A freight broker acts as intermediaries between freight carriers and those that require freight shipping for their goods. It is an attractive career as freight brokers enjoy a great deal of autonomy and flexibility.
If you want to work as a freight broker, it is important to be aware of the various costs needed to get your business up and running. The costs to become a freight broker can include everything from forming your business to freight broker training costs and getting your freight broker license.
In this post, we will break down all the costs to start your freight broker business.
1. Business registration fees
Before you can become a licensed freight broker, you must register your business with your state. For most states, registration is completed through the Secretary of State’s office or the Department of Revenue.
The cost for registering your business will vary based on your location. Depending on your state’s specific requirements, the legal structure of your business entity (LLC, corporation, etc) may also impact the price.
For example, in Nevada, it costs $500 to file a limited liability company (LLC) but $725 to form a corporation.
These fees are the highest among states. Business formation fees for most states typically range between $100 and $300 with some states getting as low as $50.
2. Freight broker authority
Freight brokers are required to obtain freight broker authority from the Federal Motor Carrier Safety Administration (FMCSA) before they can launch their business. Authority is essentially a license put in place to ensure that the freight broker is qualified and held accountable for their actions.
You can obtain your freight broker authority by submitting Form OP-1 to the FMCSA. When completing the form, you will need to decide which type of authority to apply for. There are two options; Broker of Household Goods and Broker of Property (except Household Goods). If you plan to broker both types of goods, you can apply for both authorities.
The filing fee is $300 per authority.
3. Freight broker BOC3 filing fee
BOC3 is a form that establishes a process agent that can accept legal documents on behalf of a freight broker in the states where they conduct business. The BOC3 is a requirement to receive your broker authority.
The BOC3 fee for registering a freight broker agent is $25.
4. Freight broker surety bond
Freight broker surety bonds (also known as BMC 84 bonds) are required as a way to ensure that freight brokers comply with all the conditions of their license. The bonds have a $75,000 value of which you will need to pay a small portion in order to receive the bond.
The premium rate for your bond is determined by the surety company. They will evaluate your credit score, work experience, financial standing, and other factors to determine a rate.
Well qualified applicants can get premiums as low as 1.25% or $938 to get the bond. If you have bad credit or a poor financial and work history, expect to pay a little more for the bond.
5. Insurance premiums
While freight brokers are not required to get general liability, cargo, or property insurance, getting these types of policies is a good practice and can help protect your business.
General liability insurance for a freight broker typically costs between $300 and $1,000 per year.
Property and cargo insurance both typically cost between $100 and $400 per month depending on the amount of coverage that you need.
Keep in mind that if your freight brokerage business has employees you will be required to get workers’ compensation insurance. This is a standard requirement for businesses across states. You should check with your local authority to verify their specific coverage requirements before looking for an insurer.
6. Freight broker training
Freight broker training is another cost that is not required but highly recommended. A good training course will go through all the essentials of how to run your freight brokerage business and how to safely adhere to all legal requirements.
The cost for a freight broker training course can vary drastically depending on the course that you take. Less expensive courses run for around $200 while a more expensive course can cost $1,000 or more.
7. Freight broker software
If you want to be successful as a freight broker, you are going to need transportation management software (TMS). This software helps you manage your operations and accounting. You can also use it to view reports and analyze the success of your business.
Freight broker TMS systems typically cost between $50 and $100. There are more expensive options if you desire advanced features and functionality.
8. Freight Broker Load Boards
Finally, we have load boards. These are online hubs where freight brokers and shippers come together to make shipping arrangements. Brokers post loads and carriers post trucks. Together they can connect so that both parties get what they need.
Load boards typically cost between $50 and $150 per month
Get your bond with EZ Surety Bonds
Fortunately, freight broker startup costs are affordable, allowing you to start your business with limited financial risk. Of all the associated costs of starting a freight brokerage, the freight broker bond has the potential to have the greatest financial impact.
Who you choose to issue your bond is essential to getting an affordable premium. EZ Surety Bonds offers competitive rates to both qualified brokers and those who are less qualified.
Apply online today for a quote or contact us for more information.