How to Start a Trucking Company in 7 Steps

Published 9/10/2024

Higher pay and increased freedom are two commonly cited reasons for starting a trucking company. While a well run company can provide more income for the owner than working as a company driver, it is not risk-free.

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Before jumping in with both feet, one should know exactly what to expect so they are aware of the capital requirements and how much work is required.

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Preliminary Research & Setting Reasonable Expectations

While YouTube and TikTok videos can glamorize the industry, trucking is not for the faint of heart. A new business requires a substantial investment in both time and money.

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Before jumping in with both feet, potential owners should make sure they are ready for the responsibility and stress of being one’s own boss. A few factors to consider include:

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Trucking Experience – While it’s not legally required, most successful trucking companies are started by employee truck drivers that are ready to take on additional risk and responsibility for the opportunity of higher earnings. Most employee drivers start as owner operators leased onto a motor carrier before getting their operating authority.
Business Experience – Running a successful trucking business is much more than driving, even for owner operators leased onto a carrier. In addition to finding loads, owners need to track expenses and profitability, handle insurance, and make sure they are following regulatory guidelines. ‍
Running the Numbers – Seeing large revenue numbers can be enticing but it’s important to remember that most trucking companies have a low-profit margin. A recent NYU study recently found that the net margin of 34 trucking companies was just 1.85%. Other sources estimate net margins to be between 2.5-6%. For owner operators, this does not include their market-based salary but it’s still important to be realistic about expectations. New owners should also be aware that the initial months will likely be slow as their business ramps up. Trucking forums give insight into what to expect regarding expenses and profit margins.

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About the author

Kyle Fretwell has worked as a researcher and data-journalist for over a decade. His work has appeared in publications such as Bloomberg, Fox Business, MSN, USA Today, CNBC, and the Houston Chronicle.

He now manages TruckInfo.net's content team and is a regular fixture at the Mid-America Trucking Show in Louisville.

Table of Contents

Step 1: Select the Type of Trucking Company

Before you can put together an execution plan, you need to know where you’re going. Future owners should carefully weigh the pros and cons of the various types of trucking companies.

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Owner Operators vs Motor Carrier

Owner operators are individuals that own their own trucks but do not have operating authority. Instead, they lease onto a motor carrier as a 1099 contractor and run under the motor carrier’s authority. When an owner operator has their trucking authority, they are sometimes referred to as “independent owner operators” but they are technically just small motor carriers.

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Owner Operator

Motor Carrier

Pros

Primary liability and cargo insurance is provided by the motor carrier (the biggest insurance expense)
Owner operators are typically paid every week and don’t have to deal with invoicing shippers/brokers
Most motor carriers help their owner operators find loads
Less admin work (IFTA, etc)

Higher earning potential
Total control over loads, routes, and work procedures

Cons

Lower earning potential (most carriers take 20-30% of revenue)
Still responsible for bobtail or NTL insurance, fuel costs, maintenance, etc

Increased expenses
More regulatory and administrative work
Cash-flow issues (most shippers and brokers have net 30-90 terms)
100% responsible for finding loads

Over-the-Road vs Regional vs Local

Most companies typically specialize in serving three types of geographic regions.

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Over-the-Road – Also known as OTR, these jobs typically pay the best but also require the most time away from home.
Regional – Similar to OTR but typically focused on a smaller geographic area, regional truckers are more likely to have dedicated routes and a predictable schedule. While the pay can still be good, they can spend more time at home.
Local – Like regional trucking, the routes are typically more consistent and truck drivers can almost always be home on nights and weekends, the pay is usually worse, the hours can be longer, and there is sometimes manual labor involved such as unloading cargo.

Equipment & Freight

Before buying a tractor and a trailer, it’s important to know what type of freight you will be hauling to make sure you have the right equipment. Not surprisingly, more expensive loads typically require more expensive equipment, come with increased risk, or need to be delivered on a tight schedule.

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Trucking companies can specialize in one or more of the following equipment/freight types:

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Dry Van
Reefer
Flatbed
Intermodal
Power-only
Car Hauling
Tanker / Hazmat
Hot Shot
Tow Trucks
Dump Trucks
Box Trucks

Step 2: Create a Business Plan

Most lenders will require companies to have a business plan as part of their application process but even companies that don’t need outside financing should still put together a high-level plan. Running through this exercise will make sure that all aspects of the business have been thought through and writing ideas down often leads to clearer thinking.

