If you're planning to start a motor carrier operation or add a different type of service to an existing business (think mergers or acquisitions), you need to know what type of carrier you will be. Motor carriers are considered either for-hire carriers or private carriers. To be a private carrier, 100 percent of the company's movements must be to support its own operation. If a carrier is engaged in any for-hire activities, the Federal Motor Carrier Safety Administration (FMCSA) considers them a for-hire carrier.

For-hire vs. private

For-hire carriers use vehicles to transport people or property and are paid for their service. The fee could be a direct fee like a fare or a rate but could also be other indirect forms of compensation. Examples of for-hire operations include:

·        A trucking company that hauls other people's property for a fee (direct compensation), or

·        A hotel that includes transportation to and from the airport to the hotel (indirect compensation) in its service.

Private carriers, on the other hand, transport only their own goods or people. Examples include:

·        A manufacturer that uses its own commercial vehicles to transport its product,

·        A construction or landscaping company that uses commercial vehicles to transport equipment and employees to job sites, or

·        A utility company that operates commercial vehicles in support of its operations.

For-hire operating authority

While private carriers aren't required to obtain operating authority from the FMCSA, for-hire carriers are required to get authority to move property or people that belong to somebody else and get paid for their service. Having authority is often referred to as having an MC number. The most common types of authority are:

·        Property for-hire,

·        Passenger for-hire,

·        Household goods,

·        Broker, and

·        Freight forwarder.

If a company never operates a commercial motor vehicle (CMV), it's possible to have authority but not have a USDOT number-for example, straight brokers or freight forwarders.

As part of obtaining for-hire authority, carriers must designate process agents and demonstrate financial responsibility (have proper insurance coverage).

One size does not fit all

Authorities aren't all-inclusive. Separate authority is needed for each type of service offered. For instance, a for-hire, over-the-road carrier that also wants to resell its extra demand will need both for-hire and brokerage authorities. A company is required to pay a $300 one-time fee for each type of authority needed.

Permanent authority required

There are no temporary permits available to substitute for authority. For-hire operations may not be performed until the proper authority has been granted. It's not uncommon for otherwise private carriers to become for-hire carriers to generate revenue on back-hauls or help balance capacity and demand during slow periods or seasons.

Getting it right

Carriers need to get it right when it comes to authority. Those that are required to have authority--but don't and operate anyway-can get themselves into trouble.

Penalties for operating without proper authority can get expensive and result in an FMCSA public-facing warning of "NOT AUTHORIZED." This means that the carrier does not have operating authority and isn't allowed to engage in interstate for-hire operations.

Key to remember: Carriers are either for-hire or private, with for-hire carriers being paid for their services, while private carriers transport only their own goods or people.