How to Start a Transportation Business

9 min read

Transportation is a vital cog in the machine of our nation’s industry. Raw materials and manufactured goods do not get from their point of origin to their destination without transportation businesses. People without cars cannot travel long distances without public or private carriers. Remove transportation and the economy is effectively crippled. This ensures that trucking and transport businesses are always in demand.

This industry is a great place to start a business because it allows you to start small and build up from there. Whether big or small, all owners have the same legal requirements when they start a transportation business.

Build Business Basics

Building a company from the ground up takes time. It takes careful planning to make sure you stay afloat after launch. Learning how to start a transportation business is similar to learning how to start any business. All transport businesses have some basic needs that should be applied during the planning process.

Name

You can use your own name or a creatively witty pun to form a company name. Just remember to keep it short and memorable. Long or hard-to-spell names are not as easily recalled. Do a domain search to see if someone else already has that name for the website and email.

Business plan

What services do you plan to offer? Who are your potential customers? What makes you special from other companies? What funding do you need and what are your projected profits?

Business structure

To keep private and business funds separate, it is important to create a separate business entity. While not every state requires you to register a business entity, it’s a good precaution to take. Not registering your business automatically makes you a Sole Proprietorship.

Other business structure options are LLC, Partnership, or Corporation. Each of these has pros and cons but the most commonly used structure is LLC. Note: Registering a business entity is done at the state level in your resident state.

Employer identification number

Also known as the Federal Tax ID Number, applying for the EIN is the next step in starting a trucking business. The application is short and free. As soon as you have the number you can open a bank account and apply for other required licenses. Note: The IRS does not recognize LLCs, so most small transportation companies register as an S-corporation at the Federal level. The same LLC protections apply, there is just extra paperwork. Avoiding double taxation is worth the paperwork.

Bank account

Open a bank account under your business name. Run your business like a business and keep your private funds separate. This will help you avoid complications and legal issues in the future.

Email and website

After registering the business name, establish a separate email. Keep private and business email apart to avoid mixups. As well as an email, in the age of technology, a website is a business must. Build your own or hire a developer, but make sure you have a website.

Regulation Rule Requirements

Whether you plan to transport people or goods, there is a veritable army of permits and regulations that must be complied with. Never fear, though. If you don’t want to figure out paperwork on your own, there is an entire industry based on filing your paperwork for you. Either way, it is important to understand what permits, licenses, and other paperwork is required of you.

DOT Number

Most transportation companies are required to register with the Department of Transportations. New companies are required to register online via the Unified Registration System to be issued a DOT and Motor Carrier number.

Motor Carrier and Operating Authority

The Federal Motor Carrier Safety Association is an agency of the DOT tasked with road safety. You must register with them for both motor carrier and operating authority before becoming active on the roads.

Insurance and BOC-3

Part of the operating authority agreement is that you will insure each of your vehicles. Apply for insurance while you wait for the FMCSA to process your application.

Transportation businesses are also required to file a BOC-3 form. This names a processing agent in each state that can handle legal paperwork if the need arises.

SAFER

SAFER is a part of the FMCSA that provides information about your company to insurance and other agencies. They also keep track of your safety record. It is important to make sure your information with SAFER matches what the FMCSA has in their records.

International Registration Plan

The IRP is an agreement through the continental United States allowing companies to operate within multiple states with just one license. You are required to register for this number and annually report your mileage in each state.

International Fuel Tax Agreement

Very much like the IRP, the IFTA is an agreement among the continental United States that simplifies motor carrier fuel records. Fuel tax reports are due quarterly. If you don’t plan to leave your jurisdiction regularly, trip permits may be purchased instead.

Additional paperwork

Different transportation businesses have different requirements and it is important to do your research on extra rules in your state. Companies working with the government are required to have a Standard Carrier Alpha Code. Businesses that plan to transport overweight or hazardous items must file for extra permits and certifications. Always do your research.

Commercial driver’s license

Unless your vehicle is under 26,000 pounds, you need a commercial driver’s license to drive your company trucks. For HAZMAT, tankers, or 15+ passenger vehicles, an extra endorsement is required on top of the CDL.

Always be sure your permits are up to date and valid before traveling. Keep all your permits and licenses in a permit book. The book should include:

FMCSA Authority Letter
Insurance Card
Medical Card
Unified Carrier Registration (UCR)
Intrastate Authority (if applicable)
Base IFTA License & Decals (over 26K GVW)
Apportioned Cab Card (over 26K GVW)
IRS 2290 Heavy Highway Use Tax (over 55K GVW)
KYU Permit (over 59,999 GVW)
NM Mileage Tax Permit (over 26K GVW)
NY HUT (over 18K GVW)
OR License & Bond (over 26K GVW)
Oversize/Overweight Permit (if applicable)

Overall Operations

Do you want to know how to start a passenger transportation business or how to start a medical transportation business? Once you have the necessary paperwork, it all starts with buying the right equipment. Get good quality equipment and choose carefully between buying and leasing. Be sure you are up to date on all in-cab paperwork and vehicle marking requirements. From here, it’s just getting started and learning how to hire employees if you need them.

Get Going

Remember it is OK to start small and build up as your company grows. It’s possible to start a transportation business with just one van or truck. As your customer base grows, so will your profits. Sometime down the road, your company will get the chance it deserves to grow.

There are so many online choices to get you started in the right direction. Ecwid takes pleasure in supporting your needs and demystifying the business-building process. It is our goal to see your business thrive. If you’re thinking of starting a transportation business, let us help you succeed.

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Apr 14, 2022

About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.