How to Make More Money by Getting Your Own Authority
Entrepreneurial owner-operators typically look past contract leasing to a parent company versus owning their own company. If you are willing to take on the responsibility to be your own boss and gain your own profit, you need to step out on your own.
How to Get My Own Authority
To be successful in being your own boss and owning your own trucking business, you will need your own authority. “Authority” is a fancy word for having permission from the Federal Motor Carrier Safety Administration (FMCSA) to profit from the transport of goods.
Having your own authority comes in two types, common and contract.
Common authority is where you can hire your own fleet out to anyone paying you to transport goods, without a contract for continuous work legally.
Contract authority is where you have a contractual agreement to haul goods for a repeat customer.
Whether you choose to contract or have common authority, you will have to fill out several forms during the application process. Some companies will file for you for an additional fee if you need help. However, if you feel comfortable with the forms and filing process, you can follow the steps below in applying for your own authority.
Get a Post Office Box
While you can still use your personal mailing address, you may not want your address to available to everyone as a public record. When your company grows, it could be helpful to have a mailing address separate from your own. If you choose to move offices later, you will not have to change all your business mail to the new office. Companies located near a state line may benefit from different tax rates and regulations in the neighboring state. Be sure to check with the local laws to see if you qualify.
File a Sole Proprietorship or Limited Liability Corporation (LLC)
You will need to decide if you want to be a sole proprietorship or an LLC. Sole proprietorships can tie personal responsibility to your business, while Limited Liability Corporations separate the personal and business obligations. Check to make sure another company is not already using your chosen name, then file to become a legal entity within 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 will use this number in all your tax-recorded dealings. Memorize this number to help streamline future paperwork.
Submit Your Application
Next, you will need to apply for authority through the FMCSA. You will need to complete several forms, all of which can be found on the FMCSA 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 the waiting period, be sure to get insurance. Both common and contract authority requires you to carry liability insurance. Common carriers need additional cargo insurance. The amount of insurance you carry will determine the amount of freight you can haul. Be sure to buy as much as you can possibly afford in addition to the minimum required liability insurance. Once you have made your insurance purchase, you can 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. However, there are still state Department of Transportation (DOT) requirements too. These requirements are as followed:
- 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 slightly differs in requirements. Although, some may include an additional step or two in the process of gaining your authority. If you need further information about your state, you can find it on the DOT website.
The overall costs to incorporate and obtain authority can vary by state. An insurance policy for your new venture will cost approximately $1,000 per month. The filing fees at both state and federal level can be in the hundreds for each. If you are paying a company to complete and submit the paperwork for you, estimate the same amount, but double for their time.
Before beginning your process, you should talk to your family to make sure they are willing to make sacrifices that are needed when building a business. More importantly, build the business with you.
Successful owner-operators will tell you they did not go into business thinking they would 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 are responsible in paying for the repairs. If you get a DOT citation, you must pay for it. Having your family’s support will help greatly, especially in the early days when you are paying out for insurance and fees before contracting your first client.
If you are committed to your new venture, have the drive to work long hours, and are realistic about what you will need to put into your company to make it a success, you will have the best odds of making a successful business.
Best of luck to you in your new future as an owner-operator.