Auto Transport (and Hotshot) Startup Info - Ford Powerstroke Diesel Forum
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  #1  
Old 01-23-2012, 01:08 PM
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Auto Transport (and Hotshot) Startup Info

Choosing to start an Auto Transport company is a major life decision. You should make a well informed decision since this will affect not only your life, but that of your family and friends. The work is very time consuming and you will not be spending much time at home.

The investments are huge and the payouts could be a long way off once you start. The equipment expenses are not the only large investment, but so will the insurance premiums. There are some major costs you will pay previous to driving your first mile. Even once you are started, the distance to profitability is vast. It can take years to finally realize a profit. Make sure that you are financially secure previous to engaging in this long journey ahead of you.

The love of driving is not enough to justify choosing this path, as it is not the easiest path to take. There are other ways to secure a livelyhood other than driving a truck. You need to decide whether long hours of driving for what seems like no pay after paying your expenses is justification enough.

I am not here to disuade you from this path, I only wish you to make a well informed decision before making this choice.

If you are still with me, the review the following topics which are laid out in order of completion. There are many alternate paths to take in obtaining the same goal. However, it has been determined that this path is the easiest and least time consuming. The topics are in order of completion and should be followed as closely as possible without too much deviation. Should you find yourseslf stuck by one of the steps, please do not hesitate to ask questions in the Forums. Read all of the topics and understand them completely before taking the first step. If something is not clear, ask someone that has already been through the whole process.

Happy Learning!
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Old 01-23-2012, 01:09 PM
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1. Picking Your Business Name and Structure
Selecting your business name is a very important and the first thing to be done.  From that point on, everything is registered with this name and it becomes the "face" of your business.  Everyone you deal with will remember you as the guy from "ZXY Transport", even if they know your personal name.  Your business name will be displayed on all of your paperwork and on the side of your truck.  All of your licensing will be done in the business name.  All of your customers will need to know this name as well.  Select a name that is "timeless", or does not become irrelevant due to being associated with a point in time.

You will need to decide on a business structure at the same time.  There are several options including: Sole-Proprieter, Partnership, Corporation, or LLC(Limited Liability Corporation).  I typically suggest the Corporation route, and for tax purposes the "S" Corporation as it taxes you as an individual.  You need to know the differences between these company structures before making a decision.  Do not simply pick one just to have picked one without understanding them.  This again will stick with your company from this point on.  If you select "Sole-Proprieter", then your name will be on everything and you may have to file a DBA or Assumed Name forms with your local government.

As a Corporation you have the benefit of being able to complete forms and applications in the company name, with you being the responsible person by signing the forms.  The company cannot actually sign forms, so you are a representative of the company.  This form of business will also protect you from possible legal liabilities in the case of an accident or other.  You can be protected from losing your home, etc from an unpreventable accident and the such.  There are many reasons for the various structures.  My biggest and foremost suggestion is to contact an attorney for a consultation to determine the best for you.  You do not have to hire the attorney at that time and file the papers, just make sure you understand everything previous to deciding.

Also, keep your business name short!  Completing all of the paperwork required ona  daily basis could make your hand very sore if you have to write out a long company name.  On the plus side, the shorter and simpler, your customers or potential customers will remember you easier!
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Old 01-23-2012, 01:09 PM
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2. Get Your Federal and State Tax ID's
The process for obtaining your Tax ID's is fairly simple and can typically be done online. Federal Tax ID numbers are called "Employer Identification Numbers"(EIN) and can be applied for and obtained immediately from the comfort of your home. You can complete the process on the IRS website here. Once you have completed all of the information, you will be given the opportunity to print the resulting page which includes your Tax ID number.

Some states will require a separate Tax ID for your business at the start of your business. To contact your particular state for their requirements, see our directory of contacts. Find out if your company requires one for your state and request the appropriate forms.

Your Federal Tax Id (EIN) will be required to obtain your USDOT, MC, and more. Even your license plates will require this number. Get it first, as the cost is FREE!