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Most business plans contain the following sections:

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Executive Summary – A high-level overview that should include the type of trucking business you are creating, why it will be successful, and potential risks.
Market Analysis – Should focus on the market opportunity at a granular level (if you’re hauling reefer freight in the south, what are current and historical rates, etc).
Business Operations / Management – Who will be driving, booking loads, handling invoices, doing the books, etc?
Marketing / Sales – Typically the most important part of a business plan, this should cover the specific details of how you will find clients (existing relationships with shippers/brokers, load boards, etc). Most companies fail because they cannot find enough work, not because they can’t deliver a service.
Funding – Are you self-funding, taking out a loan, etc?
Financial Projections – Along with the marketing/sales section, this is one of the most important sections. While forecasting specific numbers is extremely difficult, the purpose of the exercise is to see under what conditions the business will be successful. This should also help you to calculate how much money you need to get started – and don’t forget to include a cushion in case unexpected expenses occur or revenue growth is initially slower than expected.

Step 3: Business Registration & Trucking Regulations

In addition to the standard business filings that all businesses need to file, trucking businesses also need to register with the Department of Transportation to legally operate. Here is a quick overview of what is required.

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Business Registration

While it’s possible to run a trucking company as a sole proprietorship, both motor carriers and owner operators will want to form a Limited Liability Company (LLC).

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Owners can also elect to form an S corporation or C corporation. After LLCs, S corps are the most common for small businesses while large companies usually elect to become C corps.

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The benefits of an LLC include:

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Limited personal liability – unlike sole proprietors, LLC owners do not expose their personal assets if a company is sued or goes out of business
Less paperwork – compared to an S corp or C corp, LLCs have less paperwork that needs to be filed with the government
Taxes – LLCs can elect to be taxed as a sole proprietorship, which allows owners to take advantage of pass-through taxation, which helps save on your tax bill
Flexible – LLCs are the most flexible entity regarding ownership, management, and profit distributions but this isn’t usually a deciding factor for small trucking companies

While forming an LLC or S corp is a fairly straightforward process, new trucking companies will need to form their business entity with their state and possibly their city or county. Most states make it easy to start an LLC or S corporation and it only takes a few minutes but if you want to simplify the process, third party tools exist that make it easier to form an S corp or start an LLC online. You will pay a premium for using third party tools but many find it's worth the convenience.

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Once you have filed your company with the state, you will need to apply for an Employer Identification Number (EIN) with the IRS. EIN numbers act as identification numbers for business entities so that owners do not need to use their social security number on tax forms or with clients/suppliers.

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Lastly, businesses that want to protect their home address, will need to hire a registered agent. Companies are legally required to have a process agent available to receive notices, government correspondence, and other information during regular business hours. Business owners can name themselves or someone they know as a registered agent but the address used will be publicly available information.

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Trucking Registration

Motor Carriers Only

MC Number
USDOT Number
Unified Carrier Registration (UCR)
International Fuel Tax Agreement (IFTA) Decal Stickers
International Registration Plate (IRP)
BMC-91 Filing
BOC-3 Filing
State-specific Filings
Hours-of-Service Compliance via ELDs

Motor Carriers & Owner Operators

Heavy Vehicle Use Tax (Form 2290)
FMCSA Clearinghouse

Step 4: Financial Planning

As mentioned earlier, company drivers that transition to business owners need to calculate how much money they need to get started. While this figure might be higher than your personal savings, it’s still possible to start a successful trucking company with outside financing.

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How much does it cost to start a trucking company?

Starting a trucking company typically costs $5,000 to $20,000 in addition to purchasing or leasing a semi-truck.

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Startup Funding

Most truckers will find the easiest form of financing is a loan to buy their truck but depending on their personal finances and credit history, other forms of financing may be available.

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First-time business owners should reach out to their local Small Business Development Center for free advice.

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Financing sources to consider include:

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Personal Savings – Even with outside financing, most companies will require personal savings from the owner or friends and family
Equipment Financing – This is typically the easiest form of financing because it is backed by the vehicle itself
Private Small Business Loans – These can be harder to qualify for but working with local banks and credit unions can be worth looking into for those with a strong professional track record or personal credit score
SBA Loans – SBA loans are typically easier to qualify for than traditional small business loans because the Small Business Administration guarantees a percentage of the loan to lenders
Grants – Federal, state, and private grants are available to small business startups, check out a full list of options here

Company Operations

Figuring out how much money you need to get started is just phase one. Owners need to also set up or consider the following:

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Business Bank Account – All owners should set up a business bank account to separate their personal finances from their business finance.
Accounting & Bookkeeping – Without tracking revenue and expenses, a company has no idea how profitable they are. Most companies use accounting software that they may or may not pair with an accountant or bookkeeping service.‍
Freight Factoring – Motor carriers just getting started are likely to have cash flow issues because they have to pay for fuel and other expenses to operate but shippers and freight brokers don’t pay invoices until at least 30 days after it is received. Truck factoring companies will “buy” these invoices at a discount and then handle the collections.

