May 1, 2011

Q. I spent the last 10 years driving a big truck and still drive for someone else.  The company I drive for is having money problems so I thought I should look into starting my own trucking business.  My family is behind me on this and we want to see if we can start and run our own trucking company.  Do you have any suggestions on the best way to start a trucking company?
—Tom T.

The best way to make a million dollars in trucking is to start with two million.  That is the standard answer most drivers give me when I ask them the same question you asked me.  You are at the point in life when you wonder; “Is this all there is?” and is often referred to as the ‘mid-life crisis’.

I do not know how old you are, but everyone my age that I know seems to have experienced this same point in their life.  In my opinion, when you really think about what you really want in life and are willing to make the necessary changes to accomplish your new goals you will get there come “Heck or High Water.  Your questions indicate you are growing up nicely and can expect good things in the future.
The best way to start your own business, of any kind, is to seriously evaluate your goals, abilities and the support you have from family and friends.  Let’s look at your goals first.  What kind of company do you want, by that I mean are you looking for a 1-2 truck company or something larger such as 50 to 200 truck company or even larger; something to compete with a Werner or JB Hunt sized company.  
My advice is to plan on something you can manage by yourself, or with your family, until you really understand everything, and I mean everything from taking out the trash to surviving a DOT audit.  You will also want to incorporate your company to protect yourself and your family assets.

Let’s talk about corporations just a bit.  Depending upon the company size and taxes you will encounter, you must discuss with your CPA and your Attorney (yes you will need both to protect yourself from all the exposure you will face in trucking) what type of corporation you want to use to protect your assets.  The laws governing corporations vary from state to state.  However, you can elect to have your corporation domiciled in just about any state and take advantage of their state laws and taxes.  Again this is a decision you need to talk over with your accountant or tax lawyer.

The most common corporation types used in trucking are the ‘C’ corporation, the ‘S’ corporation and the L.L.C. corporation.  The one you select will be dictated by your situation.  The C-Corporation is taxed at the corporate level unless the Subchapter-S election is taken with the IRS, which allows the income to pass through to you and only be taxed once; stockholders own the company and elect directors who actually run the company.

‘S’ Corporations provide the same limited liability as the ‘C’ corporations and the L.L.C.  The benefit to the ‘S’ is the income is taxed only one time at your personal level.  Many different estate planning options are open to ‘S’ corporations that you will not find in other types of corporations.  The protection and tax requirements are the same as a ‘C’ corporation, only you get more benefits.

The LLC is controlled by its own private operating agreement which allows a greater flexibility than the Sub-S Corporation which is controlled by state statutes and its by-laws.  The LLC can have stockholders who are other corporations, while the Sub-S in some states can’t.  This is a subtle distinction, but can be of great importance depending upon your personal situation.  Incorporation, while simple, is very important to your future company.  This is something you can do.

Let’s look at your abilities.  Do you believe you have the knowledge and experience to start your own business and succeed?  You need to start with the ability to drive a big truck for several years as you grow your company.  Do you meet the health requirements for a CDL. How about meeting the MVR requirements?  Do you have the ability to manage other people, such as other drivers, dispatchers or mechanics who will work for your company?  None of these things require a college degree, but they do require hard work and attention to detail on your part.  These are all things you can learn on the job.  My experience is the best knowledge comes from the School of Hard Knocks.  This is something you can do.

You will also need support from family and friends when you start your own company.  Your family will be the most exposed so make sure you communicate with them about what you will be doing and how you would like them to help as you start your family business.  Getting family support at start up when things are the most difficult is very important.  This is something you can do.
You will have to either lease with a reputable carrier or go find your own loads to haul.  If you have the trucks and the ability to sell your company, go after your own loads.  That way you will make all the money and not have to split it with a broker or carrier.  This is something you can do.

You must, and I repeat MUST, learn and understand ALL the regulations facing a truck company and a truck driver.  CSA is having a huge impact on both carriers and drivers and there are many stories in the newspapers of thousands of carriers and thousands of drivers that will be run out of trucking by the new CSA regulations.  Electronic Logs are in the process of being required for all trucks.  Hours of Service is under now under review and final rules are scheduled for this summer, if it does not go to court.  Rep. DeFazio, D-OR, is asking the government to looking into driver detention, the amount of time drivers wait at a shipper.  Lots and lots of things are changing right now in trucking, which only means now is the time to make your move.  Educate yourself and survive, it will be difficult but profitable when you do.  This is something you can do.

Protect your credit as if it were your very life, for a small business is really is your lifeline to survival.  Protect your CDL from citations and CSA violations, for without a CDL your new trucking company is Out Of Service, but your financial obligations continue.  You must hire only well qualified drivers with good clean MVRs, drivers that you would bring home for dinner because they will be representing you and your company every time they pick-up, deliver, fuel, go through a weigh station or speak with other drivers.  You must strive to be the best, it is hard and sometimes impossible, but if you don’t strive to be the best the next company will take your load and your money. This is something you can do.

If you are still interested in starting your own business after reading the above, then talk with a CPA that understands trucking.  Make a business plan and find a banker that believes in you and your plan and someone you like and can trust.  Locate a trucking attorney that can help you in times of need and that you like and can trust.  My experience is you will need all three, the CPA, the banker and the attorney to be successful in business whether you are a small or large corporation.  This is really something you can do; do you want do it?

• You can contact Jim C. Klepper at www.interstatetrucker.com or

The information, advice and opinions in Legal Lane are entirely those of Jim C. Klepper.