Are you wondering how to become an owner-operator? It’s highly likely that if you have been working as a truck driver, you have dreamed of owning your own truck that will allow you to start a new venture of your own. There are independence, freedom, and profits to be had if you choose to begin a career as an owner-operator truck driver.
Choosing to become an owner-operator can be a lucrative business decision, but if you want to be successful, there are a few dos and don’ts you need to keep in mind. In this article, we will discuss everything you need to know about taking charge of your business dreams and becoming an owner-operator.
Should you follow the proper steps to becoming an owner-operator truck driver, you have a higher chance of succeeding. In addition to sharing with you the owner-operator startup checklist, we’re also going to discuss the costs involved and the mistakes you’re going to want to avoid.
What Is an Owner-Operator?
Before delving deeper into the steps you need to take to become an owner-operator truck driver, you must understand precisely what this profession is.
An owner-operator within the trucking industry is an individual self-employed truck driver that transports goods (cargo) for customers. Instead of working for a single employer and their customers, an owner-operator works with multiple clients they source themselves.
Additionally, in most instances, an owner-operator owns or leases the trucks and equipment and works independently. Yet, it’s not uncommon for an owner-operator truck driver to employ a few truck drivers and have multiple leased or owned trucks.
How To Become an Owner-Operator: The Owner-Operator Startup Checklist
Below we have discussed the owner-operator startup checklist that involves the steps you need to take to become one. These are a few of the most important steps you need to seriously consider.
Acquire a Commercial Drivers License
If you do not have a commercial driver’s license (CDL), you will need to get one to become an owner-operator truck driver. Although getting this type of license is not difficult, it has a more involved process than a standard driver’s license.
To get your CDL, you will need to first determine your license type (most choose a Class A), and you will need to pass a physical exam. After doing this, you will be required to take a knowledge test, obtain your CDL permit, and then take a CDL skills test. Only after you have done each of these things can you become a fully licensed owner-operator.
Form Your Business
Once you have your CDL, you can form your legitimate owner-operator truck driver business. The first part of the process is identifying a name for your business and ensuring it is not taken by someone else. After you have your business name, you have to decide on a business structure.
This part of the process can be tricky if you’re not certain how you want to operate your business. If you’re working alone, you will likely be better off creating a limited liability company (LLC) or a sole proprietorship.
Should you choose to become a sole proprietor, you will be able to make your own business decisions without input from anyone else. However, all legal and financial aspects concerning your business will be tied to you. This means that if your business ever faces a lawsuit or you face problems with debt, your company belongings could be used to cover damages or pay your debts.
Yet, if you choose to have an LLC, you won’t have the liability risk. With an LLC, only your business will be liable. At the same time, your personal assets are protected, whereby a lawsuit can only affect your business, and your personal debts cannot affect your business. Interestingly, you can have a single-member LLC or a multi-member LLC, unlike with a sole proprietorship.
If neither of these business options appeals to you, you can form a corporation. Yet, you should note that this is usually only a good option if you plan on adding employees as your business develops and grows. If you choose to form a corporation, the tax requirements are more complex than an LLC or sole proprietorship.
Obtain Your USDOT Number
It’s crucial to obtain your U.S. Department of Transportation number after you have formed your business. The prestigious FMCSA assigns you a (USDOT) number and is likely to ask you questions about the company you have created.
Yet what is this number? Simply put, your USDOT number is what identifies you as a truck carrier that operates in interstate commerce. Without it and your motor carrier number, you won’t be able to operate.
Decide To Either Lease or Buy Your Truck
Another important step you need to take if you want to become an owner-operator is to choose if you want to lease or buy the truck you will use. Often the best course of action is to buy your own truck, but not everyone has the finances for a significant upfront down payment.
If you can’t afford to pay a hefty downpayment, you need to consider leasing a truck because it is a far cheaper alternative. Should you be looking into buying a used truck, you need to be careful about who you buy the truck from because the previous owner might not have properly maintained it.
However, leasing a vehicle means that you won’t own it, which won’t allow you to build up any equity. Leasing comes with many problems that might make owning a truck more attractive, even if it is the more expensive option.
Get Trucking Insurance
Perhaps the most crucial step you need to take when becoming an owner-operator is obtaining trucking insurance. Regardless of if you own or lease a semi-truck, you need to carry owner-operator insurance if you want to cover all your bases. If you obtain the right insurance in Ohio, like the owner-operator insurance offered by InsurA, you will be reliably keeping your assets safe.
The FMCSA requires all owner-operator truck drivers with authority to have liability coverage. If you’re planning to be a general freight carrier, you need to have an estimated $750,000 in liability. However, most freight brokers and shippers you will be working with require $1 million in liability coverage.
The Mistakes To Avoid When Becoming an Owner-Operator
It can be incredibly easy to make mistakes when you begin your career as an owner-operator. Below, we have provided a brief breakdown of the various errors you want to avoid making when you choose to become an owner-operator.
- Don’t try and do your own finances and accounting, as this could have serious tax implications.
- Avoid working with companies that don’t allow you to choose your own loads and freight rates.
- Try not to purchase a truck from a trucking company and haul for them simultaneously.
- Don’t feel pressured to take loads from brokers or agents who claim disastrous things will happen if you don’t haul for them.
- Don’t ever neglect to maintain your truck, and always treat it fairly by adhering to road rules.
- You need to ensure that the mechanics who work on your truck are ASE certified.
The Costs Associated With Being an Owner-Operator
Before you commit to becoming an owner-operator, you need to evaluate the various costs you will likely incur. Below we have provided some of the average prices you can expect to pay as an owner-operator in the trucking industry.
- Documentation costs: How much you will have to pay for documentation will vary by state. Still, you can expect to pay around $300 for an MC/DOT number, $1,700 for an IRP credential, $50 to $350 for business registration fees, $550 for HVUT, and $10 for IFTA Decal.
- The cost of buying a semi-truck: Often, the average price of a used semi-truck is between $45,000 and $100,000. In contrast, the average cost of a brand new semi-truck is between $125,000 and $150,000. These prices will depend on where you buy your semi-truck and its year, make, and model.
- The cost of leasing a semi-truck: If you plan on leasing a semi-truck, you should expect to pay between $1,600 and $2,500 each month. Yet, how much you pay will depend on the company you lease from and the type of truck you choose to rent.
- Fuel costs: Often, the highest cost of owning a truck is fuel. The majority of owner-operators spend about $50,000 to $70,000 annually on fuel which equates to about $4,000 to $6,000 a month.
- The insurance costs: Owner-operators can expect to pay between $250 and $450 for insurance each month, equating to approximately $3,000 to $5,400 each year.
Get Owner-Operator Insurance from InsurA
Choosing to become an owner-operator is a challenging but exciting experience. The steps we provided in this article will help you become an owner-operator. As long as you avoid the mistakes we spoke about and follow the steps provided; you shouldn’t have issues creating a successful business.
However, most importantly, you need to obtain trucking insurance. Without insurance, you can face many legal issues down the road. Having insurance will allow you to protect your assets if you’re involved in an accident and will cover the costs associated with injuries and damages.
The experts at InsurA can help you obtain owner-operator insurance. Our insurance experts have many years of experience providing insurance to owner-operators in the trucking industry. If you have any questions or want to begin the insurance process with us, you can contact us today.