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How To Start A Trucking Company

How To Start A Trucking Company

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How To Start A Trucking Company

How To Start A Trucking Company

In the bustling world of commerce, the trucking industry plays an essential role. From transporting raw materials to delivering finished goods, trucking companies are the lifeblood that keeps the wheels of the economy turning.

You might be interested in launching your own trucking company, but it requires more than just getting behind the wheel. So, where do you begin? This guide will provide you with a roadmap, navigating the essential steps you need to get your company up and running.

Business Overview

A trucking company’s core operation involves transporting goods from one location to another for a wide variety of goods. This includes moving anything from dry freight, refrigerated freight, platform freight, and bulk freight over long or short distances. This business can range from a single truck operation to a large fleet covering regional or national routes.

In order to drive, a truck driver usually has to complete a truck driving training course and hold a commercial driver’s license (CDL) for long-haul trucks. In addition to that, drivers must attain a HAZMAT endorsement if they intend to transport hazardous materials.

This is a highly regulated industry with laws and regulations likely to differ from state to state. Understanding and adhering to all relevant requirements is necessary to run a trucking business successfully and safely.

Industry Summary

The trucking industry plays a significant role in transporting goods across the country. According to the American Trucking Association, trucks move more than 72% of all U.S. freight and generate around $941 billion in revenue annually.1 The U.S. trucking industry is made up of well over 128,800 companies. Almost 90% of trucking businesses are small carriers operating out of a single location. In fact,  1 in 4 truck drivers identifies as an independent owner-operator trucker, meaning they own their truck and contract their services out to trucking companies.2

While there is a lot of opportunity, it’s essential to be aware of the challenges of the industry, such as fluctuating fuel costs, driver shortage, regulatory changes, and intense competition. It’s also worth noting that approximately 90% of startup trucking companies fail. This high failure rate is often attributed to common mistakes made by inexperienced business owners, such as poor business and profit management and non-compliance with Department of Transportation regulations.3

Steps To Start A Trucking Company

Step 1: Write your Business Plan

You may wonder if writing a business plan is really necessary when starting a trucking company. After all, it’s time-consuming, and if you just want to be out on the open roads, it can seem like an unnecessary distraction. However, taking time to complete one is important for several reasons:

First, before investing significant money, time, and effort into launching any new business, you need a clear picture of your industry landscape. In the business plan, you’ll conduct market research to analyze demand trends, identify your target customer base, study freight rates by region and cargo type, assess the competitive environment, and validate if there is sufficient opportunity. This information equips you to carve out a profitable niche and tailored services.

Once you have conducted market research, you can narrow down the type of trucking company you want to start. Do you want to specialize in long haul or local delivery? Do you want to transport specific cargo, such as refrigerated goods or hazardous materials? Your business plan should help you identify a niche that aligns with your interests, resources, and market demand.

Last, your business plan will include financial projections, which are estimates of start-up costs and potential profitability. Trucking companies face substantial startup costs, and a business plan helps you estimate these costs so you’re financially prepared for the journey ahead. By projecting income and expenses, you can also better understand the numbers and manage your finances.

Related: How to write a business plan

Step 2: Source Funding

Starting a trucking company requires not just a passion for the open road, but from purchasing trucks to securing permits, the costs can add up quickly. To help you find the money, here’s a look at some of the most common ways entrepreneurs find the funding to get their trucking business rolling.

Personal savings: Tapping into personal savings is the first step for many entrepreneurs. Using your personal savings provides the advantage of retaining full control over your business without the burden of repayment or interest rates. However, make sure you have enough funds left for personal emergencies. If your personal savings aren’t enough to get started, you will need to look at outside funding sources.

Bank loans: Banks are a common funding source, but acquiring loans for a trucking company can be challenging due to the high failure rate of new trucking businesses. Despite this, there are loan guarantee programs offered by the Small Business Administration (SBA) specifically for small businesses. These programs help reduce the risk for lenders, making it easier for trucking entrepreneurs to secure the funding they need.

Equipment leasing: Leasing trucks through a bank or manufacturer is another option that can preserve capital for other startup needs. This option is attractive because it offers flexible terms, lower monthly payments, and it ensures that the truck fleet is updated with newer models. However, leasing can also be more expensive in the long run, as you will be paying interest and the cost of the lease for several years.

