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Owner Operator 411

a

05 May 2009

9) What You Actually Need to Get Started


 
1973 White Road Commander

FAQ for the Owner Operator
Pictures
Anti-Idling Regulations
Definitions and Industry Terms
Blackrock Auxiliary Power Unit (APU)
Interactive Cost per Mile (CPM) Calculator Spreadsheet
Privacy Policy
1) Owner Operator 411 – Welcome
2) Income and Expenses
3) Financing and Credit
4) Operating Authority or Leasing?
5) Equipment
6) How To Do Bookkeeping and Other Necessary Paperwork
7) What You Need to Know About Loadboards
8) Companies That Lease Beginning Owner Operators
10) Truck Driving Schools


OK. You have done all of your research, and decided you really do want to become an owner operator.

Hopefully, you have:
  • Read this entire blog
  • Talked with other owner operators, especially at the company you want to lease on to.
  • Run a "What If" with the Interactive Cost Per Mile Calculator and found you really could make a profit.  Not just a profit, but enough income to pay all of your expenses and to have enough to live on, too.  (Don't forget, you also need to save enough to cover repairs or a major breakdown and enough to live on while you are getting the work done.)
  • Made a business plan.
  • Gotten your family to support you.  You would be surprised how many people quit driving a truck because their family doesn't like for them to be away from home.
  • Decided what kind of entity you want to have.
  • Decided what you will be hauling so you can spec your equipment properly?
    Have you found a truck?  Do you need a trailer too?  If you are leasing to a company, many of them have requirements as to how old of truck they will lease.  Be sure to check it out before you buy.
  • Made sure your equipment will pass a DOT, state and company inspection.
  • Talked with a loan officer at the bank, credit union, or loan company that will financing your equipment to see what information they require, and to see if you can even get financing for your equipment?
  • Figured out how you are going to get your Commercial Driver's License (CDL).  Will you be going to a truck driving school?  If not, do you know how you are going to take a road test?
  • Found an accountant or tax professional and got a list of what you need to keep track of before you start buying equipment.
  • Check out Owner-Operator Independent Drivers Association (OOIDA) for vast amounts of information.  As before, I recommend that if you do become an owner operator, that you join OOIDA (non owner operators can join, too).
I would advise you to get your CDL first.  If you can't pass your tests, it would be a shame if you had already bought a truck and/or trailer.  Then you would be stuck with having to try to sell them.  Now is not a good time to try to sell your equipment.


You do not have to go to a school to get a CDL.


You do have to take both a written test and a (skills) road test. If you can pass both, then you will be issued a license.


A word of CAUTION, however,  I know you can rent trucks in some states, but in my state that is not possible. I know of no place (and I have looked) where you can rent a truck to take a road test.


Also, we tried to loan our truck to a friend to take his test in, and examiner giving the test wouldn't let him use our truck because he wasn't listed on our insurance. Don't forget, you have to take your road test in the "type of vehicle" you will be operating. In other words, you have to have a "Class A" type vehicle to get a Class A license.


In my state you must 'supply your own vehicle" and pay the road test examiner $75.00.


Also (any state) before you can even apply for a permit, you must have a long form DOT physical.  Cost depends on the doctor.


Don't forget, if you are applying for your own authority, you have to have a drug and alcohol program in place.  You will be required to have pre-employment  drug testing before you begin to operate your truck.  If you are leasing your truck to a company, they will do handle the drug and alcohol testing.


After you decide what type of entity you will become (sole proprietor, partnership, LLC, corporation, etc.) you may have to get an Employer's Identification Number (EIN), also called a Federal Employer's Identification Number (FEIN).  It's FREE! and will be issued immediately if you apply online. If you will be a sole proprietor, your EIN will be your social security number, unless you will be hiring employees (including family members), then you will need an EIN.  All others will have to file a IRS Form SS4, or file online at Employer ID Number (EIN).  See: 6) How to Do Bookkeeping and Other Necessary Paperwork Permits and Taxes for more information about sole proprietorships, partnerships, spousal partnerships, employees,and more.

