How to get your own authority in trucking?

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So, you are planning to establish your own trucking business…

Congratulations in advance!

Trucking is a great business that can fetch you tons of money if managed properly.

The legal compliances to get a Trucking Authority/Operating Authority is not as hard as it is projected if done carefully.

You just have to follow the right steps for a successful registration…

This Trucking Authority Guide is intended to help all of your registration process smooth. We have given 11 step-by-step processes on how you can get your own trucking authority.

Before going to the steps, first you have to know what is trucking authority?

What is Trucking Authority? or What is Operating Authority?

Trucking authority is a legal authority given to someone who wants to do trucking business.

This is issued by the Federal Motor Carrier Safety Administration (FMCSA). It gives you the authority to transport freights as a motor carrier.

This is mandatory to transport freight across the United States as an owner-operator.

FMCSA (Federal Motor Carrier Safety Administration)

The FMCSA monitors and ensures compliance with regulations governing both safety (all carriers) and commerce (for-hire carriers).

Once you have your own trucking authority you are permitted to choose your own truckloads, plan your own routes and schedules.

In other words, by obtaining trucking authority you are entitled to operate as a trucker.

Trucking authority is also called as motor carrier authority or operating authority.

Trucking Authority/Operating Authority is given through the Federal Motor Carrier Safety Administration (FMCSA) once compliances are clear in the form of a Motor Carrier (MC) number.

To obtain your own trucking authority, you have to follow a few steps. This includes establishing your business entity, getting a USDOT number, and getting an MC number. Additionally one also has to register for IFTA (International Fuel Tax Agreement), apply for state permits, before you operate in certain states.

Once you have the operating authority, you can start doing trucking business under your own MC number as an owner-operator.

Types of Operating Authority

There are different types of operating authority issued by FMCSA. Determine yourself before you apply in which category do you fall.

Operating Authority or Trucking Authority is based on the cargo being carried by the transport.

Some carriers need multiple authorities to cover multiple types of cargo.

Choose carefully the type of trucking authority

The type of insurance and the level of insurance that is required by FMCSA depends on the category of Operating Authority you are applying for.

Since FMCSA does not refund application fees, do due diligence before applying for trucking authority.

Below are the types of Operating Authority that you can apply. Select and apply based on your trucking business plan.

(a) Motor Carrier of Property (except Household Goods)

This is for someone who intends to use his carrier for the transport of regulated commodities other than household goods for the general public in return for payment.

Here one has to file proof of public liability. This liability comprises of bodily injury and property damage. This is required to obtain interstate Operating Authority. You don't have to get cargo insurance in this category.

(b) Motor Carrier of Household Goods (Moving Companies)

This is for motor carriers that intends to transport only house hold goods for the general public in exchange for payment.

FMCSA defines household goods as personal items that will be used in a home, and it includes the items that are purchased and shipped from factory or store with the intent to be used in home by the user who pays the transportation charge to the carrier.

For this category also one has to file proof of Bodily Injury public liability and property damage liability. Also, cargo insurance with FMCSA is a must in order to obtain an Operating Authority.

(c) United States-based Enterprise Carrier of International Cargo (except Household Goods)

This is for transport companies that transport international cargo (excluding household goods) which is headquartered in the USA but is owned and controlled by a Mexican citizen or resident alien. This is applicable only if the Mexican citizen or resident alien who has more than 55% of ownership or control of the transport company.

The international cargo must originate in or be transported for a foreign country.

(d) United States-based Enterprise Carrier of International Household Goods

This is for transport company that transports international household goods which is headquartered in USA, but is owned and controlled by a Mexican citizen or resident alien. This is applicable only if the Mexican citizen or resident alien who has more than 55% of ownership or control of the transport company.

Household goods means personal items that will be used in a home.

It also includes items shipped from a factory or store if purchased with the intent to use in a home and transported at the request of the householder who pays for the transportation charges.

International household goods must originate in or be destined for a home in a foreign country.

Application System to be used Apply for Own Trucking Authority

1. If you are a first time applicant

If you are applying to FMCSA for the first time, you will be required to use the Unified Registration System (URS).

Companies may find they are subject to both USDOT registration requirement and MC number requirement or any one of them separately, depending on the nature of service. We will explain it in detail later.

Unified Registration System (URS) has simplified the registration process of the previous tedious registration style and has made it very simple. This URS form has combined various forms that were earlier used for carriers, freight forwarders, and brokers into one platform and this is completely online.

Note that the URS system is only for the new applicants.

2. You have previously registered with FMCSA

If you have registered with FMCSA earlier you have to use OP-series forms.

OP-series forms can only be used by transport companies to apply for additional authorities. This is not for initial registration with FMCSA.

Now, we will give you the actions that are involved in obtaining trucking authority.

Getting Your Own Trucking Authority, Step-by-step process

We have summarized a step by step process on how to get your own trucking authority in the United States.

You just have to follow these steps to acquire Trucking Authority.

