Getting Your Own Authority in Trucking

How to Make More Money by Getting Your Own Authority

Entrepreneurial owner-operators look past contract leasing to a parent company toward owning their own company. truck-authorityIf you want the responsibility and profit that can come with being your own boss, you need to strike out on your own.

Getting Your Own Authority

To be successful in being your own boss and owning your own trucking company, you’ll need your own authority. “Authority” is basically the permission of the Federal Motor Carrier Safety Administration (FMCSA) to profit from the transport of goods.

Authority comes in two different types; common and contract. Common authority means that you can hire your own fleet out to anyone paying you to legally transport goods, without a contract for continued work. Contract authority means that you have a contractual agreement to haul goods for a repeat customer.

Application Process

Whether you choose contract or common authority, you’ll have to fill out several forms during the application process. There are companies that will file for you for an additional fee if you need assistance. However, if you’re comfortable with the forms and filing process, follow these steps to apply for your own authority.

Get a Post Office Box

While you can still use your personal mailing address, you may not want to available to everyone as a public record. When your company grows, it may be helpful to have mail already separated. Also, if you choose to move offices later, you won’t have to change all your business mail over to a new office. Companies located near a state line may benefit from different tax rates and regulations in the neighbouring state. Be sure to check local laws to see if you qualify.

File a Sole Proprietorship or Limited Liability Corporation (LLC)

Decide if you want to be a sole proprietorship or a LLC. Sole proprietorships can tie personal responsibility to your business, while Limited Liability Corporations separate personal and business obligations. Check to make sure another company isn’t already using your chosen name, then file to become a legal entity in your state.

Get Your Employer Identification Number (EIN)

Be sure to get an EIN from the IRS. An EIN is basically your company’s equivalent to a social security number. You’ll use this number in all your tax recorded dealings. Memorizing this number can help streamline future paperwork.

Submit Your Application

Apply for authority through the FMCSA. You’ll need to complete several forms, all found on their website. The website will instruct you to either complete an OP, OP1 (b), or OP1 (ff), depending on what type of authority you are applying for.

Insure Your Company

During your waiting period, be sure to get insurance. Both common and contract authority require you to carry liability insurance. Common carriers require additional cargo insurance. The amount of insurance you carry will determine the amount of freight you can haul, so be sure to buy as much as you can afford in addition to the minimum required liability insurance. Once you have made your insurance purchase, file your proof of insurance with the FMCSA.

Department of Transportation Regulations

Following the previous steps helps take care of the requirements for your authority, but there are still state Department of Transportation (DOT) requirements too:

  • Uniform Carrier Registration fees
  • International Fuel Tax Agreement (IFTA) forms
  • International Registration Plan
  • Single State Registration through state DOT
  • Drug and alcohol testing and DOT physical
  • Heavy Vehicle Use Tax

Each state has slightly different requirements, although some may include an additional step or two in the process of gaining authority. If you need further information pertaining to your state, you can find it on the DOT website.

Authority Cost

The overall costs to incorporate and obtain your own authority can vary by state. An insurance policy for your new venture will cost around $1000 per month. The filing fees at both state and federal level can be in the hundreds each. If you’re paying a company to complete and submit the paperwork for you, estimate the same amount, but doubled for their time.

Family Support

Talk to your family before beginning the process to make sure that they’re willing to make sacrifices that are often needed to build a business. More importantly, build the business with you. Successful owner-operators will tell you that they did not go into business thinking that they could have more time off, less responsibility and less risk. Anytime you own your own venture, the risk is primarily on your shoulders. If your truck breaks down, you must pay for the repairs. If you get a DOT citation, you pay for it. Having your family’s support will help greatly, especially in the early days when you’re paying out for insurance and fees before contracting your first client.

If you’re committed to your new venture, have the drive to work long hours and are realistic about what you’ll need to put into the company to make it a success, you have the best odds of making a successful business. Best of luck in your new future as an owner operator.