A comprehensive guide on how to get Operating Authority and more
Let’s face it, everyone in the trucking industry has been thinking at some point about starting their own company. However, many get discouraged because the process seems complex and time-consuming. Relax, and see how we broke it down for you in this article.
Getting Operating Authority
It is actually not that difficult to get your own operating authority. You just simply have to go to the official FMCSA page and follow the directions there. Once you have answered all the questions from the application and paid the fee, you just have to wait. You will get your US DOT number instantly after submission, but it takes some time for your MC number to be assigned.
Once you have finished application process you will need to file BOC-3 for your operating authority, UCR Registration (Unified Carrier Registration), and activate the insurance. Without these three requirements, your MC activation process will be delayed until you complete them.
- UCR (Unified Carrier Registration) Registration. UCR is one of the required filings, you need to file it yearly. You can find more information about it, from the official UCR website by clicking here.
- BOC-3 (Designation of Process Agents) Filing. BOC-3 is a process agent, who is a representative upon whom court papers may be served in any proceeding brought against a motor carrier, freight broker, or freight forwarder. It is required to do this filing for new operating authorities. You can find more information about it, from the official FMCSA website by clicking here.
- Insurance. In order to have your MC activated after finishing the application, you need to purchase insurance for your US DOT Number/MC. You don’t need to have a truck or cargo policy right away. The main requirement is to have BIPD (Commercial General Liability) of at least $750,000. Consider just having a policy of $1,000,000, since most freight brokers and customers require that amount.
Once you complete all those 3 requirements, FMCSA will start the process of reviewing your application. Although DOT bumber is given right away, be aware that without an MC number, you can’t operate in Interstate Commerce. The waiting period could range from two weeks to a month or two. It depends on whether you filed everything correctly and how busy FMCSA is processing the new authorities. If everything is filed correctly, FMCSA grants you your Interstate Operating Authority (MC) and you will receive it via mail. Once you went through all the steps and received your Interstate Operating Authority, you are free to operate in interstate commerce and start booking freight and earn those profits.
You can view the status of your authority from the official FMCSA company snapshot website by clicking here. Just enter your DOT number or MC number.
Path of Success
With an Operating Authority come a lot of benefits and risks. In order to succeed as a trucking company, prepare a thorough plan before pulling the plug. A well organized plan can protect you from unnecessary hustling in this very competitive trucking industry. Unfortunately, not everyone nails it straight from the beginning. Jumping into the industry without understanding well your expenses and your break even point, makes you even more vulnerable to the market fluctuations and global economic factors.
Here are the first steps you should follow before pressing that start button:
- Create a Business Plan
- Save up Initial Capital
- Create a Business Emergency Fund
- Research all the requirements to keep up with the trucking market
- Research all your fixed and variable costs that are required for running your company smoothly
Creating a business plan should be your top priority. A Business plan includes the starting capital evaluation, an analysis of the trucking market, all fixed and variable expenses, and a prediction of your revenue based on the market rates. Remember, there are a lot more expenses than just buying a semi truck.
Do not underestimate the importance of creating a Business Emergency Capital. Running a trucking company is a very risky business since the expenses and revenues rely on a high level of market uncertainty. An Emergency Fund enables your business to have a lifeline, especially if you are an owner-operator. Imagine your semi-truck faces a major breakdown and you have to wait until the issues get fixed. You cannot get back on the road straight away.
This waiting time kills your wallet because you can go into a big minus. Remember your emergency capital should not just provide enough money for the truck repair, but also for the downtime as well. While your truck is in the shop, you are not behind the wheel turning in that freight for money. Therefore, you will have to keep up with your fixed expenses and pay for this major breakdown despite the lack of revenues.
Initial Capital Suggestions
Here is a list of necessary expenses to start running your trucking business.
- Truck Purchase. First of all, you need to purchase your truck. If you plan to buy it through financing, a down payment is required. Truck down payments can range anywhere from $4000 to $15,000, depending on your personal and your company’s credit score and credit history.
- Operating Authority. The second step is opening your operating authority. Here you can go two ways: open it yourself or find a trucking service company that can do it for you. Either way, it costs money. If you choose to open it yourself, the application fees will be a 1-time permanent filing for $300. If you choose to outsource help, then the price will be $300.00 + whatever the service fee charge is.
- 2290 Heavy Highway Vehicle Use Tax. Before filing your IRP, you need to submit your 2290 form. This tax form has to be submitted yearly. The price depends on the amount of vehicles you are filing for. For 1 truck, the yearly price is $550.00. You can do this yourself or find an outsourced service that will do it for you, but again there will be a service fee charge.
- IRP (International Registration Plan). Once you filed your 2290 and received the receipt, you can file an IRP. The IRP basically is for acquiring plates for your truck. The price depends on how many trucks you are filing for and how many miles you drive in each state, it can range from $1800 to $3000. You can do this yourself or pay someone else to do it for you. Remember to file your IRP yearly.
- IFTA (International Fuel Tax Agreement). The initial price is quite low since you are paying only for the decals. For example, the sticker price in Illinois is $3.75 per vehicle. IFTA reports must be filed quarterly. Note, that you cannot drive without an IFTA license. You can file it yourself or reach out to an outsourced service. We at JLKS offer this service as well. See more details on our IFTA page.
- Insurance. For the new Operating Authorities insurance is pretty pricey. You will need an initial deposit and then it will be just a monthly fixed payment. The insurance price ranges quite heavily because it depends on several important factors, such as the location of where your business is, the driving history of the driver that will be insured, and the value of the semi-truck and semi-trailer. For example, our first-year insurance quote was about $19,000 for a year. Before providing you a quote, the insurance agent will consider the location of your business, your driving history, and the insured price on the truck/trailer.
- Weight Distance Tax. It is required if you are planning to have Kentucky, New Mexico, New York, and Oregon in your routes. WDT filing is done quarterly along with IFTA.
- Trailer Purchase/Rent/Lease. This is pretty self-explanatory, if you buy a semi trailer, you need plates for it as you would need plates for a semi-truck, which goes back to the IRP filing process. If you decide to rent or lease a trailer, they will come with plates already. The rent/lease payment is usually charged weekly or monthly depending on your rent/lease contract. Prices are set based on trailer type, manufactured year, and type of the trailer, such as a dry van trailer or a refrigerated trailer. Refrigerated trailer price will be a lot higher than Dry Van.
If you decide to join JLKS as a driver with your own truck or as a company driver, connect with us on our driver’s page by clicking here.