Step 1: Choose a good name for your trucking business

This is the simplest step in forming your own trucking authority. But, this can help you in the later compliances process, where you need a name.

Step 2: Setup Your Business Entity – Form Your Company

You are going to be a business owner of a transport company. For any business one has to register themselves as a company.

You have to form a company and get EIN number before you apply to get trucking authority.

Note that your new business requirements will vary based on your state and city.

There are many forms of business entity. You can choose any of the forms based on your business purpose, partnerships, etc.

Check the types of below entities you can form as an owner-operator. If you need more help, our team is glad to help you in the process of setting up a business.

(a) Sole Proprietorship for Your Trucking Business

The easiest and most common way chosen to establish a business entity
An unincorporated business owned and run by one individual with no distinction between the business and you, the owner.
In a sole proprietorship, you are entitled to all profits and are responsible for all your business’s debts, losses, and liabilities.
Good choice for new owner-operators
There’s no formal set up for establishing a sole proprietorship – basically the moment you get a load and hit the road you are a sole proprietor
The advantage of this is it is easy and inexpensive to form, you have complete control in the trucking business, and Easy tax preparation.
Your business is not taxed separately, this makes it easy to fulfill the tax reporting requirements for a sole proprietorship. Also, the tax rates are the lowest of the business structures.
The negative side of being a sole proprietor is that you can be held liable for any lawsuits or damages that occurred during operations.
Due to the liability, it is important to be insured to avoid losing personal assets.

(b) Partnership Business

A partnership is similar to a sole proprietorship with the difference, here there will be multiple owners in the trucking company.
Partnerships are the simplest structure for two or more people to own a business together
Like a sole proprietorship, creating a partnership doesn’t require any formal documents or setup either
All advantages and disadvantages are similar to a sole proprietorship
Starting a business with one or more partners can ease your workload (provided they are also helpful in terms of money or work). Ensure that you can have a good relationship with your partner in the business process. Mutually complimenting a skill set is an asset to the partnership business.

(c) Corporation

A corporation is a legal entity that is separate and distinct from its owners. Here business is treated as a completely different entity from the owners, shareholders, and employees.
Corporations enjoy most of the rights and responsibilities that individuals possess: they can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.
Setting up a corporation is much more time consuming and complex than starting as a sole proprietor/partnership or even forming an LLC
Here you are also required to hold yearly meetings with shareholders/stakeholders
As a starter, it is recommended not to start your business as a corporation

(d) Limited Liability Corporation

A Limited Liability Corporation or LLC is another good choice for prospective owner-operators
The compliances are little more than a partnership/sole proprietorship, but it has its own benefits
Similar to a sole proprietorship, there’s no separation between you and the business entity so you don’t need to file personal and business taxes separately
But unlike proprietorship, it provides some separation between you and the business in case there are any lawsuits or debts

Step 3: Get your U.S. Department of Transportation (USDOT) Number / DOT number

There are no charges to get a USDOT number. To get a DOT number, you have to file one of the three forms from the FMCSA to get your authority.

This is a simple process that can be done online in FMCSA website.

Companies that operate commercial vehicles transporting passengers or hauling cargo in inter or intrastate commerce mandatorily have to be registered with the FMCSA and must have a USDOT Number.

Similarly, commercial intrastate hazardous materials carriers who haul types and quantities requiring a safety permit must register for a USDOT Number.

Step 4: Get EIN Number (Employer Identification Number)

EIN Number

An Employer Identification Number (EIN) is also termed as a Federal Tax Identification Number and is used to identify a business entity. Generally, all businesses need an EIN number.

For applying visit the IRS website for an Employer Identification Number (EIN). The same number will be needed for tax purposes related to your business.

Step 5: Apply for Operating Authority – Get MC Number with FMCSA

This has been discussed in detail earlier. Summary is given below…

To obtain Operating Authority you have to register with FMCSA
You have to use the Unified Registration System (URS) which has replaced several older forms (only for new registrations with FMCSA) and is online.
The filing fee is $300 for each type of authority.
The basic type of authority: Motor Carrier of Property (except Household Goods) – It grants you the authority to transport non-household goods and Motor Carrier of Household Goods (Moving Companies) – It grants you the authority to transport household goods (basically any personal commodity that can be used in the home)
You get your MC Number immediately, but it is not activated for 21 business days. Once it is activated, the FMCSA will mail you an MC Certificate. This usually takes 10 days to arrive.
Since getting an MC certificate is a long process, you need to make sure you have all the information you need to get started.
Also, verify if you need to get intrastate authority in your home state.

Step 6: Apply for BOC-3, Designating Process Agents

A BOC-3 designates process agents in every state that can represent the carrier if there are any legal proceedings or if there is a court order served from any given US state.
In simple terms, BOC-3 designates that there will be someone that a plaintiff can handle lawsuits or any legal proceedings in any area where you are not based.
For example, say you have a load issue with the state of New York, but you’re based out in California, the process agent will represent you in the state of New York.
BOC-3 is mandatory to get your own trucking authority.
FMCSA fees for BOC-3 is $125. It costs around $100 per year to retain process agents.

