Learn how to become licensed as a freight broker, and speak with an Single Source Insurance agent today about purchasing the BMC-84 bond you�ll need to operate as a freight broker.
Who Needs a Freight Broker License?
Freight brokers are licensed at the federal level, but the process is referred to as registration rather than licensing and the end result is an operating authority from the Federal Motor Carrier Safety Administration (FMCSA). Learn more about what freight brokers do and what it takes to become one.
What Are the Steps in the Licensing Process?
Here�s what you will need to do in preparation for applying for a freight broker operating authority:
- Unless you plan to open your own freight brokerage, skip to #3 below. If you will be starting your own brokerage, you�ll first need to form a legal business entity and, unless it will be a sole proprietorship, register it with the California Secretary of State.
- For taxation purposes, register your brokerage with the�IRSand the California Franchise Tax Board.
- Decide which type of freight broker operating authority you will apply for: �Broker of Household Goods� or �Broker of Property (except Household Goods).� Many freight brokers apply for both.
- You must designate a process agent in every state where you will have an office or write contracts. You have the option of choosing a blanket process agent company that can represent you in every state. List all of your designated process agents on a single Form BOC-3�(Designation of Process Agents) that you will submit to FMCSA. A blanket process agent company can complete and file the form for you.
- Purchase a $75,000 freight broker bond (Form BMC-84) or set up a Trust Fund Agreement (Form BMC-85). The bond is by far the more popular option with freight brokers because it doesn�t require tying up $75,000 that could otherwise be used as operating capital.
When you are ready, go ahead and complete the online application through the Unified Registration System (URS). At the end of the process, after you have paid the $300 registration fee, the system will generate your MC number (MCN), which is the evidence of your operating authority. Within 10 business days, you will receive the operating authority documents in the mail.
Why Is a Freight Broker Surety Bond Required?
The BMC-84 surety bond you purchase serves as your guarantee to do business in full compliance with FMCSA regulations and to pay all valid claims resulting from any noncompliance on your part. It provides financial protection for FMCSA (the �obligee� requiring the bond) as well as for shippers and carriers using your services.
How Are Freight Broker Bond Claims Paid?
The BMC-84 bond required by FMCSA (the bond�s �obligee�) is a legally binding three-party contract with a freight broker (the bond�s �principal�) and the bond�s guarantor (the �surety�). That contract legally obligates the principal to pay all valid claims. The surety has guaranteed the payment of claims and typically will pay a claim initially and be reimbursed within a certain time period by the principal. A principal who fails to repay that debt is likely to be sued by the surety and end up paying court costs and legal fees on top of the claim amount.
What Does It Cost?
Freight brokers usually choose to provide FMCSA with a BMC-84 bond rather than a BMC-85 trust fund because a surety bond can be purchased for an annual premium that is only a small percentage of the $75,000 bond amount. The surety determines what that percentage (the premium rate) will be based on an assessment of the risk that paying claims on behalf of the principal entails. That risk is measured largely by the principal�s personal credit score.
For those with good credit, which suggests a low risk to the surety, the premium rate will most likely be in the 2% to 4% neighborhood. Those with poor credit will pay a substantially higher premium rate.
Request a�convenient online quote today, or call and speak with one of our surety bond experts who can answer your questions about freight broker BMC-84 surety bonds.