After you get your federal EIN, you will have to apply for a business license with your home state.  (If you are going to be a sole proprietor, you will apply using your social security number, unless you will have employees - then you need an EIN.)  You may also have to apply for a business license with your county (parish), and/or city.  If you are going to be a LLC (limited liability company or LLP (limited liability partnership) the you will also need to have liability insurance.

Are you going to be leasing to a company or getting your own authority?  In some states you will need a USDOT number before you can get your license plates.   ** This requirement is being phased out by September 1, 2012.  Since it is until effect until then, I am not sure if you would be required to have it at this time or not.  Check with you state registration office. **  If you are applying for your own authority, you have to have a USDOT number.

Will you be operating intrastate or interstate? (intrastate is within one state only, interstate is operating in more than one state).

Will you be hauling hazardous materials (hazmat)?  Then you need a hazmat endorsement (any state).  You will also need to have a background check and be fingerprinted and get a Hazmat Endorsement Threat Assessment.  Go to Transportation Security Administration for details.  Cost is $89.25.  It is valid for 5 years, unless you transfer (to another state), upgrade (add endorsements), or renew a license, then you need to go through (and pay) all of this again.

If you will be loading or unloading at ports, you will need a Transportation Worker Identification Credential (TWIC).  You can get information about this at Department of Homeland Security - TWIC.  The cost is $132.50 and is valid for 5 years.


If you plan to operate in Canada or Mexico, you will also need a passport.  United States government passport information. Cost is $120.00

The answer to each of these questions determines what you need to apply for.  Go to Federal Motor Carrier Safety Administration (FMCSA) registration and licensing for a matrix (list) of the required forms, and to apply online.

You will, of course, need license plates for your tractor and your trailer (if you are purchasing both).  Contact your state Department of Motor Vehicles to find out how to apply.  Unless you are applying for license plates within 30 days of your purchase of your tractor, you will need a copy of IRS Form 2290, Heavy Highway Vehicle Use Tax Return, showing you paid your road use taxes. This is an annual fee.  It is  $550.00 a year for an 80,000 pound vehicle (except logging.)

The type of trucking insurance you need will depend on whether you are leased to a company or have your own operating authority, what type of goods you will be hauling, and whether your equipment is financed or paid for.  Be sure to read all of the pages at the FMCSA website.  Join OOIDA ($45 a year) and they will give you all the help you need to decide what kind of insurance you need.  You can even purchase it from them.  Just as with your personal vehicle insurance, your driving record, type of vehicle and the company you buy from will determine the cost

If you are leasing your truck to a company, you may also be required to be fingerprinted, buy Occupational Accident Insurance, and/or Worker's Compensation Insurance.

I know that everyone reading this wanted a nice, neat little list of what you need and how to get it, and how much it would cost.  As you can see, however, there are so many variables, it is impossible for me to tell you exactly what you need.  In addition to the federal requirements, each state has their own rules.

The costs are also impossible to calculate without knowing exactly who, what, where, why and how, but here is a rough list:
  • Money to pay for a truck driving school, if you are going to go to one
  • Down payment(s) for your equipment.
  • Licenses
  • Permits
  • Insurance
  • Enough money to operate until you get your first settlement check
  • Enough money to live on until you get your first settlement check.  I would recommend having enough for at least 2-6 months 
  • Money put up for breakdowns (it could happen on your first trip)
If you need to buy products (training manuals or safety and compliance tools), J. J. Keller is a good source for safety and regulatory compliance products and services that help you increase safety awareness, reduce risk, follow best practices, and stay current with changing regulations.  They are used by most of the large trucking companies.

I hope this has helped you.  I would be interested in your comments.  Let me know if you think this has been useful.  If you need information about something I didn't cover, let me know, and I will update this.

Read my other posts for details and resources for of some of the information in this post.

