How to Start a Freight Brokerage

How to Start a Freight Brokerage

Do you want to know how to start a Freight Brokerage?

1. Select a legal structure for your business

  • Decide if you want to operate as a sole proprietorship, a partnership, a limited liability corporation, or a number of other options. Speak with an attorney or accountant to discuss the pros and cons of each option.

2. Apply for operating authority

  • Freight brokers involved in interstate commerce must apply for broker authority from the Federal Motor Carrier Safety Administration (FMCSA) using the Unified Registration System. The FMCSA is the division of the U.S. Department of Transportation that regulates interstate commerce and enforces safety rules. There is a $300 application processing fee and it takes 4 to 6 weeks for processing. DAT Solutions can help you get your authority.

3. Designate a process agent

  • A process agent is a representative to whom court papers may be served in a legal proceeding brought against a broker or carrier. Brokers must designate a process agent in each state where they maintain an office or establish contracts. Some companies offer “blanket coverage” that designates a process agent in every U.S. state. Submit form BOC-3 to the FMCSA.

4. Arrange for a surety bond or trust fund

  • All freight brokers are required to have a $75,000 surety bond or trust fund. If a freight broker does not live up to contracts with the shipper or carrier, this bond assures that the broker has the cash or assets to cover the amount. Surety bonds can be obtained from an insurance company, which will file the appropriate paperwork with the FMCSA. DAT partners with an insurance company that offers a broker bond with a special rate for DAT customers.

5. Register your business

  • All brokers, freight forwarders and carriers must complete the Unified Carrier Registration and pay an annual fee. The fee varies a little each year, but generally runs around $60-$80 per year.

6. Check your state’s requirements

  • Be sure to check with your state regarding requirements to establish and operate a business in your state.

7. Set up your office

  • This can be a home office or commercial office space. At a minimum, you’ll need a phone, fax, and computer. Be sure to budget for recurring costs, such as:
    • Utilities (heat, electricity, water)
    • Phone and internet charges
    • Insurance & Taxes
    • Rent (if not a home office)
    • Payroll and benefits (if you have employees)
    • Subscription fees for load matching, rate benchmarking, and transportation management software

8. Get broker contracts & paperwork

  • Now you’re ready to conduct business! Freight brokers are required to keep records of each transaction. This includes contracts, bill of lading, payables, receivables, carrier qualifications, and more. The Transportation Intermediaries Association’s New Broker Course includes a kit with sample contracts that can be used immediately.

9. Find shippers

  • Contact shippers who need the services you provide.

10. Find carriers

  • Identify carriers ready and willing to transport freight. This can be accomplished using a load board to post your loads or search for trucks.

11. Set prices

  • Determine an appropriate rate for each load. Rate benchmarking software can help you see current rates for both the contract and spot freight markets.

12. Move freight!!!

  • Now you’re on your way to a successful freight broker business!

Now you know How to Start a Freight Brokerage!

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