Driving a truck can be an adventurous and fulfilling way to earn a living. Driving for a company can offer stability and serves as an easy way to enter the trucking industry. However, for those with a more entrepreneurial spirit, becoming an owner operator brings the potential for financial independence and operational flexibility. But where does one begin? We’ve put together an owner operator startup checklist to help you build a strong foundation for success.
Following a carefully constructed plan with thorough preparation will help you avoid costly mistakes and delays; conversely, skipping essential steps can result in legal complications, financial setbacks, or operational downtime.
These are the key steps you do not want to miss. We will explore each step in more detail below.
The first key step in your owner operator startup checklist is defining your business. This critical decision, how to structure your business, will impact several things such as setup, operation, liability and taxes. There are a few different business structures commonly used by owner-operators.
A sole proprietorship means that the business is owned by a single person. The benefit of a sole proprietorship is its simplicity in setup and operation as well as in taxes. Its appeal lies in the minimal amount of regulatory and yearly paperwork; taxes are handled on the owner’s personal tax filing. The drawback is unlimited personal liability; the owner is at risk for debts and lawsuits against the business.
A limited liability company (LLC) can offer some protection for your personal assets—something a sole proprietorship typically doesn’t provide. While it’s not guaranteed in every situation, an LLC helps establish a legal separation between you and your business, which may reduce personal liability. This structure may also be more suitable if you plan to grow your business, and depending on your circumstances, there could be potential tax benefits. That said, business formation and taxation can be complex, and outcomes vary. It’s always wise to consult a legal or tax professional to determine what’s best for your specific situation.
Whether operating as a sole proprietor or an LLC you may want to give your owner operator startup a business name that is different from your company’s legal name; you can file with the state government for a “Doing Business As” (DBA) or ”Assumed Name” certificate. As a sole proprietor you may use your SSN as your Employee Identification Number (EIN), but not for many other business purposes, which will often require an EIN. However, for an LLC, you will also need to acquire a new EIN from the IRS, which you can do here.
Once your business entity is established you cannot simply hook a cargo van to your truck and start hauling freight; you must first acquire legal operating authority for interstate trucking operations, which is the next critical component on your owner operator startup checklist. Throughout the life of your business, timely submission and staying compliant are necessary to avoid disruptions in your operations. It starts here.
The first step for acquiring operating authority is registering with The Federal Motor Carrier Safety Administration (FMCSA), which, as implied by its name, exists to ensure safety in motor carrier operations. You must file for a USDOT Number, for which you can register here. This allows the FMCSA to track safety compliance and maintain operational records.
Once you have your USDOT number, you will also file for your Motor Carrier (MC) Number, which is what grants you the legal authority for hauling goods across state lines. The numbers are generated upon filing, but your MC number will initially be listed as “Not Authorized” until after proof of insurance and BOC-3 filings, which can be done the same day, usually within 1-2 days. Then, there’s a mandatory 21-day period for protest/review. Status can be monitored here.
Your owner operator startup checklist would be incomplete without securing appropriate trucking insurance coverage. This is essential for risk management, and it is required by law. Different types of insurance are required depending on the type of freight hauled. The mandatory coverage minimum for household goods is $300,000 while it is $750,000 for general freight.
Obtain proof of, at least, minimum commercial auto liability insurance within 90 days of filing for the MC number. It is wise to consult a professional insurance broker to get a wide range of quotes from more than one provider. Once you have executed a policy, your insurance provider furnishes proof of insurance via a BMC-91X filing directly to FMCSA.
Once you have your business entity established, your DBA, EIN, USDOT and MC numbers, you can apply for the International Registration Plan (IRP), which enables you to register your truck one time in your home state and then operate legally in other states and provinces. This will be signified by special license plates, known as apportioned plates.
Once you have a valid IRP registration, you’ll need to register for International Fuel Tax Agreement (IFTA). Depending on your state, application is typically done through the Department of Transportation, Department of Revenue, or Motor Carrier Services. You’ll receive an IFTA license, which must be kept in the cab of your truck, and two decals, which must be affixed to the sides of the cab.
This stage in your startup process presents an ongoing check box in your owner operator startup checklist. Once you are registered with IFTA, you must track the miles driven and the fuel purchased in each state and file IFTA returns quarterly.
Your owner operator startup checklist is not complete without a line for filing the yearly HVUT. Because it is not filed at the same time as annual or quarterly taxes, it can be overlooked or forgotten. Risks associated with non-compliance include penalties, delayed registrations, and operational shutdown, so while this one may seem insignificant, it is extremely important for the continued success of your owner operator startup.
With numerous boxes now checked for establishing the business itself and registering with governmental authorities to meet external demands, we now turn inward to how the business will look from the inside out. As with any startup, establishing a robust bookkeeping system from day one is extremely important.
Essential aspects of effective bookkeeping for owner-operators include expense tracking, tax preparation, and income management. Consider the Key Performance Indicators (KPI’s) that you intend to monitor as well as the critical data points you will want to review as you survey the success of your business. Ensure that your system can easily provide this information with little effort so that you can make assessments and adjust your business strategies accordingly.
This last item on your owner operator startup checklist isn’t exactly a box you check once and for all, like establishing your business entity. Rather, this is a box you check everyday for the life of your business: keep your business documentation organized.
Maintaining organized and accessible paperwork is so important. If time is money we certainly want to minimize – or eliminate – time wasted searching for missing documents, files, etc. There are numerous applications and digital tools readily available to help catapult your startup to success. Find the one that matches your vision and put it to work.
While an owner operator startup may seem complex, it doesn’t have to be. Simply follow the key steps we have outlined in this owner operator startup checklist. It may seem overwhelming, especially at first, but there is good news: one thing we can help you with is filing the HVUT with a simple, streamlined e-filing process, so you can focus on getting your trucking business up and running!
i2290.com simplifies the HVUT process, allowing owner-operators to stay compliant, save time, and avoid unnecessary penalties. With i2290, you can enjoy the convenience of e-filing your return from anywhere with internet access, while reaping the additional benefits of easily accessible digitally maintained records for seven years, filing VIN corrections and weight increase amendments for free, and access to a world-class customer service team.
Create an account with i2290 today and answer a few questions about your vehicle and your business. Then for a nominal fee, we will make the calculations for you and generate your stamped Schedule 1 in a matter of minutes!
Special note: This article is for general purposes, and is not intended to provide, and should not be relied on for tax, legal, investment, or accounting advice. The best way to ensure you’re properly filing and paying appropriate taxes is by following IRS regulations and consulting with a tax professional.
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