If you’re ready to take your trucking career to a new level and become an owner-operator, there are many resources that can help you along the way. This article provides a step-by-step plan on how to start your own business and make sure you succeed.
First Things First: What is an Owner-Operator?
An Owner-operator is a professional truck driver with a commercial driver’s license (CDL), who owns their own freight delivery business. There are two types of owner-operators: drivers who are self-employed and fully independent, and drivers who work as independent contractors for other companies.
Owner Operator vs. Independent Contractor: What’s the Difference?
Self-employed owner-operators work under their business name and authority, which allows them to keep 100% of the revenue and choose the freight and the companies they’re willing to work with. These skilled drivers run every aspect of their business, from finding the loads, communicating with brokers, taking care of all business expenses, equipment management, taxes, and everything else in between.
Independent contractors can be lease-purchase drivers who work under a certain company’s authority or owner-operators who choose to surrender a portion of their revenue in return for established loads and other components of logistics being taken care of by the company they partner with.
What Steps do I Need to Take to Become an Owner-Operator
The following is an outline of the steps it takes to become a tractor trailer owner operator.
Get a CDL License
If you have not yet obtained a Commercial Driver’s License (CDL), this should be your very first step. You can get a CDL handbook at your local DMV and study independently, or you can sign up for classes at your local truck driving school.
Assess Your Personal Situation
Owning a business in the trucking industry comes with a set of responsibilities and life changing adjustments. Whether you choose local, regional, or long haul routes, you will need to master commitment and embrace hard work. It takes a while to establish your reputation with companies and brokers before you can earn a good income.
Most owner operators begin their trucking careers as company drivers, which helps them build experience, learn the industry, and save money to build their future company’s foundation.
Owner-operators don’t just haul the freight, they have to run every aspect of their business, including expense reports, taxes, and equipment maintenance, among other things.
Get Your Finances in Order
Running your own business requires a lot of planning, and making sure you have a financial safety net is one of the most crucial parts of that plan. Before you decide to purchase or lease your own truck and trailer, make sure that you have at least three months worth of savings for all of your necessary expenses at your disposal. That also includes at least three months worth of lease or purchase payments.
Most successful owner-operators recommend building a spreadsheet that keeps track of your expenses and potential earnings to estimate how much you’ll have to work to make sure your business is profitable.
Steps to Starting an Owner-Operator Business
- Every business requires several steps in order to make it official, and opening your own business in the trucking industry is not an exception. Opening your own Limited Liability Company (LLC) is the safest way to start your trucking company. Having an LLC will help you establish your business’ credibility, protect your personal assets, and increase your tax options and benefits. First you’ll have to come up with a name for your company. Dedicate some time to your research and make sure that the name is unique and is not being used by any other companies or organizations. You can fill out all of the necessary paperwork at your local Secretary Of State or file your LLC paperwork online.
- Next on the list is obtaining your Employer Identification Number (EIN). You will need this number to file taxes, hire employees, and open a business bank account. You can get your EIN by visiting the IRS site and file all of the necessary documents online or via mail.
- File for U.S. Department of Transportation (USDOT) number. This number is assigned to you by the Federal Motor Carrier Safety Administration (FMCSA). All of the necessary paperwork can be completed online at the FMCSA website.
- Your next step requires obtaining your Motor Carrier (MC) number. This number is what secures your trucking authority and makes you an independent owner-operator. This number can also be obtained on the FMCSA website.
- One of the final steps requires you to purchase your truck insurance. FMCSA requires all owner-operators with authority to have liability coverage. The government requirement demands a minimum of $750,000 coverage, while most brokers and shippers require a minimum of $1 million liability coverage.
Buying or Leasing a Truck: What’s Better?
Deciding whether to buy or lease a truck depends on your financial situation. Purchasing a semi-truck usually requires a large down payment and good credit history for financing the purchase. Although this is the preferred route for most successful owner-operators, it comes with a high initial cost.
Leasing a vehicle is an alternative route that many owner-operators decide to take. One of the pros of this option is that it’s less financially taxing at the early stages, but with this route you won’t have full ownership of the vehicle.
Ready, Set, Go!
Once you’ve established your business and figured out all of the legal logistics, you can start searching for loads online. There are various resources available for owner-operators that help with safe and secure load search. Most owner-operators join the Owner Operator Independent Driver Association (OOIDA) that provides safe and reliable resources for their members.
In order to succeed in the trucking industry as an independent owner-operator, you need to keep track of your expenses, stay on top of your equipment maintenance, and build a strong work ethic that will set you apart from your competition.