Becoming a successful owner operator means becoming a successful small business owner. It requires careful planning, legal compliance, financial flexibility, and a lot of hard work. Whether you’re an experienced driver looking to work for yourself or an entrepreneur entering the industry, this article will hopefully give you a starting point that will help point you in the right direction.

This is by no means an all-encompassing guide, but should serve as a launchpad for your own research.

Phase 1: Understand the Industry and Plan Your Business

Trucking is the backbone of the U.S. economy, moving over 70% of all freight in 2022. Due to its size and importance, it’s also a highly regulated and competitive industry. Jumping in without any preparation or prior experience is a surefire way to cut your chances of long-term success.

Understand What You’re Getting Into

Before starting your engine, it’s important for you to consider your options. While it’s true that becoming an owner operator, running under your own authority, can earn you higher revenue, there is also far more risk. Also, if you’re not hauling, you’re not earning (unless you hire drivers). The buck stops with you.

This is why it’s crucial to recognize that being a successful owner operator means being a savvy business owner. At the very least, you should surround yourself with trustworthy people who understand business, finance, accounting, and so on.

If that sounds like too much hassle, you find more stability in being a company driver. There is also the possibility of being a leased driver, but it is important to be aware of the potential problems with leasing agreements.

Define Your Trucking Market: How, what, and where?

Assuming you’re still onboard to be an owner operator, the next thing to think about is target market. Understanding how far you want to drive, what you want to haul, and where you want to drive will help guide your business. No one trucker can be all things to all shippers. Ask yourself questions like:

• How far do I want to drive? Across town? Across the state? Across the country? This will help you determine what kind of truck to get.
• What will I be hauling? Will you be hauling wood? Cars? Produce? Oil?
• Where will I be driving? Will you be driving over the great plains or up and down the Rockies? Will you be crossing state lines, or country lines into Canada or Mexico? Will the temperatures be mild, or will you drive through snow and ice?

What you haul, how far you go, and where you drive will influence what type of truck and/or trailer you need, and whether you need extra certification.

Once you determine the answers to the questions above, you should have a better idea of what type of truck and/or trailer to invest in. Each option has its place, cost, and legal requirements.

• Box Truck: Lower entry cost, but lower load rates.
• Dry Van (General Freight): Most common, relatively low entry cost.
• Refrigerated (Reefer): Higher rates but requires temperature-controlled trailers.
• Flatbed: Ideal for oversized loads, construction materials, or machinery.
• Heavy Hauler: Similar to flatbed, but more suited for heavier cargo, resulting in higher pay.
• Hazmat: Requires special licensing but offers higher pay.

Develop A Business Plan

Once you have a clear picture of what you plan on hauling, where you plan on driving, and how far you want to go, it can be helpful to develop a business plan. As the old saying goes, “if you fail to plan, plan to fail.”

A business plan doesn’t have to be overly complicated, just laying out a vision of where you’re going, how you plan on getting there. For example, research your market area to find contracts, make a plan for how you will secure those contracts and how you will manage the administration and compliance of the business.

Phase 2: Register Your Business and Choose a Legal Structure

Once you have a good idea of where you’re going and how you’re going to get there, you will need to establish a business entity before you can get started. Registering your business with the state ensures your company is recognized by the government and can help protect your personal assets.

Pick a Business Name

Obviously, your business needs a name. The name should be unique, professional, but doesn’t have to be complicated. You can also file for a “Doing Business As” (DBA) or trade name. A good practice is to check your state’s business registry and the U.S. Patent and Trademark Office (USPTO) to make sure the name isn’t already taken.

Choose a Legal Structure

The legal structure of your business determines taxes, liability, and other legal requirements:

• Sole Proprietorship: A Sole Proprietorship is the cheapest and easiest form of business to start. Often you will just have to register a DBA name with the state. However, Sole Proprietorships offer no legal protections. That means that if someone brought a legal dispute against your business, it would also be against you personally, putting your personal assets at risk.
• Limited Liability Company (LLC): An LLC is the most popular choice for small trucking businesses, as it protects personal assets, is tax-efficient, and is scalable. It is more expensive to set up, but the legal protection is worth it in the long run.
• Corporation (S-Corp or C-Corp): A corporation is best for larger businesses and requires more paperwork and taxation. It provides legal protection for the owners, like and LLC, but is better suited for issuing stock and attracting large investors.

Register Your Business

Once you have determined your business name and legal structure, you can go ahead and register with your state.

• Register With Your State: File your business with the Secretary of State where you’ll operate. If you need a DBA name, you should register for that as well. It’s worth noting that some businesses register outside their home state, where some legal environments may be more favorable. However, there can be more requirements to do this, and so it should be thoroughly researched.
• Get an EIN (Employer Identification Number): This is the Tax Identification Number or TIN that is required for taxes and payroll; You can apply through the IRS.

