Law and order are important and practical concepts for every ideal society. In the spirit of being orderly, there are usually legal requirements that qualify the conduct of business operations.
The auto transportation industry (also referred to as car carrier or vehicle hauling industry) is no exception. On this note, knowledge of these legal requirements forms a crucial part of any reasonable Guide to Auto Transport Careers, among other things. This is why this article specifically addresses this by discussing 3 basic legal requirements. So, read on to find out more.
Legal Essentials for Aspiring Auto Transporters
Knowledge and adherence to pertinent legal requirements are important for people who want to venture into the auto transportation industry. Some of the reasons why this is crucial include the following:
- Legal Compliance and Avoiding Penalties for Violation
- Safety & Liability
- Financial Security
- Operational Efficiency
- Credibility & Professionalism
In the spirit of ensuring all of the above-listed and more, some of the legal requirements for running an auto transportation company in the US are explained below:
1. Business Structure
Running an auto transportation company requires some level of structure and some legal requirements are designed to ensure this. For example, a clearly defined business structure has to be chosen. This could be a partnership, LLC (Limited Liability Company), sole proprietorship, or corporation.
You should also understand the implications of having any of the above-mentioned business structures. This ensures that you make the right choice and do not misrepresent your establishment.
Having your business duly registered is also part of what being structured is about. This requires knowledge of the local authority charged with this responsibility and meeting their demands.
Furthermore, some registrations also have to be done at the federal level. This includes applying for and obtaining a federal EIN (Employer Identification Number), which is usually issued by the IRS (Internal Revenue Service). However, these are not the only federal numbers that you would need, as seen in the subsequent points.
2. MC Number (Operating Authority)
The services of auto transportation companies often entail the transportation of vehicles between states. This makes it a federal and not just a state affair.
As a result, a pertinent federal license has to be obtained. The MC Number, which is also known as operating authority, is one such license to be obtained from a federally constituted body.
By the way, the FMCSA (Federal Motor Carrier Safety Administration) is the federal authority that issues it. To find out more about the FMCSA, you can click here to access its homepage. The process of securing this number issued by the FMCSA requires a couple of things:
- Filing of OP-1 Form – Filling and submission of this form is a formal indication of your request for broker authority and Motor Property Carrier
- Insurance Proof – The MC Number cannot be issued without relatively sufficient liability coverage in place. In other words, insurance proof has to be provided, and sufficient one at that. This should (at least) include cargo, physical damage, and liability insurance
- Filing of BOC-3 – It is also obtained from and submitted to the FMCSA. It offers legal permission to the company to have agents in various states. Additionally, these agents are qualified to collect court papers, legal notices, and other forms of legal documents on the company’s behalf
Overall, having an MC number is important for interstate commerce, legal authorization, tracking & accountability, and ensuring safety & regulatory compliance. So, it is important for those who want to get into this industry to take it seriously.
3. USDOT (U.S. Department of Transportation) Number
There are federal and even state-inclined safety practice standards that auto transport companies are supposed to adhere to. Adherence is not just in the spirit of complying with the law, but also about ensuring the best interest of everyone, especially road users.
The need for a number that aids the identification and monitoring of auto transport vehicles is one of the reasons for the USDOT number. You should also know that auto transport companies are not the only ones required to have this number as others include:
- Passenger Carriers
- Freight Carriers
- Private Carriers of commercial vehicles
- Auto Transport Brokerage Firms
- For-Hire Motor Carriers
- Transporters of Hazardous Materials
- Farm Vehicles
- Intrastate Carriers – For certain states
- For-Hire Carriers that Are into the Transportation of Non-FMCSA regulated Commodities
- Freight Forwarders
The USDOT number is federal-issued, although it also plays a key role in state identification and monitoring of safety practices. It is issued by the federal Department of Transportation.
By the way, the FMCSA – which issues the MC Number, and the USDOT – which issues the USDOT number are different authorities. However, they are strongly related.
The reason is that the FMCSA is one of the several agencies that make up the USDOT. If you would like to find out other agencies that make up the USDOT and other information about this federal authority, you can visit: https://www.transportation.gov/.
Wrap Up
There is a long list of legal requirements for auto transportation companies. However, some of them are more basic and important than others. For example, insurance is a major requirement. However, it is almost impossible to get an MC Number without being duly and sufficiently insured. This goes to show how basic and important securing an MC Number is.
The same goes for the other 2 tips shared here. So, people who intend to get into the auto transportation industry should pay more attention to these tips. However, this does not translate to neglecting other requirements.