Step 7: Get Trucking Insurance

Any carrier has to obtain Liability & Cargo Insurance to get Operating Authority Certificate.

It is recommended to start the insurance work in two weeks of your application of MC Authority.

Similar to any auto insurance, trucking insurance covers property damage and bodily injury in case of an accident.

Your insurance also covers General Liability. General liability is the coverage given to your non-trucking business activity like – an untoward incident happened to your employees, customers, or your business properties or even if the wrong product was delivered to your clients.

The rate of insurance varies from $8000 to $16000 per year depending on the limit of the cover. Insurance is considered as one of the biggest expenses in your trucking business, but it can be a lifesaver in cases of a bad incident that can ruin your entire business.

Your trucking authority will not be considered as “active authority” without proof of insurance.

Once your insurance is done, the insurance agency will need to submit form BMC-91 which covers public liability in case of an accident causing injury or property damage.

You are not required to submit your proof of insurance directly to the FMCSA. The FMCSA requires that your insurance company submit the form and insurance certificate on your behalf.

After 14 days of your insurance filing, be sure to verify that your insurance is on file.

BMC-91

A BMC-91 filing is a document submitted to the Federal Motor Carrier Safety Administration (FMCSA) by the insurance company. The BMC-91 filing gives the assurance to the FMCSA that you have enough Liability Insurance Coverage to cover the risk of transporting goods or people across state lines.

Filings with Federal Trucking Authority – Summary

MC Number
USDOT Number
BOC 3 Process Agents
Insurance

(8) Get UCR Registration (Unified Carrier Registration)

The Unified Carrier Registration or UCR is an annual fee mandated by the federal legislation for all trucking companies that haul loads across state or international borders.

The annual UCR fee is calculated based on the size of the company’s fleet.

Fees of single truck is less compared to large fleet of trucks.

UCR has to be applied within your state.

You will need to complete the UCR within your state.

Some states do not participate in the UCR.

These states are Arizona, Florida, Hawaii, Maryland, Nevada, New Jersey, Oregon, Vermont, Wyoming, and the District of Columbia.

If you are based in any of these states, you have to complete the UCR in a neighbouring state.

This annual registration must be renewed by December 31 each year.

Use your USDOT & MC Number to apply for the Unified Carrier Registration (UCR) system.

UCR also verifies active insurance coverage in the states you operate in.

UCR

UCR is the Unified Carrier Registration program. Created by federal legislation, it
replaces the former system for registering the operators of vehicles engaged in interstate
travel – the Single State Registration System (SSRS).

Under the regulation of the UCR program, any self-propelled or towed (like a trailer) vehicle used on highways engaged in interstate travel that:

has a gross weight of 10,001 pounds or more or,
is designed to transport 11 or more passengers (including the driver) or,
is required to have hazardous waste placarding

are required to register for UCR.

Step 9: Do IFTA (International Fuel Tax Agreement) Registration (for large trucks)

International Fuel Tax Agreement or IFTA registration is for vehicles over 26,000 pounds crossing state lines. who run interstate operations for-hire or privately. Once you have registered, you will have to complete and file quarterly tax filings. The fees of IFTA is $95.

Step 10: Do IRP (International Registration Plan) Registration (for large trucks)

IRP (The International Registration Plan) is for large trucks that weigh over 26,000lbs.

There is an annual fee to register your truck. The cost of your fee is dependent on the number of miles that you run in each province or state.

Registered motor carriers receive apportioned plates when IRP is done and are able to travel through all IRP member jurisdictions.

Notice Title

The International Registration Plan (Plan) is a reciprocity agreement among states of the US, the District of Columbia, and provinces of Canada which recognizes the registration of commercial motor vehicles issued by other jurisdictions.

Step 11: Put on the Right Signage

Once you have received your Trucing Authority in the form of MC Certifaicate, did all other mandatory registration, you are now set to get into road for your transportation business.

Before that ensure you use the right signage.

In your signage ensure the following:

(a) The legal name is used as stated in MCS-150 form.

(b) Put the DOT number correctly as issued by FMCSA. The dot number should be preceded with the letters “USDOT”.

Single Permits

Certain states do require additional permits if you want to operate within their borders. The states that require permits are NY, KY, NM & OR. Each state will base their fee on the number of miles that you have traveled in each state.

Other urgent requirements for a owner operator

There are few operational adjustments an owner operator should make while he/she is in nascent stages of operation. Like enlisting a dispatcher to help you get good and well paid loads.

Secondly you need a good insurance agency/provider covering you for various circumstances/policy types. You need to take 3rd party liability, cargo, uninsured motorist, trailer/equipment insurance.

We need to enlist a factor who have competitive rates and above par service quality to make your. This will help you to have a good cashflow and working capital.

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