How Much Does it Cost to Get Your Own Authority?
Lots of people go into trucking because they like independence. If you truly want to “be your own boss,” you’ll need to be able to operate under your own authority. That means that you’re legally allowed to transport freight as your own trucking company. While it can mean more income and business growth, it also comes with added expenses and legal requirements.
Applying for your own permanent authority costs $300, but you’ll also need to obtain the appropriate insurance and have specific documents on file before the FMCSA will issue your authority. The total cost could be between $3,500 and $10,000 all together.
What Does it Mean to Get Your Own Authority?
The Federal Motor Carrier Safety Administration (FMCSA) is a government agency that’s in charge of regulating the trucking industry in the U.S. Part of its role is to grant active operating authority to truckers. This is done by issuing Motor Carrier (MC) and U.S. Department of Transportation (USDOT) numbers.
These identifying numbers are how you’re known to regulatory agencies and they’re used to ensure that your trucking company stays in compliance with inspections and safety regulations.
When you apply for your MC and USDOT numbers, you’ll have to choose the type of authority you’re applying for. Depending on what you do and what kinds of items or cargo you transport, you may need to apply for one or more authorities.
Types Of Operating Authorities
This is required if you plan to transport goods or passengers for a fee.
This is for companies that use their own trucks to transport their own goods.
This type of authority is for a for-hire carrier that transports goods for a fee, truckers that transport federally regulated commodities (or those who arrange for their transport across state lines), or if you transport passengers (or arrange for their transport) through interstate commerce.
These are companies that transport freight from the time it’s received to the endpoint of delivery using rail, motor, or water transport.
When you operate a truck to transport freight, you’re either operating under your own authority, operating under the authority of the trucking company you work for, or you’re operating under your own authority while contracting for a trucking company.
How to Get Your Own Authority
Getting your own trucking authority from the FMCSA is no simple task. There are many different things that you’ll have to do and steps you’ll need to take to be eligible. Plus, many of the requirements cost money, so the total cost can add up quickly.
Here are some of the most common steps you’ll have to complete to obtain your own authority:
Step 1: Create your business entity
You can do this by starting an LLC or incorporating your business. It’s a good idea to check with a professional to ensure you understand the tax implications and other liabilities establishing your business may create. This process could cost anywhere from $200 to $800 depending on the specifics of your business and which state you operate in.
Step 2: Register for an Employer Identification Number (EIN)
Register for an Employer Identification Number (EIN) with the federal government
Step 3: Apply for a Motor Carrier (MC) number
Visit the FMCSA and apply for MC #. This is required so that you can do business across state lines. There’s a $300 fee for this process.
Step 4: Register with a USDOT number
A USDOT number is required for vehicles over 10,000 pounds transporting goods or if your vehicle carries hazardous materials across state lines. If you transport 9-15 passengers for a fee or 16+ passengers at all, a USDOT number is required.
Step 5: Get Proper Insurance
You can start shopping around for insurance at any point during this process, but it’s good to get an early start so you know what to expect. Insurance can be very costly, and the price you’ll pay usually depends on your driving history, where you live, and where you plan to operate.
There is a minimum amount of coverage required if you plan to haul household goods, but other types of freight don’t have a legally required minimum coverage for cargo protection. Still, many shippers, brokers, and other parties still require certain coverage levels.
Step 6: Select a process agent
This will be the entity where court papers could be served to your business, and it’s required for interstate commerce. The FMCSA requires a form BOC-3 to designate your process agent. You should expect to pay a one-time fee and then possibly an annual renewal fee for the service ($100 – $150)
Step 7: Complete the Unified Carrier Registration process (UCR)
UCR fees are typically $60-$80 as they fluctuate over time. There are third party companies that will take care of this process for you, but they charge double the price of filing the registration yourself. This is a simple task you can do online.
Step 8: Required truck decals
In accordance with federal requirements, you’ll need to have decals or signage with the legal name of the motor carrier and the DOT number (USDOT####). These have to be displayed on both sides of the truck and be in an easily visible, highly contrasting color.
