MODULE 1: PRE-REQUISITES TO BROKERING | Exodus Dispatching
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Truck and Warehouse

MODULE 1: Pre-Requisites to Brokering 

Pre-Requisites to Freight Brokering

 

Prior to applying to become a freight broker, as well as the information that is asked of you while filling out the OP-1 form on the FMCSA website, you first would need to be established as a business.  The OP-1 form, which will be covered later, is the form you fill out to obtain your AUTHORITY, whether Freight Broker or Motor Carrier Authority.

 

What are some of the things needed to start a business prior to applying for AUTHORITY?

 

A.   BUSINESS PLAN

 

A business plan is a blueprint or outline of how your company may or will run.  The following are some components of your business plan:

 

  1. Executive Summary – is an overview of your business plan and is usually placed last on the business plan.  It includes:

  • a.  Business name and location.

  • b.  Business products and/or services offered.

  • c.  Mission and vision statements.

  • d.  Whatever the specific purpose of this plan may be, like for example, to get investors.​

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    2. Company Description – is an overview of your business telling who you are, how you operate and what your goals are.  It includes:

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  • Legal structure of the business (corporation, sole proprietor, etc.).

  • Brief history, the nature of your business, and the needs or demands you plan to supply.

  • Your products/services overview, as well as customers and suppliers.

  • Company growth, both financial and market points.

  • Short- and long-term goals, and how are you going to profit.

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   3. Product/Services – describe products or services you are selling, concentrating on customer benefits.  This includes:

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  • Detail descriptions of products/services.

  • An explanation of the market role of what you are offering and what advantages you have over competitors.

  • Your product/service lifecycle.

  • Any important copyright, patent or trademark information.

  • Research and develop things that may lead to new products/services.

 

   4. Market Analysis – display your industry expertise and present conclusions based on thorough market research.  This includes:

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  • An illustration of targeted customer segments, including the size and demographics of each group.

  • An industry description and forecast with statistics.

  • Current, projected and historical information marketing data for your product/service.

  • Evaluation of your competitors, focusing on strengths and weaknesses.

 

   5. Strategy and Implementation – what are your sales and marketing strategies, and how will they be implemented with your operating plan.  This includes:

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  • How will you promote your freight broker business to customers and enter the market.

  • Cost details, pricing, distribution, logistics, and promotions.

  • How your freight broker company will function (either work from home OR brick-n-mortar) including the cycle of operations (from acquisition of supplies to production/services to delivery of services).

  • Sources of labor and employees, if any.

  • Information on operating hours and facilities.

 

   6. Organization and Management Team – what will be your freight broker company’s organizational structure?  Identify the management team.  This includes:

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  • Organizational chart with details of departments and key employees.

  • Details about owners, listing names, percentage of ownership, extent of involvement within the company and biography of their skills and background.

  • Profiles of your freight broker company’s management team, including names, positions, main duties and responsibilities, and experience.

  • Any advisory people, such as accountants or attorneys.

 

   7. Projections and Financial Plan – may need to consult an accountant on this after completion of market analysis and goals.  Important information includes:

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  • Historical financial data, if you currently have a business.  Income statement, balance sheet and cash flow statement for 3-5 years.

  • Prospective realistic financial information like forecasted income statements, balance sheets, cash flow statements and a budget for the next 5 years.

  • Financial data brief analysis on all financial statements.

 

B.   BUSINESS NAME – have your business name registered with the state and pay your fees (usually a couple of hundred dollars).  Register a business name within your home state or local municipality.  Select a unique name and check to make sure that the name is not already used by someone else.

 

C.   LEGAL BUSINESS FORMATION/STRUCTURE – what type of business structure will your freight broker company be?  The choices may include:

 

  1. Sole Proprietor – An individual who owns and operates a business normally in his or her legal name and in which there is no legal distinction between the owner and the business. In some jurisdictions the proprietor can use a trade name or business name other than his or her legal name, but the individual is also required to file a ‘doing business as (dba)’ statement with local authorities. Every asset of the business is owned by the proprietor and all debts of the business are his or hers as well.  Too much personal liability.

  2. Partnership – A voluntary contract between two or more competent persons to place their money, effects, labor, and skill, or some or all of them, in lawful commerce or business, with the understanding that there shall be a proportional sharing of the profits and losses between them.  Few people involved and not expected huge growth.

  3. LLC (Limited Liability Company) – A business structure type that combines corporation limited personal liability with partnership or sole proprietorship single taxation. Each shareholder files his or her own separate tax return. Profits and tax benefits are split any way the stockholder and shareholder entities choose.  Small to medium-sized businesses.  If you don’t anticipate several owners or selling parts of the company in the future.  It mitigates legal obligation of owners and keeps it on the business side.

  4. Limited Liability Partnership (LLP) - A partnership in which some or all partners (depending on the jurisdiction) have limited liability. In an LLP, no partner is responsible or liable (directly or indirectly) for an obligation of the partnership due to another partner’s misconduct or negligence, thus shielding innocent members of these partnerships from liability.

  5. Corporation - An artificial person or legal entity created by or under the authority of the laws of a state or nation, composed, in some rare instances, of a single person and his successors, but ordinarily consisting of an association of numerous individuals, which is regarded in law as having a personality and existence distinct from that of its several members. Corporations may own assets, and incur liabilities that do not pass to its shareholders personally.

  6. C Corporation – allows you to issue shares in your company.  Shareholders are not liable.

  7. S Corporation – more restrictions on the number of shareholders (100), but also favorable tax treatment.

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D.   EIN – Employee Identification Number.  This process is done by going to the www.irs.gov website and applying/registering for an EIN for your business name.

 

E.   OPEN A BUSINESS BANK ACCOUNT – you need legal business documentation prior to opening up a business bank account.  You need an EIN number from www.irs.gov IRS website and your articles of incorporation papers, from the Secretary of your State of Residence.

 

F.   PROTECT AN INTANGIBLE ASSET

 

  • Copyrights – protection offered to authors of original content. Writings and recordings are a good example.  Content on a website is another.

  • Trademarks – a word, name, or symbol that distinguishes your product or service.  Logos are a good example.

  • Patents – granting of property rights on an invention.

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G.   TAXES – research what types of taxes you are responsible for.  Calendar the due dates of your taxes to give yourself enough time to prepare.  Understand the forms needed and whether it can be done online.  Adequately budget for paying your taxes.  Remember, revenue and profits are the driving forces for taxes.  Also, mitigate (or reduce your taxes) and NOT avoid them.  DISCLAIMER:  Always seek an accountant and/or legal counsel!  The types of taxes include:

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  • Federal income tax

  • State income tax

  • Franchise board

  • Sales and Use taxes

  • Payroll taxes

  • City taxes

  • County taxes

 

H.   LEGAL SERVICES – always seek legal advice when forming a business.  Some choices could be Rocket Lawyer (https://www.rocketlawyer.com/ ) or Legal Zoom (https://www.legalzoom.com/ ).  These two can assist you with drafting contracts and agreements, as well as helping you decide the type of company or corporation to formulate.

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