Will Location Affect My Freight Brokerage?
The short answer to the question of whether or not location matters when it comes to setting up your freight brokerage is no. In fact, the majority of freight agents and brokers work from home. However, there are some caveats that are important to consider before establishing your business in a particular location.
Let’s explore the considerations you should make when choosing the location of your freight brokerage.
Different States Offer Different Benefits
Some states have higher registration fees than others. Some require additional inspections or certifications to operate that can add up to lots of money. Even to become a freight broker, you will find different states have different standards for licensing and titling for instance.
Another area that can affect your bottom line by location is local and state taxes. Even though you can operate your business from any location, your tax treatment will depend on where you establish your freight brokerage. On the plus side, you can rely on uniform national standards for most of your operation costs.
Some states have heftier tax burdens for businesses than others, however, many offer special tax incentives and credits for independent contractors and small business owners. Nearly everything you use to operate your freight business is deductible including your home office as well as:
- Internet Fees
- Continuing Education and Licensing
- Costs for Health Insurance
But these are not the only outside costs associated with operating a freight brokerage from state-to-state. One factor in particular can be hugely important when deciding where to establish your freight brokerage; the gas tax.
Factoring in the Gas Tax
A study recently conducted by the API (American Petroleum Institute) determined which states had the most favorable tax treatment when factoring the gas tax. They ranked the top 5 states with the highest gas tax this way:
- New York
Overdrive rates the states based on overall business burden using numbers from Truckstop.com and found that southern and Midwestern states dominate the market for freight brokerage-friendly states. According to their rankings, the top 5 states stack up this way, # 1 being most friendly:
- And Michigan
You can take a look at the different regulations by agency at the IRS website Trucking Industry Overview. Always keep track of your business expenditures on a daily basis and verify your deductions and tax burdens with a tax professional.
The Size of Your Freight Brokerage Matters
The bigger your freight brokerage the more costs you will have. From hiring more employees, to renting office space and buying office equipment, the size of your freight brokerage matters. In addition to operating costs, your insurance costs will go up as you expand your business as well as:
- The Weight of Your Loads
- Costs by State For Business Licensing
- Local Regulations
- And Other Preconditions for Business Operators
Some states have fewer restrictions, regulations, and business operator requirements than others. Overdrive also ranks the worst states for freight operators based on rates for outbound loads.
They noted that out of all of the states over the previous two years it has been Colorado who has had the worst rates on outbound loads. On this end it was the northeastern states that topped the list of the worst including:
- Rhode Island
- West Virginia
- South Dakota
When you factor in gas taxes, business operator costs, excise tax, and load rates it really does matter where you decide to build your freight brokerage. Individual freight brokers and agents earn higher salaries on average in bigger cities but when comparing apples to apples, freight brokerages located in the south and Midwest have the lightest overall operating burden.
TMS Matters the Most
You can establish your freight brokerage in Colorado and still make more money than a brokerage operating in say, Virginia and save more on overall costs using a top flight transportation management software program. TMS cuts your costs exponentially and reduces overhead to just a few thousand dollars a year by:
- Providing Real-Time Data
- Reducing Hours Searching on Load Boards
- Practically Eliminating Empty Returns
- Offering Analytic Tools
- Automating Documentation Processing and Transmission
- And Much More
Freight brokers have been changing the entire trajectory of their careers using our world-class GlobalTranz TMS products. You get every tool necessary to compete in the dog-eat-dog world of freight logistics.
Become an Agent Today with GlobalTranz!
As competitive as the freight industry is right now, it is one of the most attractive careers these days. The industry for 3PLs and independent freight brokerages has never been more favorable. If you are interested in learning more, take a look at our Freight Agent Opportunity Program and then contact us for more information.