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Freight Brokers May Wear Two Hats
Many of my clients have their own trucking firms. Some are setting up a brokerage and a trucking company at the same time.
In either case, these clients want to go directly to shippers for loads.
Here is the first step to remember: a freight brokerage should not be co-mingled with a trucking company. Yes, that means setting up two separate companies with one owner owning both.
By setting up two separate companies, freight brokers eliminate a lot of potential legal and financial problems. Plus, brokers may eliminate confusing shippers.
What if your trucking company has damage or missing pieces on a particular delivery? If the brokerage is set up inside the trucking company, the shipper might file a claim on both companies. Not good.
A freight brokerage never assumes liability for damage or missing pieces unless they are under contract for that liability or unless they are negligent.
With two separate companies, a freight broker will approach shippers as a FREIGHT BROKER. The broker may then give those loads to his or her trucks – or the broker may broker those loads out to any other trucking company.
Many shippers, if not most, do not want to work directly with a trucking company for a number of reasons. Many or most want to turn that responsibility over to a freight broker.
For each load, the trucking company’s name should be on the bill of lading and the shipper doesn’t care who carries the cargo as long as it is properly delivered.
So, eliminate any potential confusion and make sure you represent yourself as a “freight broker” not a trucking company when searching for loads.
Here’s an example:
For outbound calls while seeking loads and while acting as a freight broker, the caller may say, “This is Marge with Glory Road Freight Brokers. We’ve got a couple of empty reefers in your area. Can we help you move some of your cargo?”
Or, if the brokerage is already set up with a shipper, the conversation might go, “This is Marge with Glory Road Freight Brokers. Do you have any loads for us today?” Or, “Are you looking for any trucks today?”
What I am saying is that when you give those loads to YOUR trucks, you are wearing two hats – one as a freight broker and one as a trucker. You just need to keep in mind which hat you are wearing when you make and receive phone calls.
What you want to avoid is getting loads for your trucking company and then brokering them out to other TRUCKING companies. This would be “double-brokering” and the Moving Ahead for Progress for the 21st Century (MAP21) passed legislation to prevent this.
If you want to stay free of potential financial and legal problems plus some of the confusion that comes with this, set up two separate companies.
Your transactions between your brokerage and the trucking company would be considered “arm’s length” transactions and your accountant should be able to help explain the invoicing and disbursements’ process between your two companies. It’s no different than dealing with other companies that you normally deal with.
It won’t take long for you to learn how to juggle these two roles. And if you DO have both a trucking company and a brokerage, you DO want to tell the shipper that you have trucks ready to roll. You would then get set up with the shipper as a freight broker.
I’ve trained a number of truck drivers who have told me that the shipper they are picking up from is asking – sometimes begging them – to get their broker authority. Otherwise, the shipper is unable to work directly with the truck driver.
If you need help in setting up a freight brokerage, I can help to some extent. I’ll help explain your options, you decide which way you want to go.