How to Start a Transportation Business: The Ultimate Guide

How to Set up Transportation Business

So, you’re thinking of starting a transportation business? You’ve come to the right place! Transport businesses aren’t just about planes, trains and automobiles. There’s much more to it. If you’re looking to start your journey into the transportation world, follow our ultimate guide to get started! 

What Does a Transportation Business Do? 

To start, we need to understand what exactly a transportation business is. A transportation business is essentially any business that transports people or goods. They can also provide services for other business owners that need their goods or employees transported, like the trucking industry. 

The transportation business market is pretty lucrative. In fact, the public transportation market is a $76.9 billion industry. There are several different types of transportation businesses, so you’ve got options. 

Types of Transportation Businesses 

We’re going to look at three categories of transportation businesses, and from there you can choose which one interests you most. 

Personal Transport 

This type of transportation business is one-on-one services. Think of taxi services, or ride shares like Uber. 

Local Transport 

Local transport businesses serve regional markets and transport consumer goods. Think of when livestock or crops are transported. They’re either commercial or private, depending on what they’re transporting. 

Global Transport

Alright, this one may not be where you get started with a small transportation business. But, we thought we’d mention it anyway. Global transport is, of course, transportation of goods globally. Think of shipping containers on huge barges, or cargo airplanes. These services operate on a very large and international scale. 

How to Start a Transportation Business in 8 Easy Steps 

1: Choose Your Transportation Business Type 

The first thing you need to do is pick what type of business you’d like to start. Think about your community and the needs you see. Talk to people and find out what’s missing, or what they want more of. Begin with some market research to point you in the right direction. It’s also important to start small and not bite off more than you can chew. 

2: Pick Your Business Entity 

Once you know what type of business you want to start whether it be bike rentals or ride sharing, you’ll need to pick a model. For transportation businesses, there are typically three options:

Sole Proprietorship

You know those mom and pop shops you love to visit on vacation? Those are usually sole proprietorships. A sole proprietorship is an unincorporated business that’s run by an individual or a married couple. 

Limited Liability Partnership (LLP)

A limited liability partnership is designed to protect all partners involved in the business. This means that partners are only liable for the amount that they put into the business, instead of the whole. 

Limited Liability Company (LLC)

A limited liability company(LLC) separates the business owner’s personal information from the business. That means that the owner won’t be personally responsible for debts and liabilities. 

If you haven’t already, this is going to be the time where you choose the name of your business, as well. You can typically look up a database of businesses in your state to see if the name you want is available. 

3: Create a Business Plan

This is going to be the most crucial step in the process. It may be the biggest headache in your journey, but you’re going to come out well-versed on the transportation business and be ready to go. So, if you’ve been feeling lost, this is where things really start to come together. Your business plan should include: 

  • A mapped out overview of your business 
  • Marketing plan
  • Market analysis
  • Pricing
  • Financial projections 

4: Register in Your State and Get a Federal Tax ID Number 

To be an actual business, you’ll need to register with your state. Your business plan research hopefully led you to the requirements to apply, since it can vary by location. 

You’ll also need a federal tax ID number or employer identification number (EIN) to get started. An EIN is a necessity. It’s going to make your life so much easier. These numbers will come in handy when it’s time to start hiring employees, as well. 

5: Acquire Licensing and Permits 

The transportation business is full of licenses and permits. Since you’ll be working with transporting people or precious cargo, the transportation business requires more licensing than others. 

Depending on your business, you’ll need different licenses and permits, but here are some of the most common: 

  • Commercial Driver’s License (CDL)
  • Commercial vehicle registration
  • Fuel Carrier licenses 
  • Heavy Load/Cargo Permits 
  • Commercial Auto Insurance

6: Get the Proper Insurance Coverage 

Along with licenses and permits, you’ll need to have proper insurance coverage for your business. A transportation business is going to not only need small business insurance, but commercial auto insurance, as well. 

Commercial auto insurance is essential if you have employees driving vehicles while on the clock. If they get in an accident while driving a company vehicle, their private insurance may not cover it. It’s important to cover your bases. 

Business insurance is an absolute must. While you’re covered by your business entity, this insurance will protect you from unexpected costs. If you’d like to learn more, check out our blog on what insurance a small business needs

7: Purchase Your Equipment 

When you created your business plan, you likely did research on the type of equipment you want. It’s important to purchase quality vehicles so you look professional and guarantee safety to your customers. 

8: Hire Employees 

If you’ve got a fleet of transportation equipment, you’re going to need employees! In the beginning, you may be able to get by without, but as you grow you’ll probably need a staff. 

At this point, you should have everything in order including an EIN, so you should be in good shape to bring more people on. It’s also important to make sure that the employees you hire are all properly trained and licensed and are good additions to your team. 

Mistakes to Avoid When Starting a Transportation Business 

Once your transportation business is up and running, avoiding these mistakes will set you up for success. 

  • Don’t ignore routine maintenance on your vehicles
  • Don’t avoid calculating expenses until the last minute 
  • Not doing mileage cost math 

Need Small Business Insurance?

One of the best things you can do for yourself when you’re learning how to start a transportation business is to research insurance policies. Let the team at G&G Independent Insurance help you! We will gather information and find the best policies for you from local companies, so you have more time to work on your business. 

We offer small business insurance, as well as commercial auto insurance. Contact us today for a free quote