What is trucking authority ? It is the operational authority given by FMCSA—Federal Motor Carrier Safety Administration. Every transportation business, carrier moving company, or freight forwarder is required to get this permission to transport cargo across different state lines.
By having trucking authority, business owners can select loads, routes, and schedule transportation activities accordingly.
Trucking Authority: 6 Things to Consider When Applying For It
If you are also looking to obtain full freedom to operate a trucking business, then apply for an authority. Here are a few things that you must consider when applying for your trucking authority:
1. Business Structure
Business structure is an imperative factor to consider when choosing the type of authority you need. In general, the authority is based on structures such as sole-proprietorship, LLC, and Corporation.
You can discuss this business expert to understand how you are going to maximize your business profitability and operating efficiency through securing trucking authority.
Your business structure will also help you file your company accordingly under DBA (in case of LLC & Corporation) or assumed name (in case of proprietorship).
2. Trucking Insurance
When applying for a trucking authority, it is compulsory as per the FMCSA to acquire a sustainable insurance plan beforehand.
If you don’t have any insurance coverage against your commercial MVs/trucks, then your transportation business doesn’t stand a chance.
You need to obtain a suitable coverage plan for your cargo and vehicles. Normally, $750,000 is considered to be the prime liability and $100,000 is for cargo insurance.
However, if your fleet vehicles are going to be used for carrying or transporting hazardous materials, then you will have to consider additional insurance coverage.
3. Tax Structure
Up next, you are required to pick the right tax structure. In business, you get to avail many tax benefits. However, there are several tax structures that you need to consider considering your business expenses and revenues. You can pick one based on analysis and reviewing pros & cons. Common tax structures are;
- Disregarded Entity—It is best for proprietorship businesses and single-member LLCs. According to Schedule C, the business tax will be part of a personal tax return.
- Partnership—LLC businesses with more than one member come under the umbrella of partnership and are taxed as a partnership as well.
- S-Corporation—It is suitable for small businesses. The company itself will not pay any tax instead taxed as an S-Corporation. The tax amount is moved towards personal tax obligations.
- C-Corporation—It is considered a default tax method for corporations. First, the company pays tax on its net profit, and later the dividends are paid to shareholders/owners (which can also be taxed).
4. Additional Startup Costs
If you are a newbie in the transportation industry, then you must know that there are going to be additional startup costs.
When applying for authority, you can expect a number of costs depending on your company, commercial trucks, size of the fleet, etc.
Registering with the FMCSA to acquire USDOT# & MC#, ensuring drug & alcohol testing, Unified Carrier Registration, audit assistance, Heavy Highway Vehicle Use Tax (HVUT), filing for BOC-3, etc. can cause additional costs.
5. International Fuel Tax Agreement (IFTA)
When your business is operational, you need to start tracking the travel miles for your MVs and how much you have to spend in each state on fuel.
Then, after each quarter you will need to submit an analysis-based IFTA report to the state you are operating.
Probably you may find this odd, but this report is imperative to keep things straight and simple. To keep a record of miles, you can use modern-day tools like trip envelopes or an electronic onboard recorder.
It is advantageous on your end to know cost-per-mile. Many businesses fail to succeed as they don’t keep a record of how much costs it takes to operate per mile.
6. Additional Permits
You should know that there are a few listed states that need additional permits when it comes to obtaining authority. For instance, if you are going to make your carrier moving company or any transportation business operational in New York, Kentucky, or New Mexico, then you will have to check on more information.
These states require additional permits owing to some reasons so it is best to do your research in which you intend to operate.