The Legal ABCs of Running a Transportation Service
In Start Your Own Transportation Service, the Staff of Entrepreneur Media explains how you can launch a profitable transportation service, whether you want to start a long-haul operation or an in-town service. In this edited excerpt, the authors explain the primary legal considerations that come with running a transportation business.
Transportation is a highly regulated business. It will be up to you as a business owner to not only understand the regulations of your particular segment of the industry but also keep up with the ever-changing regulations as your business matures.
Zoning refers to the legal limitations of a physical area for the kind of business you plan to start -- or any business at all for that matter. If you’re planning to start your transportation business at your home, you need to know the zoning in which your home falls. If your home is in a zone in your town or city that doesn’t allow for any business operation, then even an office may not be legal.
For instance, East Coast Equine Transport operates from the owner’s home. The business maintains one heavy-duty pickup truck and trailer that holds four horses, which she keeps in her yard. In rural residential zoning, agricultural-related businesses are typically allowed.
East Coast Equine Transport subcontracts to transporters who own their own rigs that they keep at their own properties. If the business were to have multiple rigs of varying configurations, the business owner would have to be sure that their area zoning allows for the housing of those rigs. Or they’d have to lease or buy a storage garage or piece of land somewhere that’s zoned for that kind of heavier traffic.
The same goes for self-employed truckers who own the “tractor” and pick up trailers full of goods to transport to their destination. If that tractor is stored at the owner’s home or if the owner picks up a trailer and wants to park it overnight at his or her house before starting out on the road to its destination, the area of the home would have to allow for that in the zoning laws. Not only could that be a big intrusion on the neighborhood but if the driver wants an early 3 a.m. start, that’s a lot of noise in the middle of night. And the vehicle weight is a lot for roads that aren’t designed for it. This is where the zoning board of a town is the vigilant body to protect residents and town assets.
The Small Business Administration (www.sba.gov) suggests that homebased business owners be mindful of the following typical things that are prohibited under residential zoning laws:
- Exterior physical changes to the home for purposes of conducting business
- Outside business activities, storage, or displays
- Signage or commercial vehicles
- Traffic restrictions like number of visitors, number of employees working in the
- home, and parking
- Prohibit or restrict nuisance impacts like noise and storage of hazardous materials
If you’re going to be doing driving of any kind, whether it’s transporting horses or driving a taxi or getting behind the wheel of an 18-wheeler, it all starts with a valid driver’s license, preferably in the state in which you plan to conduct business.
Commercial driver’s license
A commercial driver’s license (CDL) is what you need to drive in the trucking industry. Each state has slightly different licensing procedures, and some are more restrictive than others. CDL schools are generally seven weeks long if you do them full time, and full time means 40 hours per week, which pretty much precludes working, so you’ll need to plan accordingly. AllTrucking.com recommends the following:
- There are different classes of licensing to drive commercially. The more technical the class, the more time involved in the licensing process. Choose your licensing class, and schooling time after careful thought about where you might want to take your career.
- Once you have your basic CDL, you can add what are known as “endorsements” for specific types of transport—passenger, hazardous, or double trailers, for example. Each endorsement probably adds additional time to your training period, but if it’s part of your planned career path, it may be worth it.
- Some licensing schools offer part-time programs, but keep in mind, it will take you longer to get to the end goal of your CDL.
- Schools vary in their classroom training. Some might require you to do the classroom work and pass that exam before you start driving training. One way or another might be a shorter path to your license, so check out these details.
Federal licensing and regulations
The federal government has its own transportation laws specific to any part of the transportation industry you plan to join. In particular, any transportation that crosses state lines (i.e., interstate transportation) is subject to federal law as well as the laws of the states you’re leaving from your original destination, passing through en route, and entering as your final destination. You’ll become very familiar with the U.S. Department of Transportation (DOT) no matter what transportation business you choose to start.