Once you’ve chosen a name, and registered your business with your state, you can also trademark the name at the USPTO for extra protection.  This may not be necessary early on and will require additional expense.

Phase 3: Obtain Required Licenses and Permits

As mentioned before, trucking is a highly regulated industry, and you must comply with both federal and state requirements before operating. Below are some of the most common licenses and permits you may need:

Commercial Driver’s License (CDL): If you are driving your own truck, and that truck’s Gross Vehicle Weight Rating (GVWR) is over 26,000 pounds, you will need a valid CDL from your state’s Department of Motor Vehicles (DMV). To learn more, visit the Department of Transportation.

USDOT Number: A US Department of Transportation (DOT) Number is required by the Federal Motor Carrier Safety Administration (FMCSA) for safety tracking. The company’s safety record, compliance reviews, crash investigations, as well as drug and alcohol tests will all be recorded under the DOT number and stored by the FMCSA.

Operating Authority (Docket Number): The FMCSA grants carriers their operating authority, which can be applied for online. Operating Authority is generally granted under a Motor Carrier (MC) number. A company may need multiple docket numbers, depending on the company’s operations. The number is issued within 24 hours, but your operating authority does not become active until at least 20 to 25 days after you apply. This is referred to as the “protest period” where other parties can challenge the new authority. If your authority needs to be vetted, the process could take 50 to 60 days. Operating authority can come in the form of an MC, FF, or MX number. For how to get your operating authority, check the FMCSA.

BOC-3: You will need have a process agent file a BOC-3 form, which designates process agents in every state where you’ll operate. It’s a legal requirement for getting your authority to operate. According to the FMCSA, “A process agent is a representative upon whom court papers may be served in any proceeding brought against a motor carrier”.

IRP: An IRP (International Registration Plan) allows you to operate across multiple states while ensuring proper registration. Commercial plates are for when you are using a vehicle for a business purpose in one state, whereas apportioned plates are for commercial vehicles operating across multiple states, requiring registration under the International Registration Plan (IRP) to distribute fees based on mileage driven in each jurisdiction.

IFTA: The IFTA (International Fuel Tax Agreement) is an agreement between all states and Canadian provinces which allows you to register and pay fuel taxes in your home or base state for all participating jurisdictions.

SCAC: A Standard Carrier Alpha Code (SCAC) is a unique two-to-four letter coding system used to identify transportation companies. A SCAC is often required for commercial carriers operating in the United States, especially those doing business with government agencies, crossing borders, or working with large commercial shippers in industries like automotive, petroleum, or chemicals.

Due to all the rules and regulations surrounding the trucking industry, it can be helpful to work with a trucking compliance service to handle paperwork correctly and avoid costly mistakes.

FMCSA New Entry Safety Audit

The FMCSA also mandates a safety audit within the first twelve months of a new carriers entering the industry. A company that has recently been granted operating authority or DOT number will be considered a new entrant for the first 18 months. This audit generally takes place in person. Companies are often required to provide a list of drivers, active commercial vehicles, proof of drug or alcohol testing, driver logs, proof of insurance, CDLs, and more.

Electronic Logging Device (ELD)

The FMCSA requires that most motor carriers use Electronic Logging Devices. ELDs help track a carrier’s compliance with HOS (Hours of Service) regulations to ensure safety on the road. ELDs track this by recording date, time, location, engine hours, vehicle miles, and other carrier identification information. Some ELDs can also help automate your IFTA reporting. Carriers should research carefully to ensure that the ELD they are using is approved by the FMCSA.

Phase 4: Secure Insurance

Insurance is one of the largest upfront costs when starting a trucking business. It is essential for legal compliance and protecting your business.

Types of Insurance You May Need

(Mandatory) Primary Liability Insurance: This insurance is required by the FMCSA and covers damages in case of an accident. The FMCSA requires a minimum of $750,000 in coverage for standard freight, up to $5,000,000 for motor carriers hauling hazardous materials. Some brokers require a minimum of $1,000,000 of coverage.

Cargo Insurance: Cargo insurance protects the freight you’re hauling against damage, loss or other liabilities. This type of insurance is sometimes required by the FMCSA. It is usually essential for brokers and shippers who want to protect the freight. Generally, $100,000 in cargo insurance is a good place to start.

Physical Damage Insurance: Physical damage insurance covers damage to your truck and trailer, whether from collision, theft, fire, or other events. Once again, while not required by the FMCSA, it is highly recommended. Further, if you finance your truck, lenders will probably require you have physical damage insurance.

Bobtail Insurance: Once again, while not required by the FMCSA, bobtail insurance is highly recommended. Bobtailing refers to driving your truck without a trailer attached. This is not a normal mode of operation, and thus not covered by primary liability insurance. Driving a truck without a trailer can be more dangerous, since the additional weight of a trailer adds traction. Because of this, it is important to have bobtail insurance.

