Are you thinking of opening your own freight brokerage? It’s a great time to do so with improving economic conditions across the US and currently low competition among brokers.
Starting your own business requires many steps, such as making a great business plan, creating your company, and getting the training you need, but once you complete these preliminaries, it’s time to make it all legal. At this point, you’re ready to officially register your brokerage and get your Motor Carrier (MC) Operating Authority from the Federal Motor Carrier Safety Administration (FMCSA).
This trucking authority functions as your freight broker license. Getting it and fulfilling all the other legal requirements can be a long and grueling process, so here’s a step-by-step guide to make it easy!
Step #1: Obtain Your MC Authority from the FMCSA
What is an MC number? It stands for “motor carrier number” and it’s a necessary component of making your brokerage legal. Obtaining your broker authority will take several weeks from start to finish. So, make sure you get started as soon as you can.
Obtain A Pin
To begin the process of obtaining your MC Authority online, you must first obtain a PIN from the FMCSA. Applying for an PIN requires a valid credit card, though no charges will be made. The PIN will be securely shipped to your business’s address in 4-7 business days.
Submit Your Mc Authority License Request
Once you have your PIN, you’re finally ready to submit an online OP-1 application for your MC Authority. Begin by selecting the first option, “New or Additional Registration” and continue from there filling out all the relevant information. The filing fee is $300 and is not refunded if you’ve made a mistake and need to refile. Therefore, be sure all of the information is correct before submitting!
If you want multiple licenses (say, to be a broker and a carrier), then you’ll have to file for them separately and pay $300 for each one. The processing time for your ICC authority is 4-6 weeks, but you can check your application’s status online anytime. If you are a carrier and work in interstate commerce, you will need a DOT number to operate and need to apply for it separately with an MCS-150 form.
SUBMIT BIENNIAL UPDATES
Bear in mind that once you’ve obtained your DOT registration, you must file a biennial update by submitting an MCS-150 form online. Fortunately, this process is free.
You’re required to provide this update even if your company has not changed its information, has ceased interstate operations, or is no longer in business.
Step #2: Obtaining Insurance
Liability insurance is legally required by the FMCSA for all freight forwarders and carriers, but not for anyone operating only as a freight broker. Once you obtain your insurance insurance, you’ll have to submit proof to the FMCSA.
Keep in mind that you can bundle your insurance with your surety bond. This saves both time and money by simplifying the whole process, particularly when you’re working with a company that is eager to work with you on explaining and getting through it.
Step #3: Obtaining Processing Agents
For each state in which your brokerage will be operating, you must obtain a processing agent. If you’re only a broker, “operating” refers to having an office or making contracts. If you’re also a motor carrier, then “operating” means your freight passes through that state.
The role of the processing agent is to be the person who can be served papers if a claim is filed against your brokerage in that state. There are many commercial firms who will provide processing agents for a fee. The FMCSA has a useful list of such firms. You can also get someone to work directly for you, since freight agent training is easily available.
Once you’ve obtained the necessary processing agents, either you or the firm you may be working with need to submit a BOC-3 (Designation of Processing Agents) form both to the FMCSA and to each state in which you’ll be operating. Having submitted this form, the FMCSA recommends you keep a copy in your own files.
Step #4: Getting Your Unified Carrier Registration
Part of getting licensed is getting bonded. But what is a bond and how do you get it? At the most basic level, it’s insurance for your customers. And as part of the MAP-21 law, all freight brokers are required to have a bond or trust in the amount of $75,000 in order to work legally.
There are a few different ways to satisfy the bonding requirement, among which are the BMC-84 bond and the BMC-85 trust fund. How do you decide which one’s right for you? To learn more about how both of these work, check out JW’s article that has been dedicated to this topic alone.
Step #5 Getting Your BMC-84 Bond or BMC-85 Trust Fund
The final step in the legal process is obtaining your Unified Carrier Registration (UCR). For freight brokers, it’s relatively simple and inexpensive at only $76. If you’re also a motor carrier, then your registration cost will vary depending on the size of your fleet. In either case you’ll need to re-register and pay the fee annually.
Fortunately, the system for registering has been updated relatively recently. The UCR system registers and collects fees from the operators of vehicles engaged in interstate travel. Registering through this system can be done online at the UCR application website. They even have a mobile application.
However, it’s important to note that this system currently operates in most states except the following: Oregon, Wyoming, Nevada, Arizona, Florida, Maryland, New Jersey, and Vermont. If you operate in one of the latter, you’ll have to complete a separate process to register there.
All in all, learning how to get a freight broker license is an easy process when you break it down. Sure, finding the right forms online can be a pain, but we hope that by following the directions and links we’ve provided here, you’ll have your MC Authority and license to operate in no time!
For a complete guide to every aspect of becoming a freight broker, download our free e-book, The Freight Broker Starter Kit: