To be or not to be an owner operator is not the question, but it’s how to be a trucker.
We have created a step-by-step guide on how to become an owner operator, it is a pretty testing journey, you need to be fit and financial sound to set out on the voyage to be an owner operator.
First of all you as a budding owner operator need to have some money saved up to stand strong during the 20-30 days it requires to be an owner operator.
- Obtain Your CDL (Get Licensed and Registered)
- Step:1 Unified Registration System (first-time applicants)
- Step:2 Register your business
- Step 3: US Department of Transportation Registration (US DOT)
- Step 4: Apply for a Motor Carrier (MC) Number with the FMCSA:
- Step 5: Get your EIN
- Step 6: Sign up for a drug consortium & testing:
- Step 7: Get your Insurance plan
- Step 8: Apply for the BOC-3 process
- Step 9:The Unified Carrier Registration (UCR)
- Step 10: International Registration Plan(IRP)
- Step 11: IFTA License and Decal
- Step 12: New entrant Audit
- Step 13: Prepare Driver and Equipment files
- Step 14: Set up a contract with a factoring company
- Step 15: Get a Fuel card
- Step 16: Connect with a dispatcher
- Step 17: Determine if Load Boards are Right for You
- Bonus 1 : Have a positive attitude, be focused, and follow the money
Given below are the steps to become an owner operator:
Obtain Your CDL (Get Licensed and Registered)
You need to have a Commercial Driver’s License (CDL) to be an owner operator. You have 2 options either you can drive your truck if you have a CDL or you can assign a trucker with CDL to drive your truck.
Getting a CDL is not so difficult but you need to be more involved to get a CDL. Need to pass a physical exam, determine your license type that is most likely a (Class A), then take a knowledge test, earn your CDL permit, and then take a CDL skills test to be fully licensed.
To start, get a CDL handbook for your state. You can either study independently or take classes at a trucking school.
As soon as you get a CDL, you can legally drive a heavy commercial truck as an owner operator/ company driver.
Step:1 Unified Registration System (first-time applicants)
First-time applicants, who have never registered with FMCSA before and have not been issued a US DOT number, need to register via the new Unified Registration System as of December 12, 2015.
Step:2 Register your business
Before you forward an application for the USDOT number, you need to register your business. Because the Federal Motor Carrier Safety Administration (FMCSA) will inquire about your business operations. You can know more about the registration of your business from this FMCSA page.
First, go to the state’s secretary of state portal and search to see if your business name is unique and is available. The name you choose should resonate with your values, your personality, and your mojo.
As you are an independent owner operator you can either take a sole proprietorship or a limited liability company. You can also consider other business types to get more information on other business formation types to look at the Small Business Association.
A sole proprietorship is a single-person business, the owner is not separate from the business. All the business decisions are made independently by you alone without input from anyone. This means if you have a cash crunch in your business or you are facing a debt issue or a lawsuit your personal assets will be used to pay off debts or to settle the lawsuit.
Limited Liability Company
Limited Liability Company to get the merits of pass-through taxation, without the risk of personal assets being attached to your business’ liability like in sole proprietorship. With LLC your business is liable and your personal assets are protected. You either have a single-member LLC or a partnership of multiple members.
Eventually, if you think of growing your business and adding more employees, you can form a corporation. Such a business structure will help you to be safe from litigation, business failure. A separate legal entity also will help you to receive benefits pass-through income tax.
You can also register your trucking business as an INC
Inc. is the abbreviation for incorporated. An incorporated company, or corporation, is a separate legal entity from the person or people forming it.
Directors and officers purchase shares in the business and have responsibility for its operation. Incorporation limits an individual’s liability in case of a lawsuit.
INC is a bigger and better version of an LLC entity, if you have multiple owners or stakeholders you can use INC business type and form a company
Once you’ve decided on a business structure, complete the application and pay the registration fee to submit it.
Step 3: US Department of Transportation Registration (US DOT)
USDOT registering is compulsory for all trucking companies. This is your company’s ID or file number. Anybody like brokers/shippers/government can access your trucking company’s vehicle, cargo, safety, and compliance information using this number. It doesn’t provide authority to participate in interstate commerce. There are some points that you need to know prior when you begin the registration process. Some of them are given below.
• Where are you operating from?
• How many trucks will you operate?
• What type of trucks will you use?
• Are you planning to carry hazardous materials? If so, what types?
• What is the weight of your vehicles?
• Do you plan to haul exempt cargo?
• Would you like to be a freight forwarder or a broker?
All the furnished information will be filed under your USDOT number and it will be available to shippers you haul for. You will be issued a PIN number together with your USDOT number. To make any changes in USDOT or FMCSA you would need your PIN number.
Your USDOT number will be renewed every two years or anytime you make changes to your fleet size, company name, phone number, address, or cargo type.
Step 4: Apply for a Motor Carrier (MC) Number with the FMCSA:
MC Number provides you with the requisite authority to participate in interstate commerce. You need all the info you collected for the USDOT registration to complete the application. You will be immediately given a MC number, you can’t start trucking yet.
Once the MC Number is issued you will have 20 days to complete the 2 pending steps. Once those 2 steps are filed with FMCSA, your authority will be active within approximately 2-3 weeks. The Authority certificate will reach you via mail in another 2 weeks.
You can’t participate in interstate commerce until the MC number is active and your BOC-3 and insurance policy details is bound on record with the FMCSA
Step 5: Get your EIN
An Employee Identification Number (EIN) is a nine-digit number assigned to various business entities for federal tax filing and reporting purposes.