General Liability Insurance: Once again, while not often required, general liability insurance is often recommended, as it covers incidents such as people slipping and falling at your office location, or property damage.

Cost Considerations

Trucking insurance costs vary based on your driving record, credit score, and type of freight. For single owner operators, you can expect to pay anywhere from $8,000 to $20,000 per year for coverage. Be sure to research various providers and compare prices.

A professional tip about securing insurance is to not activate your policy until the FMCSA finishes reviewing your motor carrier authority and you are ready to haul. If you activate the policy before the FMCSA approves your authority, you could end up paying for a month or more of insurance out of pocket before you ever start hauling and bringing in revenue.

Phase 5: Purchase or Lease Your Equipment

The biggest investment in your trucking business is your truck and trailer. Whether you buy or lease depends on your financial situation and long-term goals.

Buying vs. Leasing a Truck

Buying: Buying a truck means you have full ownership, but it requires a large upfront investment ($50,000–$200,000 for a new truck), which often means securing some form of financing. The higher your credit score, the better your terms. New trucks come with fewer maintenance issues, and will likely come with a better warranty, but higher upfront cost. Used trucks have lower upfront cost but may require more repairs. If buying used, have a mechanic inspect the truck before purchase to avoid costly repairs later.

Leasing: Lower upfront cost, but depending on the agreement, you won’t own the truck at the end of the lease term, and it may cost more long term. That being said, it may be beneficial to lease a truck starting out before fully committing to a purchase.

Phase 6: Set Up Business Operations

Set Up a Business Bank Account

Once you have set up your business entity, you can set up your bank account, and keep your business income and expenses separate.

At Flexent, we are a bank owned factoring company, and offer business bank accounts to our factoring clients, speeding up their receipt of payments.

For more information about bank owned factoring: Why Use a Bank Owned Factoring Company?

Track Expenses and Taxes

Once you’ve set up your business bank account, make sure you are tracking your income and expenses. Accounting software like QuickBooks can be great for bookkeeping. There are more cost-effective methods if one is proficient with spreadsheets, but that may take more time.

Additionally, it can be helpful to set aside money for quarterly tax payments.

Choose a Freight Management System

As you grow, you may find that you have a need for more automated freight management software, but this may not be necessary starting out.

Ensure You Have Enough Cash

Trucking is a cash intensive industry, and ensuring you have enough cash on hand to meet current obligation is crucial to maintaining healthy operations. Many brokers and shippers won’t pay for 30, 60, or even 90 days. That means you could haul a load today, and not get paid for up to three months.

One solution for this is to have a substantial cash reserve to cover insurance, fuel, and other operational expenses before you receive payment. Another option is freight factoring, which is a form of commercial financing that allows you to sell your unpaid invoices to a factoring company in exchange for immediate cash. Essentially, once you haul a load, you sell that revenue stream to a factoring company, who pays you same day. They wait for repayment from your customer, and you continue hauling.

To learn more about freight factoring, check out our Ultimate Guide to Freight Factoring

Consider A Business Accountant

Since the trucking industry is so highly regulated, it could be invaluable to work with an accountant or legal professional to ensure that you are complying with all applicable laws and regulations, positioning your company for long-term success.

Phase 7: Get Your First Loads and Start Hauling

Finding Loads

Once you have all your boxes checked, finding freight is the most important step. Below are some of the most common ways carriers find thier next load:

Load Boards: Load boards are online platforms where shippers and brokers can post freight for carriers to haul. Generally, load boards are a good place to start out as a new owner operator.

Freight Brokers: Freight brokers work directly with shippers, connecting shippers with carriers. Generally, brokers have a network of trusted carriers that call on to haul for their clients. A strong relationship with reputable brokers is invaluable.

Direct Shippers: Building relationships with shippers is a good long-term strategy for trucking companies, since it cuts out the middle men (freight brokers and the load boards). But it’s important not to put all your eggs in one basket, so that if that shipper goes out of business, you still have freight to haul.

Negotiate Rates

Understand your cost per mile so you can negotiate profitable rates with brokers and shippers. The process of negotiating rates with brokers or shippers is a topic requiring it’s own scope. Suffice it to say that understanding your costs and margins is paramount to ensuring the load is worth your time and effort.

Work with a Dispatcher

As an owner operator, you will be on the road a lot. It’s invaluable to get a good dispatcher who can help with some of the administrative duties, such as planning routes, scheduling, coordinating delivers, etc. This becomes especially vital as your company grows.

Final Thoughts

Starting a trucking company is a huge endeavor, and not as easy as some might make it appear. With thoughtful planning, execution, and a lot of hard work, you can build a flexible and profitable business.

If you’re just starting out with your trucking company, and need help with financing your operations, feel free to reach out to us!