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Are you an experienced truck driver who’s seeking more freedom? If you're looking to take the next step in your profession, becoming an owner operator might be the move you're considering. Becoming an owner operator in the trucking industry can be a rewarding path for those looking to take control of their career and income. However, this shift also comes with just as much risk and responsibility as it does privileges. The process of becoming an owner operator is challenging and complex, so it’s important to understand the ins and outs before diving in.

Owner Operator vs. Company Driver: What's the Difference?

An owner operator, often abbreviated as “O/O” or “OO,” is a truck driver who owns and operates their own trucking business, typically working on a contract basis rather than as an employee of a trucking company. This distinction means that owner operators have the flexibility to choose what jobs to take, set their schedules, and enjoy the potential for higher earnings.

Pros and Cons of Being an Owner Operator

It’s important to evaluate whether the owner operator path is right for you before taking your first steps forward. One of the biggest benefits of becoming an owner operator is the potential for increased earnings. O/O’s can benefit from higher pay rates, especially when negotiating contracts or finding their own clients. Additionally, many owner operators enjoy the autonomy that comes with choosing their loads, schedules, vacation times, and driving routes. You never need to compromise on the quality of your equipment since it all belongs to you. However, these benefits are accompanied by significant challenges that come with running a small business. Owner operators are responsible for covering all operating costs, including fuel, maintenance, insurance, and permits. This means that financial planning and management become crucial aspects of your operation. The stress of variable income, especially during slow seasons, can also be daunting for many. O/O’s must handle all paperwork and diligently ensure regulatory compliance. When you’re an owner operator, everything falls on you, and that is not something to be taken lightly.

Key Steps to Becoming an Owner Operator

The journey to becoming an owner operator begins long before you purchase your first truck. Gaining experience as a company CDL driver is an essential foundation. You should develop your driving skills and gain a solid understanding of the industry, including routes, regulations, and customer service. Additionally, most carriers prefer working with owner operators who have at least 1 - 2 years of driving experience. Build your skills, learn the industry, and get familiar with truck maintenance, freight handling, and DOT regulations before taking the plunge.

Like any entrepreneur, you will need an excellent plan for your small business that outlines everything you need and your long-term objectives. A key part of your plan is deciding your business model. Many owner operators choose to lease to a motor carrier and operate under a larger company’s authority. They act as your agents and often help with dispatching, fuel discounts, and compliance, but take a cut of your revenue for their assistance. This is a great option for beginner O/O’s who may feel overwhelmed at the idea of handling every aspect of their business. The other option is to operate entirely under your authority. This offers the most freedom and potentially higher profits, but also more risk and complexity.

Setting up your business involves registering your entity, acquiring the necessary permits, and understanding the financial aspects of getting things started. One crucial step is establishing a legal business entity. The IRS offers a great guide on business entities here. When you have selected a company name, you will have to officially select a business structure, which will affect your taxes and liabilities. Many O/O’s select a sole proprietorship or a limited liability company (LLC). If you plan to transport passengers, deliver interstate freight, or move hazardous material, you will also need to obtain a USDOT number through the FMCSA website. Some O/O’s need to obtain a motor carrier (MC) number to be granted interstate operating authority for transporting regulated commodities, which is also done through the FMCSA.

The startup costs for an owner operator business are significant. In addition to fees for various registrations and licensures, there is the large initial cost is purchasing a truck. This is a significant investment, and it’s essential to consider what type of truck will best suit your needs based on the types of freight you want to haul. A lease-purchase allows you to lease a vehicle at a specific rate and eventually own it at the end of the contract. Leasing can be lower risk, especially for new operators, since it often includes maintenance and lower upfront costs. If you want to own it right away, you can buy either a new or a used truck. Conducting thorough research and being aware of the specific features that can impact your earnings, like fuel efficiency and maintenance costs, is imperative before making a purchase.

You’ll need to obtain insurance coverage that meets industry standards based on the type of O/O you become. For example, owner operators under their authority are federally required to have liability insurance with at least $750,000 in coverage. Some motor carriers offer their O/O’s limited insurance coverage, but additional coverage should be researched and purchased. Motor truck cargo, lease gap, non-trucking liability, and physical damage insurance are all important options to consider. O/O’s also must get their own health and life insurance, unless a motor carrier allows its leased drivers to buy from their plans.

Familiarizing yourself with tax implications and potential deductions for owner operators is also crucial for your bottom line. Two common taxes are the Heavy Vehicle Use Tax and the International Fuel Tax Agreement. We take a look at some more of the tax requirements and deductions for O/O’s here. No matter what, it’s crucial to always keep thorough documentation of your business practices and maintain strict compliance with trucking industry regulations. We strongly suggest doing thorough research on regulations and requirements for owner operators with the FMCSA’s resources.

Finding work as an owner operator can be approached through various avenues. Many choose to establish ongoing relationships with freight brokers, while others may opt to contact shippers to secure contracts directly. Online load boards and apps have become popular options for finding immediate work opportunities. Networking within the industry and utilizing platforms specifically designed for truck drivers can further ease the process of sourcing freight.

Becoming an owner operator can be a rewarding way to take control of your career and grow your income potential, but it’s not a decision to take lightly. Make sure to assess your finances, understand the risks, and have a clear plan. Setting up your business involves numerous steps, including registering your entity, acquiring the necessary permits, and understanding the financial aspects of running your trucking business. With the right mindset and preparation, you can be in the driver’s seat of a successful business. Already on your way to becoming an owner operator? Explore some of the best opportunities in the industry here!