How to Become a Freight Broker – Steps to Do It Right

Want to know how to become a freight broker? Third Party Logistics can be a very rewarding career; you just need to know where to start. What are the steps to take to get started? Here’s what you absolutely need to know.

 

How to Become a Freight Broker: Stay Legal from the Start

Register with the Federal Motor Carrier Safety Administration.

Freight brokers are regulated by the government. The first thing you need to do fill out an application the Federal Motor Carrier Safety Administration. Then, post a $10,000 surety bond and fill out a proper process agent form called a BOC-3. There is a long road ahead. This is just the start.

 

Register to get a USDOT number with the Department of Transportation

While this is not specifically required in order to become a freight broker, the USDOT number is required when you apply to be a freight broker through the Federal Motor Carrier Safety Administration (FMCSA). The rules states:

“If you are going to be a company that operates commercial vehicles transporting passengers or hauling cargo in interstate commerce must be registered with the FMCSA and must have a USDOT number.”

What does this get you? A USDOT number serves as a unique identifier when collecting and monitoring a company’s safety information, acquired during audits, compliance reviews, crash investigations and inspections. Want to be 100% sure if you need a USDOT number, you can take this short quiz to find out, here.

Obtain Broker Authority

What is Broker Authority? It’s is a license from the FMCSA authorizing individuals or companies to act as a freight broker. How do you obtain broker authority, by application of course. You apply for broker authority by filling out MFCSA form OP-1 and selecting the “broker of property” option. Form OP-1 requires contact information for an individual or company, and your USDOT number. This application comes with a $300 fee.

You need to get a surety bond or trust fund.

What does the surety bond provide? The surety bond or trust find acts as insurance to guarantee that the shipping companies will be paid for their cargo space. If a shipper doesn’t pay for the shipping service, the cost fall on the freight brokerage. So what happens if the freight broker can’t cover the cost? This is where the bond company or trust fund covers the cost. Not only does a freight broker need to have a $10,000 surety bond or trust fund, but they’ll need to pass a background and credit check.

Have Legal Process Agents

If you want to understand how to become a freight broker and grow your freight brokerage business, you’re going to be operating in multiple states. Hopefully many, many states! And when you get to this point, your freight brokerage business needs to register legal process agents for every state they operate in with the FMCSA. The process agent provides legal representation within their state for any situation where legal representation may be necessary. Law firms with offices in multiple states should be retained in replacement of a process agent.

 

Forming your LLC for your freight brokerage business.

Part of understanding how to become a freight broker is understanding how to set up your LLC. If you don’t feel 100% comfortable forming an LLC on your own, it is best to speak with an attorney who is well versed in handling this type of matter. But, the steps are generally as follows:

  1. Choose an available business name that complies with your state’s LLC rules.
  2. File formal paperwork, usually called articles of organization, and pay the filing fee (ranging from about $100 to $800, depending on your state’s rules).
  3. Create an LLC operating agreement, which sets out the rights and responsibilities of the LLC members.
  4. Publish a notice of your intent to form an LLC (required in only a few states).
  5. Obtain licenses and permits that are required for your business.

 

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