With the recent economic turmoil, many individuals are rethinking their career choices and making bold moves to secure their financial futures. As a result, the trucking industry in the United States is more active than ever, with commercial trucks hauling over 72% of the country’s total freight by weight in 2021.
Additionally, the long-distance freight market is projected to reach an all-time high of $826 billion by 2025. This data indicates that the trucking industry will likely continue being a stable source of income for many people well into the future, prompting many to consider a future in this industry.
Starting a trucking business is more accessible than one would think. And given the likelihood of steady income in the industry, even long-time truck drivers who have worked for others may want to consider starting their own trucking business.
While starting a trucking business may be easier than starting other small businesses, there are still a lot of details to consider.
We’ve broken down the “How to Start a Trucking Business Checklist” into four main task categories — planning, trucking basics, business setup, and regulatory & finance.
Do Your Research: There are many pros and cons to consider before deciding to work in the trucking industry.
You get to travel and set your own hours, but you also have to do your own marketing, and it’s easy to get burned out if you work long hours. So before starting a trucking company, you will want to research industry trends to learn more about what to expect and ensure it’s the right option.
While the industry is large and offers many opportunities, it is typical for between 85-90% of startup trucking companies to fail. It is difficult to run any startup business, but it can be challenging in the highly competitive transportation industry.
Some of the most common reasons these businesses fail are an inability to effectively manage the company’s finances, drivers, or the business. However, these pitfalls can be avoided by preparing yourself to be a trucking company owner. When done well, conducting market research and planning up-front can reduce the odds that your business will fail.
Draft Your Business Plan: Once you’ve researched the industry and feel confident it’s right for you, you will need to develop a business plan. This plan will provide a summary of where your business is today and your goals for it in the next few years. In addition, it will explain your strategy for reaching your goals and include research that indicates you can achieve the goals you have identified.
Trucking business plans often contain multiple sections, including:
- An Executive Summary that provides an overview of the entire plan
- A company description that includes the history and background of your business, as well as the mission of your company and information about the owners, the organizational structure, and roles and responsibilities. This section also includes business details (such as your registered states) and your competitive advantages.
- The services your company will provide and related pricing. This section will also include information about the materials you will haul and the industries you serve.
- A market analysis that shows awareness of industry trends, local trends, customer needs, and how your business can meet them. You will want to include projections about the industry and the market you will operate in to show that it will remain viable for years to come.
- A sales and marketing strategy. It may be easier to split these into two sections. The marketing strategy will provide details about how you will build a customer base, and the sales strategy will provide details on your process for attracting new orders.
- Financial projections that show your company’s ability to meet the goals as outlined in the business plan. You will want to describe how you anticipate your business growing over the next few years.
While writing a business plan may seem intimidating initially, many online resources, such as templates, can help you fill in the details you need for a solid business plan. Additionally, many states or communities have organizations that assist small business owners with starting up, including assisting with drafting a business plan.
Select Your Business Structure: As a business owner, you must determine what type of business you want. Options include sole proprietorships, partnerships, LLCs, or corporations. Your choice will determine how you file tax returns for the company, so it’s vital to do some research before making a decision.
In addition to impacting your tax filings, your business structure may affect your personal liability. Most trucking companies start very small, and in other industries, this would likely lead them to stay a sole proprietorship (this classification is the government’s default if another business structure isn’t in place).
However, this isn’t the ideal structure for trucking companies, since you remain liable for all business-related incidents, including employee accidents or other activities where parties may take legal action against your company. If you remain a sole proprietor and lose in litigation, your personal assets may be at stake. For this reason, many owners of trucking companies prefer to establish a limited liability corporation (LLC) or S-corporation.
At this time, you will also want to obtain an Employment Identification Number (EIN) and get the required business licenses from the state or municipality.
Get Your Commercial Driver’s License: The Federal Motor Carrier Safety Administration (FMCSA) requires all truckers operating a commercial vehicle over 26,001 lbs. to obtain a CDL. Those operating cargo vans, non-CDL Hotshots, or Box Trucks generally don’t need this license.
If you are planning on driving a truck that requires a CDL, you can obtain this license by passing an inspection and taking a written exam and driver’s test. The CDL General Knowledge Test is the same in all states and consists of 50 questions. Examinees have one hour to complete the exam.
The inspection requires the driver to walk around the vehicle, point out important features to check, and explain why to the examiner. This includes checking the engine compartment and the cab and doing a brake check.
Complete Your Trucking Authority: A DOT number is required for all trucking companies to legally operate. A Motor Carrier Number is required in addition to the DOT number if a truck plans to cross state lines. This is the permission granted by the government to transport goods across state lines. Those trucking companies required to have a Motor Carrier Number are also required to have a BOC-3. The FMCSA will never approve interstate authority without a valid BOC-3.