Step 9: Register in the International Registration Plan (IRP)
Step 10: Drug and alcohol Requirements
You’ll need to go through drug and alcohol testing requirements for federal and state regulations. If you have any additional drivers, they’ll also have to complete any required screening processes.
Step 11: Check for state requirements
There may be additional requirements depending on what state you’re in, so it’s always a good idea to verify with your state’s office. For example, you may need to obtain an International Fuel Tax Agreement account with the state.
If you live in certain states like New York, New Mexico, Kentucky, or Oregon there are additional requirements for separate taxes you’ll have to do tracking for.
You may also have to plan for the heavy use vehicle tax. The Heavy Highway Use Tax (form 2290) is an annual tax that’s required for vehicles over 55,000 pounds. If this tax applies to you, you should plan for an additional $550 expense each year.
Step 12: Pass a DOT Safety Audit
If you operate in interstate commerce, you’ll have to pass a DOT Safety Audit within your first 12 months of operation. You’ll receive all the required information through the mail.
Insurance Costs for Trucking Authority
One of the biggest expenses for owner-operators is insurance. The price you’ll pay for insurance can vary quite a bit depending on your vehicle, the type of freight or cargo you plan to transport, and your geographic location.
When you have your own authority, you should plan on having a minimum of these types of insurance:
General Liability Insurance
This includes bodily injury and property damage liability coverage, personal and advertising injury liability coverage, damage to the premises, and medical expenses.
Standard Automotive Liability
This is just like what you carry on your personal vehicle. It covers damage and bodily harm in the event of an accident. For this type of insurance, you’ll need collision and comprehensive coverage in most cases.
This covers the items that you transport. The exact amount you need depends on what kind of cargo you’ll be carrying.
Physical Damage Coverage
There are other types of insurance and coverages you may need depending on the specifics of your business. Factors such as when and where you travel and how long you’ve been in business can impact the coverage you’ll need and your rates.
Even your age, experience, and credit history can have an impact on your insurance needs and rates. Plus, there are other types of supplemental coverage that you may want or need depending on your situation.
|Insurance Type||Cost Estimate|
|General Liability||$5,000 – $8,000|
|Physical Damage Coverage||$1,000 – $3,000|
|Cargo Insurance||Varies Based on Cargo|
|Occupational Accident Coverage||$1,500 – $2,500|
|Bobtail Insurance||$300 – $500|
|Umbrella Insurance||$500 – $2,500|
|Uninsured Motorist||$200 – $800|
|Hazardous Materials Coverage||$3,000 – $5,000|
|Livestock Cargo Insurance||$6,000 +|
The amount of insurance that you’ll need mostly depends on what you’re hauling and where. Let’s take a look at some of the different requirements you should be aware of.
Motor Carrier and Freight Forwarder Authorities are required to carry public liability insurance to cover bodily injury, property damage, or environmental damage. Freight vehicles must have $750,000 to $5 million in coverage depending on what’s being transported.
If the freight is non-hazardous and the vehicle weighs less than 10,001 pounds, then $300,000 worth of insurance coverage is required.
Household Goods Motor Carrier or Freight Forwarder Authorities are required to carry a minimum of $5,000 worth of cargo insurance per vehicle and $10,000 per occurrence.
Freight Forwarder and Broker Authorities are required to carry a Surety Bond in the amount of $75,000.
Because insurance is such a hefty cost and since it’s a non-negotiable requirement for having your own authority, it’s a good idea to get pre-approved for whatever types of insurance you need. At minimum, that means getting pre-approved for liability insurance and cargo insurance.
You’ll need to shop around and get a few quotes so you know what to expect, and so you can make sure that the insurance will be affordable as part of your business plan.
Other Federal Requirements for Getting Your Own Authority
Another consideration is whether you’ll have to complete any federally-required training programs or other prerequisites in order to obtain your own trucking authority. One such requirement is the Federal Motor Carrier Safety Administration’s New Entrant Safety Assurance Program.
This program is for motor carriers (not out of Mexico) that apply for a USDOT identification number for the purposes of transporting freight for interstate commerce. So, if you’re planning to haul goods across state lines, this program may apply to you.
