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Step 1 -Broker
- Thread starter load4u2020
- Start date
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Incorporate your company. Open a “trust account”for your payables at the bank. This step is controversial as many brokers do not have a trust account. It is my understand that it is required under the Ontario Highway Traffic Act…..your call, I guess. Obtain a Property Brokers Licence (freight broker) from the FMCSA to conduct freight brokerage betwen Canada and the US. You will need to get a 75k surety bond from an insurance company to do that, or put up 75k of your own money or assets. Talk to an experienced transportation insurance specialist. You should have contingency cargo coverage in the event a carrier’s insurance company denies liability. Other policies could include Errors and Omissions. An experienced insurance broker can save you lots of money, try and locate a good one. Optional steps could include joining various trade associations , such as TIA or the NTBA here in Canada, it makes you appear like you know what you’re doing. Keep in mind that as far as carriers are concerned, your ability to pay your bills is paramount and will determine how easy or how difficult it is to get your freight moved. Slow payments equal no trucks or a very hard time getting one. There are a ton of freight brokers out there, of differing degrees of professionalism, do whatever you can to make yourself stand out as one of the good ones, to both your customers and your suppliers. I have probably forgotten something, if so I will add it later.
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Ontario de-regulated the need for a brokers license years ago, but everything else mentioned is spot on . Good US company that handles surety bonds for about 2000.00 I think it was vs 3500-5000 the cdn insurance companies charge
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Correct, the brokerage industry was de regulated many years ago, but the trade off made at the insistence of carriers through the work of the OTA, was to have the Trust Account provision included in the Ontario Highway Traffic Act. It was meant to force freight brokers to place funds received from their customers into an account held in “trust” for the carries who actually perform the transport. Similar in a way to lawyers and real estate trust accounts. In the event of a broker bankruptcy, these funds would be separate and available to the carrier debtors, and not subject to seizure by other parties.
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Ya that has worked out well lol. I would venture a guess maybe 10 brokers in Canada have the trust account if that many. They go broke or disappear the carriers is on the hook and gets nada usually.
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So true Rob. I really don’t know what the answer is other than for carriers to make doubly sure the people they are dealing with are completely legit. We have operated a trust account for years and it really is nothing more than words on the account. I could walk into our bank branch today and withdraw every nickel, drive to the airport and fly off into the sunset. However, it does supply a small, increased level of security for a carrier in the event of a brokerage bankruptcy .
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Hi All
if signing up as a broker SOLO, what type of entity would you recommend? and if doing this with a partner what entity would you suggest and recommend? Pros and Cons would be greatly appreciated from past experience.
if signing up as a broker SOLO, what type of entity would you recommend? and if doing this with a partner what entity would you suggest and recommend? Pros and Cons would be greatly appreciated from past experience.
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If you are referring to establishing a freight brokerage business, it would be my recommendation to register as a limited liability entity. If you have a partner/s you will need and definitely want, a shareholders agreement. Either way, consult with a lawyer for the most current and accurate advice. Starting any company is the easy part, making it successful is the hard part.
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Another option is to buy a brokerage company that's already established, licensed, and operating in Canada and USA.
We care deeply about our clientele but may be interested in selling if the right individual comes along.
We care deeply about our clientele but may be interested in selling if the right individual comes along.
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However, it is better than zero and it does demonstrate a certain level of professionalism on the part of the broker. I guess as a carrier, one has to ask themselves, if everything else is equal and given the choice, should I deal with a broker that holds a bond, or one that doesn’t?
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The bond is the price of admissions if you want to work with most American shippers and carriers. Not needed if you're only working with Canadian shippers and carriers.
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If your freight brokerage business involves shipments that cross the US/Canadian border, you will need to register for a US, FMCSA property brokers licence . In order to obtain this license, you will need to secure a 75K US surety bond. If your business is limited to intra Canada shipments, none of this is necessary .