Regulation Simplified - Starting a Trucking Company
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How to start a trucking company?
Here is a step by step guide to starting a trucking company. See Quick Links below to access website and information needed to start your trucking company.
- Creating a business plan (optional) (search the internet for templates).
- Opening an LLC and get a business license. Both can be done online through the state. A limited liability company will limit personal liability in case of an accident or issue with freight.
- Getting and Employer Identification Number (EIN). This is required for filing for the Heavy Highway Vehicle Use Tax (HVUT 2290) through the IRS.
- Go to the new Unified Registration System if filing a new application for DOT number. Link to Unified Registration System. Keep in mind a new owner can do this themselves and are not required to use a service provider or third party.
- File a form with the IRS called a Heavy Highway Vehicle Use Tax – HVUT form 2290. This can be done online at HVUT 2290
- If the owner is also going to be a truck driver he/she will need your CDL. If not, see Recruiting and Retention toolbox and Products and Services for ways to find drivers. Check the department of licensing for the state for CDL requirements. Go to State Agency toolbox to find CDL requirements for the state.
- Get trucking insurance. Estimate paying around $1000 per truck per month depending on variables like experience and driving history. To activate your operating authority and DOT number the insurance company will electronically transfer insurance information to the FMCSA. Motor carriers can use google or another internet search engine to find a local truck insurance company.
- File for an International Registration Plan tag (IRP). This is done through the state and can be done when setting up IFTA.
- Register equipment with IFTA and obtain IFTA decals for the commercial vehicles. See IFTA/IRP toolbox for additional information.
- Get a process agent. This is a DOT requirement and will be the resource for the filing of the BOC-3 prior to getting your operating authority. This can get this online there are many companies that do. It just assures that the motor carrier can be served in a lawsuit in any of the 50 states. We recommend Process Agent out of Montana called at processagent.com. It costs $25 per year after the initial filing fee. You can view more process agents for BOC3 at the FMCSA website – Process Agents.
New motor carriers will also need the following:
- Trucks (s). If your company is going run owner operators they will provide their own equipment. Keep in mind the motor carrier is required to have a lease agreement for your owner operators. See Owner Operator for lease agreements requirements.
- Put the DOT number/operating authority (know as markings) on side of truck along with the name of the motor carrrier. See marking requirements under Equipment & Maintenance toolbox for marking requirements.
- Get an ELD if necessary. See “HOS” to see if it is required for the motor carrier. Find ELD providers at Products and Services toolbox.
- Get loads!
- Register for a load boards like Internet Truck Stop
- Lease onto another company
- Reach out to brokers like CH Robinson
- Contact shippers directly
- A driver file for yourself and other drivers working for you. See Driver Qualification under Documents and Templates for Driver Applications to be completed and kept on file by your new trucking company.
What else do motor carriers need to know about running a business?
The next step is taking care of the business. Including filing your federal taxes. and preparing for your new entrant audit.
Remember owners of trucking companies are self-employed so the owner is now responsible for their own your social security, FICA, and Medicare tax. Many new owners don’t realize that currently their employer pays 6.2% of your social security taxes and 1.45% on your Medicare tax. When you become self employed they must pay both sides of that tax for a total of 12.4% to social security and 2.9% of Medicare. Self employment means filing and paying taxes quarterly instead of having it withheld from their paychecks.
There are many ways to file taxes. Online, using software, good old fashion paper, or use an accountant. It can be complicated, and motor carriers will have many deductible expenses, so we recommend and accountant or a service to help with taxes.
Below is a list of documents motor carriers should save in a file folder or in electronic format to use to use during the preparation of a federal income tax return.
