Are you ready to take control of your trucking career and operate on your own terms? Securing your own authority in the U.S. trucking industry is essential for achieving independence and success. Whether you’re a seasoned driver or just starting out, understanding the key implications of obtaining your own authority is crucial.
While the journey to securing your own authority may seem complex, it opens the door to countless opportunities. With this, you gain the freedom to choose your routes, set your rates, and build lasting relationships with clients. By understanding the clear, actionable steps and utilizing the right resources, you can turn your authority goals into reality.
For FedEx linehaul contractors, operating under your own authority can provide a tremendous ability to branch out beyond a single source of revenue. With proper planning and a thoughtful, careful strategy, running a traditional trucking company alongside a Transportation Security Provider (TSP) can be a very profitable endeavor. This approach allows you to maximize opportunities and take advantage of business cycles.
What Does "Getting Your Own Trucking Authority" Mean?
Obtaining your own authority entails acquiring the legal right from the Federal Motor Carrier Safety Administration (FMCSA) to operate as an independent trucking business. This designation is not merely a regulatory formality; it represents a significant step toward establishing autonomy in your trucking career. With your own authority, you assume full responsibility for arranging contracts, managing financial operations, and ensuring compliance with industry regulations.
There are two primary options when embarking on your trucking career:
Running Under Your Own Authority: Grants you complete control over your business operations. You will have the ability to source your own loads and negotiate rates directly with shippers, enabling you to maximize profitability and strategically position your business in the market.
However, this level of independence also requires you to manage all aspects of your operations, including compliance, insurance, and the necessary administrative tasks.
Leasing to a Carrier: This option involves working under the authority of an established trucking company like FedEx. While leasing can streamline many of the administrative burdens—such as legal compliance and operational logistics—it also means that a portion of your earnings will be shared with the carrier.
Although this may provide an easier entry point into the industry, it limits your control over business decisions and can restrict your earning potential.
Step-by-Step Guide to Getting Your Own Trucking Authority
Obtaining your own authority is a key step for independent truck operators, enabling you to operate legally and manage your business on your terms. Here are the 10 essential steps to secure your authority:
Step 1: Register Your New Transportation Company
The first and most fundamental step is registering your transportation company. You need to register your business as a legal entity in the state where you plan to operate. Common business structures include Sole Proprietorship, Limited Liability Company (LLC), and Corporation.
However, it’s important to note that FedEx Ground does not contract with LLCs; a new Transportation Security Provider (TSP) must be a Corporation. The choice then becomes whether to form a C Corporation or an S Corporation, with each offering different tax implications and benefits.
Tip: Registering as a foreign entity can provide significant tax advantages while ensuring compliance with local regulations. If you plan to operate in multiple states, consider this option. For an easier incorporation process, services like Northwest are popular among FedEx contractors for their efficiency and ongoing support.
Step 2: Obtain an Employer Identification Number (EIN)
Once your business is registered, you need to apply for an Employer Identification Number (EIN) through the IRS. The EIN acts as your company’s federal tax identification number, which you will use to file taxes and handle other financial responsibilities with the IRS. More importantly, it enables you to open a business bank account, apply for loans, and hire employees.
You can obtain your EIN online through the IRS website, by mail, or via fax, with the online option being the quickest. Note that this is a requirement for businesses with employees or those filing certain tax returns.
Applying for an EIN is free, so avoid any services that charge for this process.
Step 3: Secure a DOT Number
Your next step involves applying for a Department of Transportation (DOT) Number. A DOT number serves as a unique identifier for your trucking business, allowing DOT to monitor your company's safety information, cargo, and overall compliance.
To obtain a DOT number, you will need to register with the FMCSA. Once registered, you’ll provide key details about your operations, vehicle type, and the type of cargo you’ll be transporting. DOT number is a legal requirement if you plan to operate commercial vehicles across state lines, making it critical for ensuring compliance with federal regulations.
Traditionally, obtaining a DOT number did not require a registration fee. However, since 2016, the FMCSA's Unified Registration System has shifted the previous $300 filing fee for MC numbers (discussed in the following steps) to apply to the DOT number instead.
Step 4: Apply for an MC Number
If your trucking company will engage in interstate commerce (i.e., operating in more than one state), you'll also need to apply for an MC (Motor Carrier) Number from the FMCSA. This step is essential if you plan to transport goods across state lines or carry passengers.
Upon receiving your MC number, it will not be activated until you complete the next steps, which include filing BOC-3 forms and obtaining the necessary insurance (discussed in the following steps). The government will grant you 20 days to fulfill these requirements. If you fail to meet the 20-day deadline, your MC number could be delayed or denied.