Required Internal Revenue Service (IRS) Form: • SS-4
Step 6: Sign up for a drug consortium & testing:
You need to keep your drivers compliant with FMCSA rules on drug and alcohol testing.
A consortium manages all, or part, of your DOT drug and alcohol testing program.
The consortium can only do this for owner-operators.
These duties include removing owner-operators from safety-sensitive work after a violation. They must also help return them to work after a violation.
Step 7: Get your Insurance plan
Getting insurance is a vital part of reaching the goal of a complaint trucking company. You need to work out the nitty-gritty of the policies like price, coverage, terms, and conditions, etc.
So it is ideal to start the process of getting an insurance plan right after you are issued a temporary MC and DOT number.
You need to set up an insurance plan for your trucking company. An insurance plan includes the FMCSA mandated 3rd party liability plan for $750,000, but usually, your brokers ask for $1,000,000.
And cargo insurance of $100,000 or coverage of $250,000 if you are plying electronics cargo.
Your insurance coverage should be reported to FMCSA by your provider for your MC number to be active. If you make changes in your MC number information you must report it to your insurance company to resubmit the information to FMCSA or else you will be risking the inactivation of your authority
Step 8: Apply for the BOC-3 process
“Designation of Agents for Service Process” or a BOC-3 filing is a federal filing in the United States that assigns a process agent to accept legal documents on behalf of a transportation or logistics company, in every state that the company is authorized to do business.
Most carriers obtain blanket coverage for designating a process agent, listing agents in all 50 states and the District of Columbia.
Step 9:The Unified Carrier Registration (UCR)
The federal law establishes the Unified Carrier Registration (UCR)to replace the Single
State Registration System (SSRS).
UCR consolidates several motor carrier databases maintained by FMCSA into a single online portal.
UCR fees are based on the fleet size and should be renewed annually. The motor carrier safety laws are enforced by the states using the UCR funds collected.
Step 10: International Registration Plan(IRP)
The International Registration Plan is a registration reciprocity agreement between the contiguous United States and Canadian provinces, which provides apportioned registration fees based on the total distance operated in participating jurisdictions.
Step 11: IFTA License and Decal
IFTA is a cooperative agreement between 48 states in the U.S. and 10 provinces in Canada. It allows inter-jurisdictional carriers to report and pay taxes for the fuel their vehicles consume across states using a single fuel tax license.
Step 12: New entrant Audit
FMCSA has its ways to make sure that new entrants are following its roster of rules and safety standards.
All trucking companies within their first 12 months of the operation can expect to be audited based on these criteria:
- Alcohol and drug violations
- Driver violations
- Operations violations
- Repairs and inspections violations
Step 13: Prepare Driver and Equipment files
The driver qualification file, or DQF, is an FMCSA record-keeping requirement that trucking companies must meet for every employed driver.
The difficult part of the DQF is that trucking companies must know the driver qualifications file requirements to pass a safety audit, and there is a lot to know!
The file must include:
- Driver’s application for employment
- Inquiry to previous employers — driving record for last 3 years;
- Annual inquiry and review of driving record;
- Annual driver’s certification of violations and annual review;
- Driver’s road test and certificate, or the equivalent to the road test;
- Medical examiner’s certificate; and
- If granted, a waiver of physical disqualification for a person with a loss or impairment of limbs.
Step 14: Set up a contract with a factoring company
First of all, as owner operator/ trucker you need to take care of bill payments for your clients/brokers.
Because a client will pay you late and you wouldn’t be able to wait for that much for a payment for a load. Each day you wait creates undue stress on your cash flow/finances.
So you need a factoring agent who takes your load bills and discounts them and pays you 95% to 98% of your bill/invoice.
You need to check for a good factor to find one. Then, if you find a good broker who is ready to work with a newbie like your company, you need to first see the norms and conditions, hidden terms and fees, etc. Also if your factor’s credit ratings, green flags your new broker.
If you have gone through the fine print of norms and conditions we can sign up with them for a carrier package. This means you can factor any authorized invoices with the factor and receive the money within hours.
Connect with a factor.
Step 15: Get a Fuel card
Fuel is one of the biggest expenses for an owner operator. If an owner operator has a fuel card that provides you with discounts he/she can save a lot of dollars,
Fuel cards should be able to cover tire and engine maintenance, truck upkeep, lodging, driver amenities, etc.
Step 16: Connect with a dispatcher
As an owner operator, you should look for a dispatcher who caters to small trucking companies/carriers with 1 -5 trucks.
A dispatcher should assist you with load hunting, backhaul, negotiations, paperwork, reports. Through their personalized services, they should improve the experience of finding, hauling loads and operating a trucking company.
Connect with a dispatch partner.
Step 17: Determine if Load Boards are Right for You
How do you continuously generate loads for your trucks?
There are 2 options: you run dedicated lanes for brokers/shippers. Or find loads day by day using an internet marketplace that matches truckloads entries to interested truckers/owner operators.
The market has a few very good load boards such as 123 loadboard, Truckstop. DAT TruckersEdge. Among these DAT TruckersEdge and DAT Power are the best and provide maximum bang for your buck.
Check out the best load boards in the industry.
Bonus 1 : Have a positive attitude, be focused, and follow the money
The process of becoming an independent owner operator is 20–30 days long. You need to be positive and financially plan all of your moves. Because while in the process of certification you won’t be able to work and make money. So, you need to dig deep into your savings pit.
You should point your trucking business to the true north, where you can follow the money and make max earnings for hauling great truck loads