One major mistake many owner-operators make when considering the move to run under their own authority is to underestimate the total cost of operations.
Consider these areas and decide if you are going to handle them yourself or pay somebody else to do them:
Compliance, safety, drug testing and hours of service fall under Federal Motor Carrier Safety Administration regulations. Addressing these can cause a lot of stress and confusion. But you'll need to handle it -- the new entrant safety audit awaits all new motor carriers with authority. New entrants now face a shortened deadline for correcting problems in their applications. Applicants must submit a corrective action plan within 15 days of the audit or, in some cases, 10 days.
You'll need in place a drug and alcohol testing program -- typically membership in a consortium for owner-operators -- as well as a system for keeping hours of service and vehicle maintenance records.
A carrier often handles tax filings for its leased owner-operators, but as an independent, you are the carrier. You are responsible for accounting for income and revenue for federal and state tax purposes, fuel tax, mileage tax and heavy vehicle use tax.
Also, it’s possible that you would be better off forming a limited liability company (LLC) or an S Corp for tax reasons before getting your own operating authority. Explore the question of tax structure with your business services provider or accountant before starting the application process. And keep in mind new requirements if you're filing with your Secretary of State to set-up the business: You'll likely need to make a one-time report to the Financial Crimes Enforcement Network of the U.S. Treasury.
[Related: Financial Crimes Enforcement Network's new reporting requirement hits owner-ops, small fleets]