Last edited by AutoExpeditor; 01-24-2012 at 08:21 AM.
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Old 01-23-2012, 01:11 PM
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3. Selecting and Purchasing Equipment
You probably already have decided that you will be transporting vehicles. So the obvious next step will be to purchase equipment that is able to carry automobiles. The decision on the type of equipment is one of those to be made after being informed. You need to make a decision on the types of vehicles you will be transporting. Some trailers are great for hauling compact to midsized cars, but cannot simply fit a medium to large pickup truck.

You will also need to make a decision on the number of cars you want to typically carry. From experience, under 3 cars is completely unprofitable and you will fight just to survive. You can choose to carry 4 cars which is also a tough market, but can be done. Anything above that number and you will start to look beyond a 1-ton pickup truck. Even with the 4-car trailer, a pickup truck is nearly outclassed by the weight.

Most startup transporters begin by using a truck which they already own. These are typically Dodge 3500 pickup trucks. The major issue that has been seen is in the case of MegaCab or Shortbed pickup trucks. In that case, there is not enough space between the back of the truck cab and the front of the car hauling trailer. If this is the case, contact an administrator on the forum to discuss options with you.

The next option "up" from the pickup truck is a Medium Duty truck. Mostly these trucks come without a bed but from that point forward look identical to a pickup truck. There will be some customization that will need to be completed before that truck is ready to be run down the road. This is typically the best "auto expeditor" class of truck depending on the model. It is capable of pulling trailers of 4 and 5 cars depending on model and configuration of the trailer, etc.

Your second decision which will also assist in confirming the first truck choice is the trailer. The style of trailer, its cost and capabilities is an important focus. You may have found what you consider is the "perfect trailer". But are you sure that you can carry the number and weight of cars that you need to become profittable? Will the truck be sufficient to pull it safely and legally? These are important questions you will need the answers to before going any farther.

Will you be able to continue making payments on this equipment should there be some "issues" with your company? What about if the equipment breaks? Will you be able to survive and pay for the repairs? Think hard!
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Old 01-23-2012, 01:12 PM
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4. Get Insurance Quotes
Insurance is not only smart, but its REQUIRED to become an active legal transporter. The Federal Government requires that liability and cargo insurance be carried for your "numbers" to become and remain active. Insurance is the second highest cost(sometimes the first) expense of running your company. If the truck was the highest cost, then insurance is an obvious runner-up.

New Carrier insurance premiums typically fall between $8,500 and $12,000 per year. Of course this will all depend on the number of cars you are carrying, the age of your equipment, and your driving history being the most important factor. If you have a clean driving record and plan on loading 3 cars maximum, I would expect the premium at the lower spectrum. If you have a 9-car truck and a few points on your license, then you can expect quotes well above the range I posted above.

Most insurance companies offer either Premium Financing through a specialized finance company, or the insurance company will take payments directly. In either case, the down payment will be approximately $1,600 for a new transporter. Since the insurance company has to file proof of your insurance with the government, they have restrictions on when they can cancel. They have to give the government at least 30 days notice of a policy cancellation, so the insurance company will want to make sure they are paid for that time. This is why the down payment is slightly more than 2 times the monthly payment amount.

Get your insurance quotes and try to make a decision on the company. The last thing you will want is to have to fine a claim for accidental damage and find out they won't cover you. Make sure they are a respectable insurer and that they are aware of exactly what you will be carrying. Most brokers will request $50,000 coverage per-car that you can carry. This is almost and industry standard, which you should follow to be safe.

Minimum insurance requirements should NOT be used to obtain your first policy. Slightly exceeding your required minimums is the best bet. You are required to carry $1,000,000 in Liability. Cargo insurance should be carried as listed above($50,000 per-car carried), typically $150,000 for a typical "wedge" hauler. Most 4-car "wedge" haulers find $150,000 in cargo insurance acceptable. I agree here since the typical 53 foot trailer will fit 4-cars occasionally and not on a regular basis.