Family and friends: Borrowing money from family and friends can be an option for some entrepreneurs starting a trucking company. This option is particularly attractive because family and friends are more willing to lend money without the stringent requirements of a bank loan. However, borrowing from family and friends also has its drawbacks. It can cause relationship issues if things don’t go how they were anticipated. It is important to have a documented agreement that outlines the terms and conditions of the loan to avoid misunderstandings.

Related: Finding the money to start a business

Step 3: Register the Business

Starting a trucking company involves more than just purchasing a fleet of trucks and finding clients. It requires careful navigation of legal requirements, including choosing a business structure, registering your business name, obtaining necessary licenses and permits, and adhering to relevant regulations. Here’s an overview of what’s needed to legally register your trucking company.

Business structure: Choosing the right business structure is the first task, which can affect your legal liabilities, tax obligations, and administrative costs. There are four main types of business structures:

  • Sole proprietorship: This is the simplest form of business structure where the owner is solely responsible for all debts and obligations of the business. The advantage of a sole proprietorship is the ease of startup and lower cost. However, there’s no separation between personal and business assets, which may pose a risk if the business is sued.
  • General partnership: In a partnership, two or more people share ownership, contributing their money, labor, and skills. Both partners are equally liable for the debts and obligations of the business.
  • Corporation: A corporation is a separate legal entity owned by shareholders, providing liability protection as the corporation, not the shareholders, is legally liable for its actions and debts. However, corporations are more complex and costly to establish and maintain.
  • Limited Liability Company (LLC): Combining elements of sole proprietorships and corporations, an LLC offers liability protection while allowing profits to pass through to its owners without corporate taxation.

While each structure has its pros and cons, many trucking companies opt for the LLC structure due to its liability protection and tax benefits.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Trucking-specific licensing: A business owner will need to obtain specific business licenses and permits. These permits and licenses can vary based on the state and town where the business is located, the types of goods being transported, and the location of deliveries.

  • USDOT number: Every vehicle hauling cargo across state lines requires a USDOT Number. It’s a unique identifier for your trucking company and is used to monitor safety information, inspections, crash investigations, etc.4
  • Motor Carrier (MC) number: If you will be transporting passengers or regulated commodities for a fee, you’ll need to obtain an MC Number.5
  • International Registration Plan (IRP) Tag and International Fuel Tax Agreement (IFTA) decal: These tags and decals are necessary if you’re planning to operate across state lines.6 IFTA is a tax collection agreement between the U.S. states and Canadian provinces to simplify the reporting and collecting of motor fuel taxes.
  • Unified Carrier Registration (UCR): This is a federally mandated program in the United States that requires all trucking companies to register annually and pay fees based on their fleet size.7
  • State-specific permits: Some states require additional permits, especially for hauling special commodities or oversized loads.

In addition to licensing, be sure to review and comply with regulations from the Federal Motor Carrier Safety Administration (FMCSA).8 These rules cover things like the required qualifications of drivers, how long drivers can be on the clock, and regular maintenance and safety of vehicles.

Obtain business licenses and permits: Depending on your location, there will likely be a variety of general registrations needed. This could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Step 4: Purchase Trucks & Equipment

After all of the planning, we finally get to the most fun part of starting a trucking business, which is sourcing your trucks and equipment. In this phase, you must decide between buying, which means full ownership and control but high initial costs, and leasing, which offers lower upfront expenses and maintenance covered but no ownership at the end. The choice depends on your financial situation and business goals, so examine both options carefully to determine which is best for your needs.

Step 5: Get Business Insurance

With the truck keys in hand, the next step is purchasing insurance coverage.

Primary liability insurance is a must as it covers damages or injuries your truck may cause others. Federally, you’re required to have a minimum of $750,000 in coverage, though the specific requirements can vary based on the type of goods you’re hauling and the areas where you’ll be operating.9

Cargo insurance, on the other hand, covers damage or loss of the freight you’re hauling, while physical damage insurance protects your truck from fire, theft, or other damages.

Related: What types of insurance does a trucking business need?

Step 6: Prepare to Roll!