Step 5: File BOC-3 Forms and Get Insurance
With your MC number in hand, the next critical task is to file BOC-3 Forms and secure an insurance policy. The BOC-3 form designates a process agent in each state where your company operates. A process agent is responsible for receiving legal documents on behalf of your company in each state.
Simultaneously, you will need to purchase an insurance policy that meets the FMCSA’s standards for liability. Without this, your MC number cannot be activated.
Insurance Costs and Tips
Insurance is one of the most significant expenses when you get your own authority. While transitioning to your own authority, you may face dramatically varying quotes for insurance, ranging from $8,000 to $20,000 or more annually. This high range is largely due to new businesses being viewed as risky, regardless of the owner’s record. However, as your business establishes itself, primary liability rates can decrease to between $5,000 and $10,000 annually, although rates have been rising in recent years.
To operate legally, you'll need several types of coverage:
Primary Liability Insurance: This covers damages or injuries you may cause while operating your truck. You must meet the FMCSA’s minimum requirements, which typically range from $750,000 to $1 million in coverage.
Cargo Insurance: This insurance protects the freight you're hauling. Policies generally require $100,000 in cargo insurance.
Employment Practices Liability Insurance (EPLI) protects businesses from potential lawsuits related to employment issues, including claims of discrimination, wrongful termination, sexual harassment, and other employment-related matters. Annual premiums for EPLI typically range from $1,000 to $5,000, depending on the size of the business and the number of employees covered .
Workers' Compensation Insurance covers medical expenses and lost wages for employees injured on the job. It is often a legal requirement, helping protect both employees and employers from lawsuits related to workplace injuries. The costs for this insurance can vary widely, generally amounting to about $3,000 to $15,000 annually for small to medium-sized businesses, based on factors like location, payroll size and industry risk.
Non-Trucking Liability Insurance (NTL) provides coverage for truckers when they are not on dispatch and using their trucks for personal conveyance, such as taking a truck to a mechanic for maintenance. It protects against accidents that occur outside of their work duties. The cost for NTL typically ranges from $300 to $1,200 annually, depending on the driver’s history and the value of the truck.
Liability Insurance covers damages to third-party properties and bodily injuries resulting from business operations. General liability insurance costs generally range from $500 to $2,500 per year, depending on the coverage limits and specific business operations.
Insurance Tips
Shop Around: Comparing quotes from multiple insurers can save thousands of dollars annually.
Bundle Policies: Some insurers offer discounts for bundling different types of coverage, like general liability and cargo insurance.
Improve Your Safety Record: A cleaner driving record can significantly lower your premium rates. Maintaining a solid safety record will help keep costs down over time.
Once you have secured your insurance, be sure to have your agent file the appropriate BMC-91 form with the FMCSA as proof of insurance.
Step 6: Pay the Heavy Vehicle Use Tax (HVUT) / Form 2290
For vehicles weighing over 55,000 pounds, you are required to pay the Form 2290 annually. This is mandatory for all heavy trucks operating on U.S. highways and is used to maintain the infrastructure.
The amount of HVUT you owe varies based on the gross weight of your vehicle and the distance it travels. Typically, the tax ranges from $100 to $550, with the specific rate increasing with the vehicle's weight.
It’s essential to file Form 2290 with the IRS to report and pay this tax, and you must do so within the first month of the vehicle's operation. If you pay the tax late, you may incur penalties and interest, so ensure you keep track of deadlines. Additionally, the payment of HVUT can impact your ability to register your vehicle, making it a critical step in maintaining compliance.
You can file and pay your 2290 to the IRS online, which simplifies the process and provides quicker confirmation.
Step 7: Complete IRP Registration
Next, register with the International Registration Plan (IRP). This registration allows you to operate your vehicle across multiple states and Canadian provinces, all under a single apportioned license plate. The IRP simplifies tax reporting and regulatory compliance for truck drivers who frequently cross state lines.
By registering with the IRP, you can pay your registration fees based on the miles driven in each state, rather than registering your vehicle in every state you travel through. This system promotes fairness by ensuring that each jurisdiction receives its fair share of revenue based on the actual usage of its roads.
Step 8: Set Up an IFTA Account
If your trucking company operates across state lines or internationally (specifically within the lower 48 states and Canadian provinces), you need to create an International Fuel Tax Agreement (IFTA) account.
By setting up an IFTA account, you can avoid the complexities of filing fuel tax reports in each state you operate. Instead, you will file a single quarterly fuel tax report that consolidates your fuel usage and taxes owed for all jurisdictions. This streamlined process not only saves time but also ensures compliance with state tax regulations.