Insurance should not be bound(paid for) until you have followed the next step completely. Wait approximately 1 week after the next step to get your insurance in place. There is no need to be paying for insurance when you cannot legally run. Wait until approximately 10-14 days before your authority is due to become active.
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Old 01-23-2012, 01:13 PM
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5. Apply For Your Authority
Getting your authority is a fairly simple matter when it comes to the grand scope of things. Basically you will be completing forms based on the type of hauling you are doing and how your company is setup. There will be several forms for your Interstate authority. Basically the FMCSA site will offer you Guided or Unguided help in telling you which forms and filings you will need. It is best to go ahead and take the Guided approach.</P>
LINK --> FMCSA Registration System
After you have completed the short questionaire, you should be told of which things you will need...

Don't start freaking out yet... This is what everyone will see. These are the requirements you will have to meet to have your authority activated. A little farther down you will see a button to 'Register Online'. If you are ready, go ahead and click it. What the system does not tell you is that you will also need a credit card or debit card for two different reasons. First the system uses your credit card to establish your identity and second it will eventually charge your card the $300 to process the application. The registration fees are non-refundable, so you better make sure you are ready. The clock start ticking once you have submitted the paperwork.

If you are not prepared to pay for your insurance and the other associated items, do not register at this time. Once you have submitted your paperwork, you have just under 21 days to meet all of the requirements listed above. There is a 21 day wait for authorities to go active anyway, but if the listed requirements are not met your authority immediatly goes into a suspended/revoked status. If that happens you will have to basically start over. You wouldn't really be starting over since you can only hold one USDOT number, but you will have to jump through some hoops to get it restarted. This is not the scope of this guide, so we will skip those details for now.

If you have insurance lined up and a company ready to accept your money, you can begin. Complete the forms as truthfully as possible. You will not be handling 'hazmat materials' as definted to require any hazardous material filings. So continue on and complete the forms and pay your $300. If you have questions, you can contact someone here to answer questions you may have. Make sure you write down/print the resulting MCS-150 form since it will include your USDOT number and your 'docket' number. Your docket number will be your MC when activated.

Once you have completed the forms, the clock is now ticking. You will have just under 21 days to secure and have your insurance filings sent to the FMCSA. Once you completed your forms, your application will appear in the FMCSA register as a new filing. Be prepared for your phone to start ringing and your mailbox will be full of junkmail.

Now will be the time to complete the list. Insurance filings and BOC-3 agents will be the next items. So now you will call the insurance agent to activate you insurance. Typically I would suggest waiting approximatelly one week before activating your insurance. Most companies will report to the FMCSA electronically at the end of the day, so it should take 1-2 days to get the requirement filled for insurance. There is no reason to insure from day one since you will not be active for 21 days, so save the money a little longer and make your insurance cover you for more of your active time before the next payment is due.

See the next section in regards to Process Agents(BOC-3 Filings)
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Old 01-23-2012, 01:16 PM
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6. Process Agents & Drug Testing
BOC-3 is a system for assigning 'Process Agents'. Basically a process agent has an address and is legally permitted to accept and legal correspondence for you in a particular state. By assigning a process agents, you are allowing them to receive legal paperwork in every state which they have offices. We use companies which have partners in every state to make it easier on you. A BOC-3 Agent Company will have registered agents listed in every state and is also registered with the FMCSA already. There are quite a few companies that offer BOC-3 Process Agent services. Prices will vary but the best I have found is $35 for a lifetime of your company. But as any other business goes, they may not always be around. But you can always designate a new company should that one cease to operate. Contact us to get a list of process agent companies.

Drug Testing is a federal mandate that spells out a few requirements for running a trucking company. You must have an established Drug Testing policy and Random/Pre-Employment Testing. The drug testing consortium which is required to meet these guidelines must be approved by the FMCSA in order to be compliant. There are many options for drug testing consortiums, so this is a matter of choice and costs. It is required! You do not have to be signed up the moment that you apply for your authority, nor do you have to have any filings. But you need to have a drug policy in your company files, be a member of a consorsium, and have random testing as well as pre-employemtn screenings available once you start. You MUST have a pre-employment drug test done previous to getting behind the wheel of your own truck.

