multiple DOT/subsidiary llc

Discussion in 'Ask An Owner Operator' started by Xray4, Jun 17, 2021.

  1. Xray4

    Xray4 Light Load Member

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    *Not sure if this is posted in the correct place. -admin can you move it if it needs to be moved?

    I run interstate flatbed, as well as some local stuff. Over the past few months I have been developing an opportunity with a few regulars that will require an additional different setup- namely small non-cdl box trucks and cargo vans operating within a 100 mile radius, all local metro city deliveries. Looking at insurance, if I add these trucks to my fleet, the cost is as expected- between $6k - $12k per year per truck depending on size, weight, and value. It's this high because my insurance guy at progressive is saying that because we have an interstate MC, everything we add will be treated as such, says I cannot have some vehicles in one policy type and others in another..

    Other local distributors, couriers, local businesses with trucks etc use way cheaper commercial policies for these types of vehicles and operation, with only intrastate authority and lower than our interstate $1m/$2m liability and $150k cargo. Insurance guy says if we had a different MC and DOT with only intrastate authority, we'd be looking at $2k-$3k per truck.

    Question is, does anyone have real experience with this sort of arrangement? I have no problem opening a new LLC and new numbers if needed, just not sure if that's the way to do it.

    I do know that if I just add these local trucks to our existing policy, we're over paying, and risking more in terms of higher potential for accidents in the metro city compared to OTR, and not getting any benefit of added inspections and positive CSA score, because these trucks are likely never going to see a port of entry or DOT officer.

    Anyone with some real experience with this sort of thing, please chime in!

    Thanks.
     
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  3. Accidental Trucker

    Accidental Trucker Road Train Member

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    First question I have is: if you drive non-cdl trucks in-state, do you need to add them to your fleet? That is, if you don't NEED to put a DOT number on them, DON'T!
     
  4. Xray4

    Xray4 Light Load Member

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    Thanks @Accidental Trucker. That's something I've been researching here in Arizona. The direct competitors of mine that currently have the business of my shipper register at FMCSA with an intrastate DOT as a courier service. Need to check what AZ requires. I'm pretty sure they require that intrastate DOT
     
  5. ZVar

    ZVar Road Train Member

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    Even a small box truck is very likely over 10k lbs gvwr, so would still need a DOT number as it still falls under FMCSA (unless intrastate, then whatever state authority) . It's still a CMV over 10k lbs after all.
     
  6. Xray4

    Xray4 Light Load Member

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    I think you for that but it does not apply here. FMCSA is federal, which regulates interstate commerce. They also regulate intrastate hazmat in some ways. But we are not talking about interstate commerce here. So, no, this vehicle, even though it is GVWR 16,000 lb, is not considered a commercial motor vehicle by the FMCSA. Some states like California have their own definition of commercial motor vehicle and this vehicle may fit that. In Arizona this vehicle is not defined as a commercial motor vehicle.

    Commercial motor vehicle means any self-propelled or towed motor vehicle used on a highway in interstate commerce to transport passengers or property when the vehicle—

    (1) Has a gross vehicle weight rating or gross combination weight rating, or gross vehicle weight or gross combination weight, of 4,536 kg (10,001 pounds) or more, whichever is greater; or

    (2) Is designed or used to transport more than 8 passengers (including the driver) for compensation; or

    (3) Is designed or used to transport more than 15 passengers, including the driver, and is not used to transport passengers for compensation; or

    (4) Is used in transporting material found by the Secretary of Transportation to be hazardous under 49 U.S.C. 5103 and transported in a quantity requiring placarding under regulations prescribed by the Secretary under 49 CFR, subtitle B, chapter I, subchapter C.
     
  7. ZVar

    ZVar Road Train Member

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    Which is exactly what I said..... Either fmcsa for federal, or state agency. I take it you are in Arizona? If so, then yes you are correct. As of about a year and a half ago the weight rating was raised to 26k to be considered a cmv. Arizona is fairly unique, although not the only state to not set the gvwr to 10,001 lbs.
     
    Xray4 Thanks this.
  8. Xray4

    Xray4 Light Load Member

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    Gotcha thanks. I read your last line about still being a cmv over 10k as referring to fmcsa or state definition, which we both agree doesn't apply as it's not interstate, and not over 26k so not state cmv defined. Thanks for the clarification.

    Anyway, I am looking at just getting a new dot number assigned to a different LLC that I haven't used in a while and using that for the local box trucks. Keep the two companies totally separate.

    It would be nice to manage the financial record keeping together however. Does anybody know how a subsidiary setup is viewed by fmcsa?
     
  9. Ridgeline

    Ridgeline Road Train Member

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    Well the first question I have is what state are you based out of?

    Here’s how I have my local work structured.

    I have a umbrella Corp that owns everything.

    I have two others for all my local work. Both of these are companies I bought for the contracts and each are located in different states. They are completely separate from the companies that have the authorities. Insurance is based on that specific company and location.

    This allows me more control and makes it easier to find drivers … and lately picked up a little more work.

    It sounds complicated but it isn’t when you get how it works and build your housekeeping routines around the structure, the Corp allows me to move assets around easier and reduce my tax liability.

    I have two llc, which are none trucking related, I don’t use llc for trucking businesses because there is no tax advantage for me and no protection at all are afforded.

    By my state law, each truck has to have a dot number including light duty pickups with commercial plates no matter what the gvrw is. My state has three definitions of what commercial, vehicle is and the dot number laws doesn’t include it, just says any vehicle.

    Most states require now.
     
    Last edited: Jun 18, 2021
    wis bang Thanks this.
  10. Xray4

    Xray4 Light Load Member

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    Thank you @Ridgeline . This is exactly what I was looking for.

    I am located in Arizona, where I need a DOT number for intrastate, under 26k.

    I too will consider a blanket Corp, probably an S, to own each of the companies if I stay in the industry. I'm still not yet convinced I'll be here doing it in 12 months, long story.

    Regarding your comment that your blanket Corp owns everything, you mean it owns and executes managerial control over each of your companies, but your individual companies own their own physical assets, correct? Or do you have your umbrella own physical assets and lease to the individual companies?

    If you're more comfortable chatting on the phone I'd love to pick your mind for a few minutes. Let me know and I'll message you my cell.
     
    Last edited: Jun 18, 2021
  11. Ridgeline

    Ridgeline Road Train Member

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    Yes this is exactly how it is setup.

    I won’t get into the why’s and where’s of the scheme but it does allow a lot of flexibility for expansion/contraction and asset exchange/tax deferments.

    My recommendation is get two things, one is a lawyer to go through the legal structure and a good corporate accountant to build it for your needs.

    sorry, I don’t do phone calls any more, no disrespect towards you but I’m frustrated with people who spend my time asking questions and then ignoring my advice. Beside if I can answer a question in the open, it helps others who read it.


    Oh and before I forget, even if you have a short term plan, I would consider this the best option because if you decide to sell a leg of your working business or all of it, it is a hell of a lot easier to sell the stock of Corp in exchange for something else than it is to sell it piece meal with the different assets if it was solely in your name while an authority and the established working relationship/company reputation left intact, the value of the overall operation is increased.
     
    wis bang Thanks this.
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