Be sure to subscribe to this blog to get the latest information, as I keep updating this site.


I am sorry I have to do this, but due to spam "comments"  I feel I need to moderate comments from now on.
I am sorry for any inconvenience this may cause to my legitimate commenters.

30 comments:

Jennifer said...

Been quite for awhile. Glad to see you blogging again! :)

This new truckers wife hates the dispatch life! LOL. Wish that could be easier!

Road King said...

Jennifer,

Thanks for the update. Yes, dispatching (finding loads) on your own is a real headache.

I read somewhere that being a leased owner operator was just being a glorified company driver, but you just demonstrated why many people choose to go that route.

Having your own authority (as you do) can have a lot of rewards, but the trade-off is a lot of extra time, trouble, and paperwork. Many people would rather pay a company to do all (or a lot) of that for them.

Keep us posted on any other things you are having trouble with, something you have learned, or anything else that may help others.

If there is anything I can help you with, I will try to do so, but sorry, I can't help you dispatch. LOL.

For previous comments from Jennifer, look for posts from "Coupon Mommie".

Michelle said...

Having been a driver for 21 years and owner op for 12, I wanted to comment on your article. I think it's very well written. You are a very generous person to divulge this incredible amount of information for the driver who is considering becoming an owner op. I also think there is a lot of valuable information that current owner ops can gleen from this article. Kudos to you for taking time from your precious schedule to educate us. I've bookmarked your site for future reference

Road King said...

Michelle,

Thanks for your comments. I really enjoy getting feedback!

Actually I am very glad that Michelle wrote, as she represents a segment of trucking that I haven't yet addressed - women in trucking.

Now that the holidays are over, I will try to write an article (as I think I promised in my first blog) about the "old days".

A lot has changed over the years, equipment, regulations, communications, truck stops, and women drivers. I will try to touch on some of these in the future.

So, "Thanks, Michelle" for getting me back on track.

I do hope also that I am helping others.

Anonymous said...

hello,
i've been reading your blog and find this information very useful. thank you for being kind enough to post and talk about your experiences as well as your "how to's"
my question is that i want to be an owner but will be hiring the operator. in this case do i pay for the operators permits?
thank you and i hope you will reply

Road King said...

Anonymous,

Once again, I appreciate hearing from all of you, especially when I have been of some help to you.

As I am on the road a lot, and do not have web access in the truck, sometimes it takes me a while to respond, but I will answer all legitimate comments.

Yes, as the owner of the truck, you will be responsible for all permits, licenses, and taxes, equipment and insurance. You will also be responsible for background checks and drug and alcohol testing of the operator. The driver (operator) will be your employee.

You will be required to pay employer taxes to the feds, state, and maybe also locally.

You will be required to withhold taxes from your employee and to issue a W-2 at the end of the year. (You will receive a 1099 for the income the truck earns.)

You may want to include some benefits, such as disability insurance for your driver, or a cell phone.

If you lease your truck to a motor carrier, some of the permits and licenses, and drug and alcohol testing may be provided by them. Be sure to check it out before leasing on.

The only thing your employee will be responsible for is his personal items and meals.

You may pay your employee whatever and however you want. You can pay him by the mile (most drivers are paid about 35¢ a mile), or a percentage of the load.

Just make sure that whatever or however you pay him, there will be enough left over for all of your expenses (don't forget taxes!) and enough for you to make a profit.

Use my CPM spreadsheet to help you figure out what your expenses will be, and how much to pay.

My eBook has details on licensing, taxes, how to figure CPM, writing a business plan, getting financing, and much more.

Good luck with your new business.

Cindy said...

I do the paperwork side of the house for my husband who just bought his own truck in July. Now, we are just now being told to turn in a 2290. Ugh. They (the company he hauls for) tells me to get him an EIN then fill out the 2290. He has no other employees but himself, so does he really need an EIN??

Road King said...

