How to Start a Freight Brokerage
Broker Start-Up Guide
Although many shippers have contracts with trucking companies to transport their goods, a significant amount of truck transport in North America is handled by freight brokers. A freight broker is an intermediary between a shipper who has goods to transport and a carrier who has capacity to move that freight. Below are steps you’ll need to take to successfully launch your freight broker business.
Set up and register your business
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 an 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 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
1. 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.
2. Find shippers
Contact shippers who need the services you provide.
3. 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. To get an idea of what this process is like, you can search for available trucks in the free load board demo version of DAT Express.
4. 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.
5. Move freight
Now you’re on your way to a successful freight broker business!
Course: The Transportation Intermediaries Association offers a New Broker Course.
Book: Start Your Own Freight Brokerage Business: Your Step-by-Step Guide to Success, by Jacquelyn Lynn. Entrepreneur Press, 2014.
Book: Broker Operations Manual, by David G. Dwinell. LoadSchool.com, 2007.
DAT offers a variety of products that help freight brokers build and grow their businesses, including:
- Load boards for freight brokers
- Freight broker authority
- Current freight rates for pricing guidance
- Onboarding and monitoring carriers
- Load tracking software
- Transportation mangement software for brokers