State licensing and regulations
Each state has its own administrative oversight and law enforcement bureaus and officers to enforce transportation and commercial driving regulations. According to the IRS, “two state agencies have regulatory authority over the trucking industry in each state: the Public Utilities Commission and the Department of Motor Vehicles.” These regulations include filing proof of insurance and obtaining permits (such as intrastate trip permits known as “bingo stamps”).
Most states require proof of having paid Heavy Vehicle Use Tax (IRS Form 2290) in order to register or renew registration of a tractor.
Become familiar with the transportation laws that are particular to the state or states in which you plan to operate as well as the laws that are particular to the part of the transportation industry in which you are starting your business. Talking with SCORE mentors who’ve been in your business, scouring the state department of transportation website, and talking with officials at the city/town and state level should provide you with everything you need to know.
Not only are there state and federal regulations to follow and comply with, there are also town and city ordinances you need to know and follow in order to successfully run your business. Taxi services, also known as vehicle-for-hire transportation, are under particularly stiff regulations.
For example, if you look online at the Portland, Oregon, auditor’s office, you’ll find a list of 74 regulations for vehicle-for-hire business in Portland. These regulations cover everything from “pedicab driver permits” to “limit on number of taxicabs allowed,” “transfer of decal, permit, or taxiplate interest prohibited,” “currently permitted companies, vehicles, and drivers grandfathered; renewal process,” and “operation of horse drawn carriages: requirements and prohibitions.”
The U.S. Environmental Protection Agency (EPA) is the manager of rulemaking and regulatory guidance related to air quality and transportation. The regulations specific to numerous parts of the transportation industry constitute volumes of material. You’ll want to familiarize yourself with any that are specific to the industry in which you are starting your business. Here are two examples:
Idling Reduction. The EPA has long been involved in pollution reduction and air quality improvement by testing and creating alternatives to engine idling of the 15.5 million trucks estimated to be operating in the U.S.
Clean Diesel Program. The EPA offers grants and rebates for projects that improve air quality by reducing harmful emissions from diesel engines. For instance, they’ve offered school bus rebates to replace older diesel school buses.
Transportation companies are responsible for knowing the EPA regulations and how they apply to them as well as keeping vehicles up to current EPA standards.
No matter what kind of transport business you’re in or whether your fleet consists of taxi cabs, bicycles, or 18-wheelers, safety for drivers, passengers, other drivers, and your load is of utmost concern.
Vehicle safety translates to driver and passenger safety. Breakdowns can happen no matter how diligent you are, but keeping vehicles maintained is the first step to avoiding unexpected breakdowns. Here are some things to keep in mind:
- Decide how you’re going to maintain your vehicles. Will you own/lease a service bay and do it yourself? Hire a mechanic who’ll maintain your vehicles for you? Contract with a local garage that you know does good, honest work to take care of this critical aspect of your business? Only you can decide which approach is best for your business, but you to need to decide probably before the first vehicle hits the road.
- If others use your vehicles -- if you have a bicycle rental or car rental service, for instance—how are you going to go the extra mile to ensure their safety? Of course you need the appropriate insurance, but insurance is useful only when something happens. How are you going to do your best to avoid something happening? Will you have a policy that all bicycle chains and brakes are inspected before the bicycle goes back into the rental rack? Require helmet use by all renters, and provide those helmets as part of the rental fee? Again, decide before you open your doors.
- Maintain your vehicles on a regular schedule, and keep maintenance records. Find a system that works for you and your business, stick with it, and make sure all who work for you stick with it as well. Also find a system that ensures that any vehicle that doesn’t meet the safety check-off list is pulled from the fleet. Have a work order system in place that makes it infinitely clear what needs to be done and that something needs to be done before this vehicle goes back into service.
- Don’t skimp on your vehicles’ safety features. It’s just not worth the risk. If the tires need changing, change them. Have a certified mechanic inspect your vehicles regularly whether or not it’s required in your city/state.
Taking risks with safety is simply not worth it for either your personnel or your passengers. If something does happen, any legal proceedings will examine your safety and track record. You want a reputation of going beyond what is necessary to ensure safety in any way you can.