Once you submit your application for a USDOT identification number by completing form MCS-150 (“Combined Motor Carrier Identification Report”) and any other required forms in the OP-1 Series, you’ll begin The New Entrant Period.
While you’re considered to be a “New Entrant,” there are certain requirements you’ll have to fulfill and maintain during the program’s period.
Important Rules While New Entrant
Keeping your records up-to-date
Complete inspections and perform routine and required maintenance on your CMV
Pass a required Safety Audit
During the program, the Federal Motor Carrier Safety Administration (FMCSA) will complete a Safety Audit, complete roadside inspections to monitor your safety performance, and then grant you permanent authority once they determine that you are a safe operator.
What to Expect During The Safety Audit and Compliance Reviews
Within the first twelve months of your operation, you will be subject to a Safety Audit. The Audit will be completed by a certified U.S. federal safety investigator or another enforcement officer. The motor carrier’s driver, manager(s), staff, or mechanics may be involved in the Audit as well.
Safety Audits and other compliance reviews typically take place at your business establishment. If the FMCSA receives data that suggests there may be a problem or concern, you should expect an audit or compliance review.
Reason You May Fail As New Entrant
No random drug/alcohol testing program in place
Allowing a driver to operate if they’ve refused a drug or alcohol test
Knowingly allowing a driver to operate if they had a BAC of 0.04 (or greater)
Allowing a driver to operate if they did not complete required follow-up procedures after failing a random drug test
Allowing a driver to operate without a valid CDL
Medically unqualified driver(s)
Failure to have the required minimum insurance coverage
Failure to have hours-of-service records for drivers
Operating a vehicle with safety deficiencies
Failure to repair issues reported in DVIRs
Operating a vehicle that hasn’t been inspected
So, while it may be intimidating to pass a federal inspection or Safety Audit, as long as you’re doing the things that are required by law you shouldn’t have a problem. Remember, the inspection officer is there to ensure that everyone stays safe on the road. They also play a role in helping protect you from liabilities in the future.
Once you pass your Safety Audit, the FMCSA will continue to monitor your progress and performance. You must continue to remain compliant and make any corrections that are requested.
The Bottom Line
Getting your own trucking authority in the United States can be a very expensive endeavor, costing you anywhere from a few thousand dollars to $10,000 and up. The exact costs will vary depending on many factors.
There are many legal and regulatory requirements to fulfill before you can begin operating under your own authority. It may seem like a daunting task to get it all done, but many drivers go on to become owner-operators successfully.
Remember, insurance expenses are going to be some of the biggest cost factors for getting your own trucking authority. Your actual rates are highly dependent on your driving record, experience, credit history, what kind of business you’ll operate, your cargo, and your location. That’s why doing sufficient research is key before you jump head-first into this project.
Getting multiple insurance quotes from a few different carriers is the best way to ensure that you get a competitive rate.
Despite all the logistics of getting your own authority, many people like the idea of being their own boss. That means you can choose your loads and destinations, be in control of your schedule, and potentially make more money.
Still, you’ll have to consider the costs of getting your business up and running and getting your own authority. It also means you’ll have to keep up with the required filings and ensure that your business remains compliant with any and all federal, state, and local regulations. That can be a lot of work for an owner-operator, so you may need to hire some employees to help you.
You’ll also have to ensure that you earn enough profits to cover all the expenses (like insurance), otherwise you won’t be able to continue to operate.
So, whether getting your own authority is “worth it” really depends on how much you want to be involved in the business side of things. If you already have a partner or someone to help you keep up with paperwork and legal “stuff,” then it might be easier.
Another option is to hire an outside company to handle those regulatory and bookkeeping-type items for you. Of course, you’ll have to pay for those services, which means it’s another added expense for your business.
Either way, if you’re interested in operating under your own authority, you’ll be able to create a balance sheet of your expenses and potential income to see if it makes sense. Be sure to get your insurance quotes early so you’ll know what to expect, as those costs can vary significantly from person to person.