How to start your own freight brokerage
The transportation and logistics industry is a continuous provider of jobs, and represents a market with space for many different types of careers. If you are considering becoming a freight broker and want to know more about the benefits of this position, read more here. If you have already decided and are ready to start your own freight brokerage, read on!
Knowing your industry before entering will make your debut as a freight broker and business owner much smoother. This step is not necessary to proceed to the next, but we encourage you to familiarize yourself as much as you can in order to position your brokerage for success. Prior experience working in the transportation or supply chain sector will prove to be beneficial to you; if you have none, consider working briefly as an entry-level broker to learn standard practices. There are also online training courses for freight brokers that can be completed in just a few weeks of time.
2. Register Your Business
Now that you're ready to start connecting shippers and carriers, you can choose a name for your company and how your company will operate. What sort of legal structure best protects your interests and supports your business? You can speak with an attorney or other legal/financial advisor for the answer that best fits you, but it is usually recommended to register as an LLC, which reduces personal liability risk, or an Inc. (corporation). This can be done at a business license department;you will need your Tax Identification Number from the IRS. Pick a name that is appropriate and memorable, and make sure it is not already in use by checking uspto.gov.
3. Apply For Operating Authority
Contact the FMCSA (Federal Motor Carrier Safety Administration) and fill out an OP-1 application. This application process costs $300 and usually takes roughly a month to complete. By filling the application out online, you can immediately receive your grant letter and MC number. The MC number, or motor carrier number, serves as your interstate authority and an identifier. This does not mean you can start operating. Once your application has been approved and you receive your USDOT number, you can begin operations.
4. Find Your Process Agent
As a freight broker, you are required to have a process agent in each state you operate. The process agent represents your company in legal proceedings brought against you. There are several options here. You can be the process agent of your own state,have employees act as process agents, or use services available. However, your process agent is required to have a physical location (not accepting P.O. boxes). Otherwise, you can find a list of process agents on the FMCSA website here.
5. Apply For Your Surety Bond
Your freight broker bond is a mandatory $75,000 that works similarly to a security deposit for your clients. In the event that you do not live up to your contracts, the bond ensures that you have some funding to cover the losses for your clients. The BMC-84 form has to be renewed annually, and the bond can be covered through an insurance company, although rates and pricing vary.
6. Getting Insurance
Companies want to make sure they are dealing with someone responsible and reputable. They want to make sure their investments are safe. One way to do that is by purchasing Continent Cargo and General Liability Insurance. Most clients will refuse to work with a freight brokerage that cannot protect their property or themselves. Quotes can vary, but having these two things are essential to starting your own freight brokerage.
7. Check Your State
You're almost set up! Make sure to look up your state's requirements regarding operating a business. Are you following all regulations? Is there more paperwork to apply for? What records do you need to have? Check to see if there is anything extra your state requires, and make sure you meet it. Then, happy brokering! You are all set to operate as a 3PL and your business is welcome in the logistics industry.