Trucking is one of the most profitable business ventures. However, to enjoy the lucrative profits from the haulage business, you have to ensure compliance.
There are numerous legal requirements for starting the haulage or transportation business.
In this article, we highlight the legal requirements for a comprehensive trucking business.
Here are the legal requirements to start a trucking or haulage company.
1. Obtain Insurance cover
Trucking is an inherently high risky business. Therefore, insurance cover is inevitable. Here are the different insurance covers to consider when registering the haulage business:
General Liability Insurance: The general liability insurance covers common third-party lawsuits not directly related to operating your truck. Examples include injuries and property damage.
Commercial Auto Insurance: The insurance covers legal costs, medical bills, and physical damage resulting from accidents involving company-owned trucks.
Workers Compensation Insurance: Workers compensation insurance is a requirement if you have employees. The cover caters to the medical costs and protects your company against lawsuits if an employee suffers during a work-related illness or injury.
Motor Truck Cargo Insurance: The insurance covers the cost of replacing damaged or lost cargo in case of theft, accidents, and legal expenses. Talk to an insurance broker to find out the insurance policies best suited for your business type.
2. Commercial Driver's License
Driving the haulage truck is a big responsibility, and requires skills and knowledge. The drivers must obtain a commercial driver's license through the home state.
Besides, additional endorsements are necessary if driving any of the following vehicles:
- A truck with double or triple trailers
- A tanker
- A truck carrying hazardous materials
For details of all requirements to get the right commercial driver's license for the type of haulage trucks in your company, consult the relevant state licensing bureau.
3. Department Of Transport Compliance
DOT compliance is a must for haulage/trucking companies.
Therefore, before starting the haulage or trucking business, familiarize yourself with the DOT rules.
Ideally, the DOT rules are classified into fleet compliance and driver compliance.
Checkout the DOT regulatory requirements here.
4. USDOT Number
Companies that transport cargo in interstate commerce must be registered with the FMCSA, and have the USDOT number.
Typically, the USDOT number serves as the unique identifier when collecting and monitoring the company’s safety information, during audits, compliance reviews, crash investigations, and roadside inspections.
5. Fire and Safety compliance
Fire can be a devastating event for a trucking company.
The Department of Transportation and Federal Motor Carrier Safety Administration requires that all trucks operating on the road must carry a fire extinguisher onboard.
Motor carriers and drivers can prevent fires if they are equipped with proper fire extinguishers.
6. Occupational Safety and Health Administration
OSHA regulations govern the safety and health of the workers, and the responsibilities of employers to ensure the safety of truck drivers throughout the country.
The trucking business owners should ensure with the trucking industry standards as set by OSHA.
6. A Motor Carrier Operating Authority (MC Number)
In addition to the USDOT number, haulage companies need to have the interstate authority number or the MC Number.
Consult the Federal Motor Carrier Safety Administration for further information and instructions on how to apply for the MC number.
7. BOC-3 filing
The BOC-3 filing is a federal filing in the United States that assigns the process agent to accept legal documents on behalf of the transportation or the logistics company in each state that the haulage company is authorized to operate.
8. International Registration Plan (IRP) credentials
Apportionable vehicles must be registered under the International Registration Plan.
The IRP defines an apportionable vehicle as the vehicle to be used in two or more jurisdictions.
Click here for more information on how to register for the IRP.
9. General Business Licenses
Haulage companies are expected to meet the federal and state licensing requirements.
Failure to obtain the stage business license or the federal business license can result in hefty fines, and even forced closure of your business.
Learn more about licensing requirements in your state by visiting SBA's reference to state licenses and permits
Therefore, talk to the state and the federal level authorities for guidance on the general licenses required to operate the haulage business.
10. Zoning and Land-Use Permits
Another important permit to operate Haulage Company is the land-use permit.
Typically, the local authorities will visit the site to examine if you have met the zoning requirements and whether the land is sufficient to operate the haulage business.
Setting Up Your Trucking / Haulage Business (Formation and Legal)
When it comes to setting up your business, you may find yourself in a place where you have to make some financial and legal decisions.
The first thing you'll want to decide on is whether you want to be an LLC, S-Corp, or C-Corp.
These three options are found to be the most common when starting a small business, and all serve to protect your personal assets and also provide you with certain tax benefits.
- LLC: All income and expenses from the business are reported on the LLC personal income tax return.
- S corp: Owners pay themselves salaries + receive dividends from profits.
- C Corp: C Corps are separately taxable entities that file a corporate tax return (Form 1120). No income tax is paid at the corporate level and any tax due is paid at the owners individual expense.
Depending on where you're conducting business, you'll also want to consider securing the proper permits, licenses and liability insurance.
Need to start an LLC? Create an LLC in minutes with ZenBusiness.
Can A Trucking Company Be An LLC?
Yes! you can register your small trucking company as a Limited Liability Corporation. Ideally, an LLC separates your business assets from your personal assets, and all income and expenses from the business are reported on the LLC personal income tax return.
Besides, a trucking company has the potential to generate profits and grow steadily.
Therefore, LLC is the right choice for any serious trucking company owner looking to protect personal assets and enjoy tax benefits.
What Are Tax Deductions for Owner Operator Truck Drivers?
Common tax deductions for owner operator truck drivers include: - Meals - Lodging - Operating expenses - Business expenses - Incidental costs - Cost of protective equipment - Work-related expenses like the cost of phone calls and internet connectivity
Tax deductions will help lower the adjusted gross income and the taxable income, translating into tax savings for owner-operated truck drivers.
Do I Need A Business License For A Trucking Company?
To operate a trucking business in the US, you need federal and state licenses/permits. In addition, the commercial driver's license remains a mandatory requirement to be allowed to drive the trucks.
Why Do Trucking Companies Fail?
Often, trucking companies fail because they are encountering cash flow problems. The cash flow issues are often a mix of several factors including hefty fines due to incompliance, high operating costs, and even low-paying freight.
Not being compliant with federal or state regulations and rules is a serious issue and one that can be dealt with from the time of setting up the business. Typically, the owners and the management of these trucking companies should focus on compliance.
How Do I Start a Trucking Company Legally?
The best approach for setting up a hauling company legally is to make sure you obtain the necessary business licenses and permits. most states and local governments have defined the licenses and permits required to operate businesses within the jurisdiction.
Therefore, visit the relevent authorities for details of the licenses required to ensure compliance.
What Taxes Do Owner Operators Pay?
Owner-operators will pay Self Employment Taxes, Federal Income Tax, and State Income Tax.
The self-employment taxes are similar to the social security and the medicare taxes paid by the company employees. As of November 2021, the IRS self employment tax rate is 15.3%, consisting of 12.4 for social security and 2.9% for medicare.
The owner-operator is also responsible for estimating the Federal Income Tax and State Income Tax. In the case of employees, the employers calculate and hold the income taxes.
Starting a trucking business can be a great side-hustle idea. However, the secret to success is making sure your trucking company operates legally.
In that regard, one of the basic considerations is ensuring you have the right licenses and permits for the trucking/haulage business.
We have highlighted some of the basic licenses you need to operate the trucking business.
Talk to relevant authorities for guidance on applying for the permits/licenses for a trucking business.
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