We frequently speak to customers who believe that because they have the three above mentioned items, they are in the clear. With that being said, a trucking company must have all of the items outlined (below) in the "Meet All Legal Requirements" section to actually operate without fear of being ticketed or put out of service. If you have any specific questions about this, please call our offices at (208) 834-2949 to speak with one of our team members.
Obtain Equipment: You will need trucks and trailers to run your business. You may opt to purchase these items or enter into a lease agreement. Unfortunately, lenders rarely provide funding to brand-new trucking companies, as the failure rate in this industry is so high.
As an alternative, many new trucking companies secure financing to purchase equipment or cashflow their business by using equipment finance companies and factoring companies. Factoring companies purchase your invoices. This financing solution is popular because you are not borrowing money from a factor but rather advancing your own money ahead of time since it's their invoice.
Establish a Business Account: Any business owner will tell you that you need a separate account to keep your business finances straight and ensure you aren’t using company funds for personal reasons. However, co-mingling your business expenses with personal expenses can make it more likely that the IRS will audit your business. An audit can be expensive, time-consuming, and incredibly stressful.
In addition to these reasons, business accounts often integrate well with accounting software, making taxes and reporting much more manageable.
Identify a Load Board: Load boards connect carriers and brokers to find loads. By identifying a load board that caters to your operating niche, you can feel confident that you will be able to generate a steady stream of work once you get started. Then, subscribe to your identified load board when you’re ready to get started.
While load boards can make it easier for your business to build its reputation, they can be challenging when there is too much competition. Using multiple load boards can increase your options and expenses, as each new subscription will cost.
Regulatory & Finance
Meet All Legal Requirements: The trucking industry is highly regulated, particularly if you are driving a truck that requires a CDL. Non-CDL drivers may have different requirements. However, drivers needing a CDL may also have to complete some or all of the following:
- Obtaining a US Department of Transportation (USDOT) number. The USDOT requires all carriers to have a unique identification number. This number monitors safety information inspections, crash investigations, and other information.
- Filing a BOC-3, if required. A BOC-3 filing is also known as a Designation of Agents for Service of Process. With this filing, you must name a process agent in each state you operate. The process agent can act on your behalf when dealing with legal matters or documents. Drivers cannot file their own BOC-3. This must be done by a broker, freight forwarder, or process agent acting on behalf of the client.
- Getting International Fuel Tax Agreement (IFTA) stickers. The IFTA is an agreement between the continental United States and 10 Canadian provinces, allowing truckers to report and pay fuel taxes under a single license. Before IFTA, truckers had to get a fuel permit from each state or province where they worked. Trucks with two axles that weigh over 26,000 pounds or those with three axles (regardless of weight) must register with the IFTA and get stickers.
- Filing your Unified Carrier Registration, which includes an annual fee.
- Registering with the International Registration Plan (IRP) to get your apportioned plates. The IRP is an agreement between the United States and Canada that recognizes the registration of trucks in other jurisdictions. It is required for trucks weighing more than 26,000 pounds.
- Installing FMCSA-compliant electronic logging devices (ELD) as part of the FMCSA’s Compliance Safety and Accountability program. Among the data that ELD tracks are the hours of service (HoS) and mileage by state.
- Paying the IRS Heavy Vehicle Use Tax (using form 2290) if your truck weighs over 55,000 pounds. A failure to pay this tax could result in an audit and additional fees for a failure to comply. A penalty of 4.5% of the total tax due may be assessed monthly for up to five months when Form 2290 has yet to be filed within the given deadline. In addition, a monthly penalty of 0.5% of the total tax due is levied for underpaying, and additional interest charges of 0.54% per month may accrue. These charges can quickly add up, eating away at your narrow profit margin, meaning you must ensure compliance.
- Enroll in a DOT-Approved Drug & Alcohol Consortium, sign up for the DOT Drug & Alcohol Clearinghouse, and complete your drivers’ pre-employment drug testing.
Obtain Insurance: Trucking insurance is required to activate your authority and keep it active, but the amount of insurance varies. Talk to an agent specializing in commercial trucking policies to find the best policy for your business. Insurance can protect against losses from accidents or injuries caused by the commercial truck.
Ensure compliance: The trucking industry is highly regulated, so you must monitor any changes in laws or regulations and stay on top of tax filings. Filings may be required monthly, quarterly, and annually to remain in compliance and avoid being put Out Of Service (OOS).
Compliance often requires knowing the legal requirements for many different aspects of your business, including OSHA safety regulations, hours of service regulations, and maintenance recordkeeping, among others.
Starting a business in the trucking industry can be the key to finding a career you love and securing your financial future. While there are many steps to the process, this checklist can help you meet all requirements and quickly get your trucks on the road!