While we’ve covered several essential steps for starting a trucking company, there are still important details to consider before hitting the road. Everyone’s needs will be different, but here’s a breakdown of some of the common remaining steps:

Hiring staff: Many trucking companies are owner-operated, but if you plan to hire drivers, be sure to understand employer requirements. This includes complying with labor laws, providing benefits, and complying with OSHA and DOT regulations.

Bookkeeping setup: Implement accounting systems to handle daily transactions, taxes, financial statements, and cash flow. Options range from DIY spreadsheets to integrated trucking software packages.

Business bank account: Opening a separate bank account for your business for better financial management such as tracking business expenses and preparing for tax filings.

Common Questions When Starting A Trucking Company

How much does it cost to start a trucking company?

The total cost to start a trucking company can vary significantly depending on factors such as the size of the fleet, location, and equipment, but in total, expect the cost to start between $50,000 and $300,000.

Here are some estimated costs to consider when starting a trucking company:

Trucks and equipment: The most significant cost will be the trucks themselves. New semi-trucks can range from $130,000 to $180,000 each, while used trucks can be found for $15,000 to $100,000. Leasing can lower upfront out-of-pocket costs but will still result in ongoing monthly payments.

Additionally, you’ll need to invest in trailers, which can cost between $30,000 and $80,000 each. Other necessary equipment, such as pallet jacks or forklifts, will add to this cost.

Licenses and permits: You’ll need to obtain a USDOT number and a Motor Carrier Authority Number from the Federal Motor Carrier Safety Administration, which costs around $300. Other permits, such as an International Registration Plan (IRP) plate, can cost between $500 to $3,000 per truck.

Business registration: The cost to register your business can vary by state, but you can expect to pay between $50 and $500.

Insurance: Insurance is a significant cost for trucking companies due to potential accidents and damage. Initial insurance costs can range from $6,000 to $16,000 per truck per year.

How profitable is a trucking company?

Launching a profitable trucking company is feasible despite high startup costs if you operate efficiently. Let’s look at a hypothetical scenario to estimate potential earnings:

For a solo independent owner-operator running a single truck, average annual revenue might reach $180,000, assuming consistent freight hauling at competitive market rates.

Here’s the math:

You have a single dry van truck that drives an average of 400 miles per day. With 300 working days in a year, that’s 120,000 miles driven in a year. If you’re making $2.50 for each mile driven, the annual revenue is $300,000 (120,000 miles/year * $2.50/mile).

Next, we need to look at expenses.
– Fuel, which costs an average of $0.70 per mile, totals $84,000 a year (120,000 miles/year * $0.70/mile).
– Other operating expenses like maintenance and tires cost about $0.30 per mile, adding up to $36,000 a year (120,000 miles/year * $0.30/mile).

Adding together the fuel and operational costs, the total annual expenses come out to $120,000 ($84,000 + $36,000).

To figure out the annual profit, subtract the expenses from the revenue. So, the annual profit for this example would be $180,000 ($300,000 – $120,000).

This scenario shows a potential profit of $180,000 per year for a single truck operation. Please note that this is based on a set of assumptions, and the exact numbers can vary based on a variety of factors like fuel price changes, maintenance costs, and the actual revenue per mile.

What is the NAICS code for a trucking company?

The NAICS code for a trucking company is 484. More specifically:
– General freight trucking – 4841
– Local general freight trucking – 484110
– Long-distance general freight trucking – 484121
– Specialized freight trucking – 4842
– Local specialized freight trucking – 484220
– Long-distance specialized freight trucking – 484230

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

Sources:

  1. American Trucking Association ↩︎
  2. VerticalIQ ↩︎
  3. Foley Services ↩︎
  4. Federal Motor Carrier Safety Administration (FMCSA) – DOT Number ↩︎
  5. Federal Motor Carrier Safety Administration (FMCSA) – MC Number ↩︎
  6. International Registration Plan ↩︎
  7. Unified Carrier Registration ↩︎
  8. Federal Motor Carrier Safety Administration (FMCSA) – Regulations ↩︎
  9. Federal Motor Carrier Safety Administration (FMCSA) – Insurance Requirements ↩︎

How To Start A Trucking Company

How To Start A Trucking Company

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