Step 5: Acquire Equipment

When putting together your business plan, you should have decided whether or not you will be leasing or purchasing your truck and possibly trailer. There are pros and cons to each route.

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Buying

Leasing

Pros

Typically saves money in the long run
Own the asset after paying it off
Ability to modify and change the vehicle as desired

Less upfront capital required
Shorter-term commitment
Likely to be driving newer equipment

Cons

Need more upfront capital, even if financing
Longer-term commitment
Maintenance costs

Can be more expensive in the long run
Monthly payments don’t result in an asset
Unable to qualify for asset-based lending programs

Step 6: Business Insurance

Motor carriers and owner operators will both need to purchase insurance but motor carriers will need a broader range of coverage.

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Motor Carrier Insurance

Primary Auto Liability – Legally required by federal law, primary auto liability covers damage to third parties and their property
Motor Truck Cargo – While not required by law, shippers and brokers typically require at least $100K in coverage
Additional Truck Insurance – Common coverage includes physical damage, trailer interchange, reefer breakdown, etc.
General Liability – Protects companies against general claims such as personal injury or property damage
Worker’s Compensation – Required by law in most states for companies with W-2 employees, this insurance covers lost wages and pays for medical expenses for employees that get injured while working
Employer’s Liability – Covers legal fees from lawsuits from a W-2 employees that are injured at work
Occupational Accident Insurance – Similar to worker’s compensation insurance except it is designed for independent contractors (not usually required by law)
Contingent Liability – Similar to employer’s liability, contingent liability protects employers from lawsuits stemming from independent contractors injured at work

Owner Operator Insurance

Bobtail or Non-Trucking Liability – Motor carriers require owner operators to either carry bobtail liability insurance or non-trucking liability insurance to prevent claims against the motor carrier’s primary liability insurance while owner operators are not driving for the company
Physical Damage – Provides coverage in case your vehicle is damaged or stolen‍
Occupational Accident Insurance – While some motor carriers offer this insurance to their independent contractors, owner operators that are leased onto carriers that don’t should look into this coverage on their own

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Step 7: Find Loads & Business Optimization

As discussed earlier, trucking is a low-margin industry. Like most businesses, growing revenue is just half of the battle. Carriers and owner operators should research and select the right tools to run their businesses efficiently. Nearly every business will need the following products and services:

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Load Boards – While contract lanes and direct relationships with shippers are preferable, most new companies will need to at least supplement their business with the spot market.
Fuel Cards – Companies should never be putting fuel expenses on credit or debit cards. Instead, they should be using a fuel card that either gives large discounts, gives a line of credit, or both.
GPS – Experienced truck drivers are already aware but industry newcomers should be aware that Google Maps and other mobile apps are not sufficient for semi-trucks, which require special routes.
Trucking Management Software – The right software will help you run your business efficiently and make it easy to track all of the moving pieces in your business.

Trucking Industry FAQs

What is the first step to starting a trucking company?

The first step to starting a trucking company is deciding whether or not you’d like to become a motor carrier or an owner operator, what type of freight you will be transporting, and how you will get your first customers.

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Can you start a trucking business with no experience?

While it is possible to start a trucking company without any trucking experience, individuals with experience in the trucking industry or running businesses will have a higher chance of success.

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Can you own a trucking company without a CDL?

Yes, it is possible to own a trucking company without a commercial driver’s license (CDL). It’s not uncommon for the owner of a trucking company to not be on the road driving vehicles.

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What is the most profitable trucking business?

While the most profitable businesses will be those that have good relationships with shippers and manage their expenses, some of the highest-paying loads include ice road trucking, hazmat, and car hauling.

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What’s the best state to start a trucking company in?

While there is no “best” state to start a trucking company in, the Midwest typically has some of the highest spot market rates and cheap fuel prices.

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How hard is it to start a trucking company?

Starting a trucking company is hard work. Most companies operate on slim margins but for business-savvy individuals that know the industry, it can still be lucrative.

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What type of freight pays the most?

Hazmat, car hauling, reefer, and flatbed are among the best-paying types of freight.

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How long does it take to start a trucking company?

Starting a trucking company typically takes a few weeks to a few months. Owner operators can usually get going fairly quickly once they have a vehicle. Motor carriers on the other hand, typically have to wait 20-25 business days just to get their MC number.

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Can you start a trucking company with no money?

While it is technically possible to start a trucking company with no money down, it’s unlikely. Only individuals with strong credit scores and relevant experience will qualify for traditional financing. So while these individuals may not be required to put money down, they will already be on solid financial footing.

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Companies or programs that advertise the opportunity to start a trucking business with no money are most likely scams. Many companies have lease-to-purchase owner operator programs but these are widely criticized in the industry.

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