- Fuel Receipts
- Maintenance receipts
- Meals or supplies purchased while on the road
- Documents from the purchase or leasing of your truck and/or trailer
- Any purchases of technology or safety systems for your truck
- Your cell phone bills if you use it for business
- Computer or any tools used to work your business
- Subscription or memberships to load boards or software programs
- Anything business related. It may be all tax deductible, keep it and ask
- Bills of lading to support any deductions you are taking and to show depreciation on your equipment
- All tax filings
Within the first 18 months the FMCSA will conduct a new entry audit on the new motor carrier company. See Compliance Reviews for more information on this topic. This is for education new trucking companies on the requirements and making sure they are implementing all the DOT requirements.
What kind of items should motor carriers to track?
- Every December you must order your IFTA decals for the next year.
- Update your HVUT form for the next year see schedule at the IRS website below called The IRS Trucking Tax Center.
- File IFTA quarterly. Your IFTA filing can be done online for most states and is due
- Quarter 1 – April 30th
- Quarter 2 – July 31st
- Quarter 3 – October 31st
- Quarter 4 – January 31st
- IRS taxes are filed based on if it is payroll or sales tax. Talk to an account or bookkeeper to determine how to file for your company.
- Driver Qualification files
- Maintenance records
- Copy of cab cards and registrations for all equipment
- Drug and alcohol testing and results, chain of custody, and MIS annual report
- File your MCS 150 annually
- Logs or time records for six months (electronic or paper)
- Bills of lading and supporting documents for trips (hours of service regulations require it)
- Lease agreement if using owner operators
- Training records (required and non-required)
- Accident reports and cargo claim data for insurance purposes
- DOT accident register
How can a motor carrier lower their insurance rates?
The less losses a motor carrier has the better insurance rates they will receive. In the beginning paying higher rates is normal. A motor carrier should work with their drivers to make safety a priority. Insurance rates can improve if losses and accidents are minimized. Once a track record starts to develop via roadside inspections and a motor carriers safety rating they will play a substantial part in insurance rates. As a new company these factors will not have been established yet so primarily a motor carriers leaderships experience and years in trucking will determine the rate.
At insurance renewal time (annually) make sure there is an understanding of what are driving rates up or down. Insurance rates are primarily determined by what insurance company calls a loss runs. Every year insurance providers will look at loss runs for the motor carrier make carrier and use a formula base on how much has been paid out and determine if they need to increase rates, stay the same, or drop the rate. Rarely will a motor carrier see a rate decrease without shopping around and potentially going to a new provider.
Many insurance companies will require a safety review of a motor carriers driver files and your safety program to see if the motor carrier is a good risk. Motor carriers should always be prepared for this to happen around renewal time and when soliciting a new policy with a new insurance provider.
If an insurance provider determines they can’t renew a motor carrier, more than likely another insurance provider can. Minimum standards for motor carriers will be different between insurance companies.
Insurance is a very competitive marketplace, motor carriers should shop around and get at least three (3) quotes when you starting and every few years during renewal time. Motor carriers should not wait until the last minute to start insurance shopping at renewal, start shopping at least six (6) weeks prior to renewal. Beware of unethical insurance agents and brokers who advise fleets not to shop or don’t provide renewal information at least four (4) weeks out. This could mean a huge jump in rates for the motor carrier and that the insurance agent or broker does not want to disclose to give the motor carrier an option to go somewhere else.
Keep all your information for seven (7) years for tax purposes and/or keep for the time frame outlined by DOT (see specific retention requirements under topics on dashboard/toolbox)
Tips from industry experts
- Having a trucking company is a big commitment, surround yourself with industry experts in every area like insurance agent, maintenance shop, safety professionals, and operational professionals.
- Join your local trucking association. They can help when issues arise with local and national law enforcement and they are a great resources for all areas of trucking.
- Owner operator with a one or two person company? Owner Operator Independent Driver Association (OOIDA) is a great resource.
- Remember even if you are your only driver, you still need to have a driver file and be part of a drug and alcohol program. (See below for a Driver Qualification for a complete file)
- Budget for issues, set aside money every month to take care of truck maintenance, repairs, taxes, and insurance.
IRS Trucking Tax Center (check file date for your HVUT)