Cindy,

First: For those of you not familiar with an IRS Form 2290, is it used to report and pay your Federal Road Use Tax, and has to be filed by almost everyone who operates an over-the-road tractor. It is supposed to be paid on the last day of the month following the month the tractor is put in service (first used - not purchased). It is an annual tax. In some states, you have to show proof this tax has been paid before you can order your truck registration (license plates).

Second - EIN (Employer Identification Number): It depends. According to the IRS (see: http://www.irs.gov/publications/p541/ar02.html#en_US_publink1000104208), when a husband and wife share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. If so, they should report income or loss from the business on Form 1065 (Return of Partnership Income). Therefore, you would have to have an EIN.

If you do not share in the profits and losses, then your husband would be a sole proprietor, and would use his social security number to file the Form 2290 (and other tax forms). He would report his business income or loss on a Schedule C (Sole Proprietorship).

For others reading this blog, my eBook, Owner Operator 101, explains the different types of entities (sole proprietor, partnership, etc.) in detail. It guides you on how to make the decision about what type of entity you need to be, how to get your business license, and what taxes you need to file.

I hope this answered your question, Cindy. If you need more information, feel free to ask.

Anonymous said...

Hello,

I just wanted to say thanks for all the great information here, and most particularly the honesty throughout. My question: Do you have any information regarding truck driving schools. They would have to have their own authority to operate under, wouldn't they? Do they have to be accredited in some fashion? Any information you have or could direct me to would be greatly appreciated.

Thanks, Carl

Road King said...

Carl,

I don't know too much about truck driving schools, but I do know they are not all created equal.

I don't believe they have to be accredited, but I would not go to one that wasn't.

I do know that in May 2008 OOIDA enter a comment with the DOT to request that the rules for truck driving schools be made more stringent - requiring more behind-the-wheel training among other things. Go to www.ooida.com and search for "schools".

I don't know if they have to have their own authority or not.

I do know that some companies (carriers) have their own schools, but after you finish, you are required to work for them until you get the cost of your schooling paid off - typically one year. This binds you to a carrier, making it difficult for you to change carriers if you are not satisfied.

Some schools, especially private ones, give you almost no or very little behind-the-wheel training.

I would go to some trucking forums and do some searches to see if you can find people who have gone to schools and what they have to say.

Sorry I couldn't give you a better answer but I learned to drive before there were truck driver training schools and I don't personally know anyone who has gone to one.

Anonymous said...

dear road king
thanks for the info. Id like to give some info about truck driving schools. I first went to re west transportation for training. their school was so bad that i reported them to dot. then i had to find another school. swift was the only one who whould give me a chance. so i went. i was surprised that the school was very extensive. swift has a bad name due to the fact that they allow drivers who have no bussiness in a truck to drive for them. their school is very good. but my friend went to a school in nashville. he paid only $750 for his school. the government pays companys and schools $3250 for every person that they put through there school. I drove 7 months for swift and when they tried to get the rest of their money for training me. I simpily payed a lawyer $50 to send them a letter requesting proff that they didnt recieve money from the government for training me. i never heard from them since.
thank you, little mike

Road King said...

Little Mike,

Thank you for the useful information. I am sure that others will benefit from your experience. It is good to know about the government payments, and how that can affect the students.

Thank you for your insightful comment.

신갈 said...

Great job, Road King!!!
First time, I have read a whole honest story to become a OO.

About driving school, like Swift, Stevens Tranportation in Dallas,TX has own driving school (3 week total) for free if the driver works for a year for them. Some schools in CA, though it is rumor or not, offer 8 day class for less than $1,000.

Thanks again. S.H.

Road King said...

신갈 (S. H.)

Thank you for your positive comment. I strive to "tell it like it is." I don't mean to scare people, I just want them to know that being an owner operator is being a business person, not a driver who owns their own truck -- there is is a difference.

Anonymous said...

I really liked the article, and the very cool blog

Road King said...

Anonymous,

Thank you for your comment, and for calling my blog cool. You just made my day.

carlos alfonso said...

