tax filings and other business documents.
Obtain the necessary business licenses and permits for your trucking business.
Besides the general federal and state
licensing requirements, trucking businesses must comply with industry-specific tax,
license, and permit regulations. The obligations may vary depending on the type
of activities the company engages in. Below are examples of some common
- Obtain a CDL (Commercial Drivers License) – Anytruck drivers working for the company
will need to get a CDL from the state driver licensing agency in their state of
- Register for a Federal DOT Number – The Federal Motor Carrier Safety
Administration issues USDOT numbers, and the U.S. Department of Transportation
uses them to collect and monitor a trucking company’s safety information,
including inspections and accident investigations. The USDOT website provides the details about when
vehicles in intrastate commerce will need a USDOT number.
Each commercial motor vehicle used in interstate commerce must have a USDOT
number. Trucking companies can apply for them through the FMCA’s Unified Registration System.
- Apply for Operating Authority – For-hire
freight carriers and those that transport (or arrange for the transport of)
federally regulated commodities in interstate commerce must apply for an MC Number (Motor Carrier Authority Number)
through the FMCSA. Operating Authority (sometimes called
“Trucking Authority”) gives a trucking company permission to transport freight
across state lines. To obtain operating authority, FMCSA requires trucking
companies to provide proof of liability insurance.
- Sign up in the Unified Carrier Registration (UCR)
system – Companies (or individuals) that operate
commercial vehicles in interstate or international commerce must register in a
state that participates in the UCR program and pay an annual fee (which varies
depending on the size of the fleet). If
a trucking company’s home state isn’t a participating state, it must register
with UCR in another state that does participate.
- Pay Heavy Vehicle Use Tax – Trucks that weigh
more than 55,000 pounds are subject to this tax. Trucking companies must file
an annual Heavy Highway Vehicle Use Tax Return
and remit the applicable tax for their fleet. The costs range from $100 to $550
per year per vehicle.
- Designate a Process Agent – Trucking companies
must designate a process agent in each state where they have an office or
establish contracts. Some process agents offer coverage in all 50 states, which
is helpful for trucking businesses that operate in multiple states. Process
agents are used in the event that court papers are served to the trucking
company in a state other than the one its business is registered in. FMCFA’s form BOC-3 (Designation of Process Agents) is
used to name Process of Agents for each state.
- Register for the International Registration Plan (IRP) – The IRP is an agreement among the U.S. states, the
District of Columbia, and Canadian provinces, which
provides for payment of commercial motor carrier registration fees. IRP
distributes registration fees to states and provinces based on the miles
traveled in each state or province. Trucking companies that will operate in
multiple states or provinces must register in their home (base) state.
- Obtain International Fuel Tax Agreement (IFTA) Permit and Decals – IFTA is an agreement between the lower 48 states of the
U.S. and Canada’s provinces that simplifies motor carriers’ fuel use and tax
reporting. The quarterly reporting and tax payments apply
to carriers who drive in multiple states and/or across Canadian provinces. The
International Fuel Tax Association, Inc. then distributes tax revenues to the
individual states and provinces.
In addition to the list above, individual
states may have their own trucking company registration requirements.
8. Stay on top of your business compliance responsibilities.
Different states have different compliance
requirements for LLCs, S Corps, or C Corps. Trucking companies must also stay
up to date with all reports, filings, and fees associated with operating a
transport business. Submitting filings and license renewals on time is critical
for running a trucking business legally.
An attorney and tax advisor can help identify
what forms and reports a business must turn in and when the deadlines occur.
One way to keep track of filings and due dates is by signing up for a free CorpNet’s Business Information Zone (B.I.Z.)
account so you can review any upcoming state, city, and county compliance
Ready to Step on the Gas and Start Your Trucking Business?
CorpNet’s team is here to help you with your
business registration filings, serve as your registered agent, and ensure your
ongoing business compliance filings are submitted accurately and on time. Our
filing experts will save you time, money, and hassles so that you can shift
your business dream into gear. Contact us today to get started!