Because the logistics of arranging for timely pickups and deliveries can be difficult for many small businesses and small freight carriers, many rely on freight brokers to arrange shipping methods and handle payment and billing. Neither California nor the City of Los Angeles regulates freight brokers with any requirements beyond those of a general business, although the Federal Motor Carrier Safety Administration enforces rules that regulate transportation brokerages in addition to city and state regulations for the operation of a business. Rule: 1 Register your business with the city and state. While incorporating or registering as a limited liability company will provide you personal protection against liabilities, you may operate a business under your own name, known as a fictitious business. Register a corporation or other business entity with the California Secretary of State. Brokers who don’t incorporate but want to use a business name must register the fictitious name with the Los Angeles County Registrar-Recorder. 2 Register with the California Board of Equalization to obtain a use tax account. While you won’t be required to pay use tax until your brokerage receives more than $100,000 in gross receipts, but brokerages that handle billing for many clients may exceed that total quickly. 3 Locate a process agent in every state in which you plan to do business. Process agents serve as a legal point of contact for your brokerage in other states, and are required by the Federal Motor Carrier Safety Administration to receive operating authority to serve as a broker. You may act as your own process agent in California. 4 Purchase a surety bond or trust fund for a minimum of $10,000 if you plan to serve as a general broker or $25,000 if you plan to broker household goods, as required by the FMCSA. You may purchase surety bonds from commercial insurance agents. 5 Provide proof of your surety bond by submitting Form BMC 84 to the FMCSA. If you will provide coverage through a trust fund, your financial institution must provide Form BMC 85 to the FMCSA. 6 Submit Form OP-1 to the FMCSA. You may obtain an operating authority to broker household goods or general property or receive both endorsements. The FMCSA charges $300 per authority. Submit payment and proof of bondage or a trust fund with the application. It may take two to four weeks to receive response from the FMCSA.
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