Great post

Road King said...

Carlos,

Thank you.

Anonymous said...

Hey road king, your blog has been very helpful in opening my eyes to the steps to becoming an owner operator. I am a young man and have been driving for a local company for about 6 months now but I have always been very business oriented. I am wondering, have you heard of anybody leasing a truck and trailer through a rental and leasing company such as Ryder or Penske? If so would I be able to run under my own authority, or would they take over and basically make me a Ryder or Penske driver?

Road King said...

Anonymous,

Thank you for the positive comment.

I do not have, or know anyone who has, any personal experience with Ryder or Penske, so I can't say for sure how they operate.

I do know that a rental or lease/purchase is NOT a good way to go. Please read the OOIDA (Owner Operator Independent Drivers Association) blog at http://www.ooida.com/blogI/?p=185 to see why a lease purchase is a bad idea.

You would be an owner operator (with or without your own authority - your choice), but as long as you were "buying" a truck from them, you would be stuck, worse than a company driver.

Save some money and buy a truck outright, you'll be better off in the long run.

Anonymous said...

I absolutely love your blog and find many of your post's to be exactly what I'm looking for.
can you offer guest writers to write content for you? I wouldn't mind publishing a post or elaborating on a lot of the subjects you write about here. Again, awesome website!

My web-site ... www.nationaltruckinsurance.com

Rachel Benson said...

I didn't know there were so many things to you needed to think about before becoming a truck driver. I didn't know that a lot of people actually quite driving due to family obligations. It does seem like a good idea to make sure your family supports your chosen profession. http://www.decaturtruck-trailer.com/aboutus.html

Road King said...

Rachel Benson,

Thank you so much for your comment. I am pleased to see that my blog helped enlighten someone. There are so many things that the general public does not know about trucking, and that is one of the reasons I published this blog.

Family support can help in any profession, even if you are digging a ditch. If your family he doesn't support you. It will always cause tension but support is so much more important when one is on the road and away from home for so long.

S&K TRUCKING said...

I just stumbled across your book as I search for information regarding an expense account in quick books. I wish I had stumbled across this information in 2004, that's the year we went into business. You have a wealth of information that is detailed. Even though we did our homework before we officially went into business, this book would have been a good investment.

Road King said...

S&K Trucking,

Thank you so very much for your kind words!!

To check out my ebook referred to, see Owner Operator 101

Jason shwartz said...

I had no idea that being able to lease a truck was something that was available to those bigger trucking companies. That definitely is something than make owning a truck a lot more nice if that is an option. Thank you for sharing. http://www.voyagernation.com

Anonymous said...

Do you no of any resources like this for potential Canadian owner/operators, also is there any information or insight in regards to being a straight truck owner that works locally? I no of a few straight truck contracts doing home appliance deliveries that pay between 500 to 700 a day, after expenses net would look more like 350 to 500 a day. If you have any info on straight truck freight or advice for Canadian owner/operators, it would be greatly appreciated.

Keep up the great work Road King

Road King said...

Anonymous,

Sorry - I don't anything about Canada regulations. In my ebook, I did publish links to trucking regulations for all of the provinces, but beyond that I can't help you.

Anyway out there who can help this person?

Anonymous said...

Road King,
I really appreciate you taking your time to publish this blog. I've been driving on and off since 2000 and have often considered becoming an o/o. I've done some fairly extensive research on the Internet and this is some of the best info I've found so far. I appreciate your frank, realistic and often comedic advice and information. It seems to me that you're a realist not a pessimist. Being a truck driver I've spoken to a considerable amount of the latter. I hope everyone considering this business runs across this and makes an informed decision. I wish you all the best and thanks again!

Sean

Road King said...

Sean,

WOW! Thanks for the positive feedback.

If you know of anyone else trying to make the decision, please feel free to point them to this blog, or my ebook.

BTW, have you made a decision? If so, let us know.

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