Most drug testing programs are a yearly contracted service and typically cost between $150-$300 per year depending on services offered. You can get that ball rolling somewhere around the 14-day mark after applying for your authority. Again, contact someone on the forums if you have questions.
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Old 01-23-2012, 01:17 PM
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7. License Plates (IRP)
IRP or International Registration Plan is a method for distributing registration fees for operating in multiple states. Each state that you select to operate will get a portion of your registration fees based on your states base plate fee and those of other states. The fees are determined by miles driven in each state and their portion of overall miles, all calculated on their plate fees. Since you are starting new and may not have mileage accrued in each state even by your second year, estimated miles tables are used and available for you to help calculate your mileage. Estimates are used for each state and were calculated based on the size of the state, its highways, and previous history of other companies. You can only use these estimates. All Apportioned plates are classified by weight class which you will establish while applying for your first(and subsequent plates).


Establishing your IRP fleet and obtaining your first Apportioned license plates can be done at any time and will have no real bearing on your company startup. I suggest that you plan your application for the day after your authority is due to be active. Your State may require an active authority before granting and establishing your fleet. This can vary from state to state.


You should at the very least contact your state DMV and request an IRP packet. This will include complete information required to setup your fleet and obtain your plates. Each state will have different methods for registering plate and typically require in-person applications. Other requirements will be that you can only establish a new fleet at their main office, must be paid in cash, etc. There are many requirements which vary from state to state. So it is best to contact your specific state and request a packet or manual. Be prepared for some travel in state that require you to visit their main office as they typically require appointments. Do not expect to be able to walk in and complete this step. Follow their manual as best as possible.


Trailer plates vary by state and you should inquire at the same time as getting plates for your truck. Some states offer Apportioned plates for trailers while others allow use of 'token' or 'semi trailer' plates. Each state will vary, so make sure you read the manual. If it not covered there, feel free to ask us or contact your DMV.

Contact me if you have questions or issues. Check our directory for specific state contact information.
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Old 01-23-2012, 01:18 PM
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8. Motor Fuel Taxes (IFTA)
Establishing your IFTA account is typically setup with your states department of revenue(State IRS). It is typically a form to be either mailed or you can apply in person. Basically you are setting up another tax account with them for the use of motor fuel within their state. Participating states will sell you stickers/decals which are applied to your truck as proof that you are paying your taxes. If you can apply in person, you really should as they will typically give you the decals immediately. Without these decals on your truck, expect to be fined as you cross state lines. IFTA is a required filing and taxes are paid quarterly.
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Old 01-23-2012, 01:18 PM
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9. Use/Length/Weight Permits & Unified Carrier Registration(UCR)

Permits
Each class of transporter will have different permits that are required or not. Depending on weight class, length and/or states traveled.

Various states will require different permits. You should check our permit directory for your specific requirements. But typically for those running under 55,000 pounds, you will have very limited requirements for permits and should contact us. Each class of truck is different. If you are planning on driving a semi- or 6+ auto transporter and traveling all 48 states, you will need almost every permit available...
*New Mexico Weight Distance Tax Permit
*Oregon Weight Receipt/Tax
*New York Heavy Use Tax
*Kentucky Highway Use License
*Various Over-length Permits (by State Required)

It is suggested that you ask on the forums with your specific situation, which someone with experience will tell you which permits and registrations are required.

UCR Unified Carrier Registration
UCR is a required registration based on the number of trucks/trailers you operate. This system replaces the Single State Registration System(SSRS) to provide for one point of registration. The fees are based on the number of units operated. You should carry a receipt for the current year registration in your truck, although the site tells you that it is not necessary, it should be in your packet in the truck. DOT will sometimes ask for proof of UCR and typically it is at the beginning of the year.

Not all states participate in the UCR system, but even if yours does not you still need to register. You will be crossing into other states that may be participants. There are fines involved for not being registered. Find your nearest participating state and register with them. You can also register on the internet via the state of Indiana. Since the online system uses your DOT/MC number, you may not immediately be able to register. In that case contact your nearest participating state and ask for their registration options.
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