To maintain your IFTA account, you must keep accurate records of fuel purchases and mileage traveled in each state. Additionally, you are required to display an IFTA decal on your commercial vehicle, which indicates that you are registered and compliant with the IFTA regulations.
Additional Signage Requirements
Federal regulations stipulate that all trucks must display specific information on both sides in a contrasting color. This includes:
Legal Name: The official name of the motor carrier as it appears in the authority filing and on form MCS-150.
USDOT Number: The USDOT number provided by FMCSA, prefaced by the letters "USDOT."
If you wish to include a different name than your registered business name, you must prefix it with the phrase "operated by," followed by the legal name and USDOT number.
Step 9: Submit Your UCR Information
The Unified Carrier Registration (UCR) is another requirement for trucking companies operating in multiple states. The UCR system verifies that your trucking company has adequate insurance and registers all your vehicles in each state where you will operate. The registration fee is based on the size of your fleet.
To finalize your Unified Carrier Registration, visit the central hub at plan.UCR.gov. The annual fee is $46 for carriers operating one or two trucks, with costs increasing for those with additional power units.
Step 10: Enroll in the DOT Drug and Alcohol Consortium
Finally, all truck drivers must enroll in a Department of Transportation (DOT) Drug and Alcohol Consortium. This enrollment is mandatory for any company with commercial vehicles that operate in the United States. Drivers are required to undergo drug and alcohol testing before receiving full authority to transport goods.
Securing your trucking authority comes with several startup costs, including fees for registering your business, obtaining licenses, and paying taxes. The cost of obtaining authority typically ranges between $2,000 to $4,000 (excluding insurance).
Profits When Running Under Your Own Authority
Running under your own authority can be more profitable than leasing, as independent truckers can negotiate better rates and establish direct relationships with shippers. Typically, drivers operating under their own authority earn between $3,000 and $6,000 per week, depending on factors such as cargo type, routes, and the size of their operation.
On average, these truckers have the potential to earn 20-30% more than those leasing from larger carriers. However, this increased income comes with greater responsibilities, including compliance with regulations, insurance, and tax obligations.
Other factors affecting profitability include:
The type of freight hauled (high-paying freight, such as refrigerated goods or hazardous materials, can bring in more income)
The regions in which you operate (cross-country hauls vs. regional routes)
Fuel costs and operational expenses
Here's a breakdown of the typical weekly earnings based on different operational setups:
Additional Tips in Getting Your Own Authority
Stay Organized with Paperwork: Failing to keep track of filings such as BOC-3 forms or tax payments can lead to delays or suspensions. Keeping all documents well-organized can save you from costly mistakes.
Understand Insurance Requirements: Many new operators underestimate the importance of getting the right insurance. Proper insurance can make or break your business. Skimping on coverage could lead to major financial loss in the event of an accident.
Take Advantage of Tax Benefits: Utilizing deductions related to fuel costs, maintenance, and meals can lower your taxable income. Keeping detailed records of all expenses will allow you to maximize these deductions.
Consider Hiring Help for Compliance: If navigating the paperwork seems overwhelming, services like FMCSARegistration.com can assist in filing.
Specific tips during filing process
Select the Correct Entity Type: Choose "Motor Carrier of Property (except Household Goods)" unless you genuinely qualify for another type.
Be Cautious with DBAs: A DBA (Doing Business As) is a registered name that a business uses that differs from its legal name. It's important to be cautious when selecting a DBA for the following reasons:
Avoid using a DBA that matches the company name.
Do not use a DBA that suggests multiple corporations using the same USDOT/MC number.
Leave the DBA field blank if not using one; entering "same" or "none" will create an incorrect DBA name.
Use the Correct Company Address: The principal place of business must be a legitimate address where records are maintained. Avoid using virtual offices or P.O. boxes to prevent suspicion.
Mailing Address: Only provide a different mailing address if absolutely necessary. An out-of-state address may raise red flags.
Declare Hazmat Status: If transporting autos, be aware that they are classified as Class 9 Hazmat, requiring additional insurance coverage. Ensure your BIPD liability insurance meets the necessary limits.
Getting your own trucking authority opens the door to a more profitable and independent career in the transportation industry. Although the process involves navigating complex regulations and dealing with significant upfront costs, the rewards can be substantial. By following these steps, understanding the key costs, and learning from the experience of other truckers, you'll be well-positioned to run a successful trucking operation under your own authority.
If you ever feel overwhelmed, don’t hesitate to consult third-party registration companies or expert insurance brokers, who can simplify the process and allow you to focus on growing your business.
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