Carrier Goes Out of Business While In-Transit! | Final Mile #46

Freight 360

June 4, 2024

Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:

  • Registering a freight brokerage in multiple states
  • Websites for freight brokers to bid on loads
  • What to do if a carriers goes out of business while in transit
  • Paying detention at “first come, first serve” facilities

Support Our Sponsors:
QuikSkope – Get a Free Trial: Click Here
Levity: Click Here
Bluebook Services: Click Here
DAT Freight & Analytics – Get 10% off your first year!
DAT Power – Brokers & Carriers: Click Here
DAT Express – Brokers: Click Here
Truckers Edge – Carriers: Click Here

Recommended Products: Click Here
Freight Broker Basics Course: Click Here
Join Our Facebook Group: Click Here
Check out all of our content online: Click Here

Show Transcript

See full episode transcriptTranscript is autogenerated by AI

Speaker 1: 0:19

All right, welcome back. It's another edition of the Final Mile, where we answer all of your usual listener questions, whether it's from email, youtube comments. Sometimes we just pull them off the internets, you know, get some good ones out there. So let's get right into our first one. This came in via email to us. It's a little bit longer, so I wanted to break it down. This is about taxes and the state in which your company is registered. So here it is. What do you got, ben?

Speaker 2: 0:51

I was going to say. Our standard intro to the Q&A is that we're going to answer a handful of questions. So whatever you saw in the title will be answered in the show, but we're also going to answer a handful of other ones.

Speaker 1: 1:02

Yep, exactly All right. Our company is registered in Delaware, but the main office is in Texas and we have employees in many other states. Our CPA emailed us the following the company will need to register in states where you are doing business. The company was formed in Delaware but won't need to file returns there unless there is a business activity there. Other states where the company will need to register are payroll Will there be employees that reside in a state? If you have an employee in Texas, the company will need to register their property. If you own property or rent property in a state, you may need to register in that state. Sales we will need to determine where customers are located. Is this accurate? This would mean we would need to register as a foreign company in most US states. Is there a? Oh? No, that's it Okay. So let's break this down a little bit. The first thing I want to differentiate here is a few types of registration for freight brokerages. Okay, there is a list of process agents that you need to fill out. That's your BOC3 form.

Speaker 2: 2:12

Start with a company right, just the one everyone thinks of. Sure, like you got an LLC and you need to incorporate it right in a state, like that company needs to exist somewhere. Right, that's your first one.

Speaker 1: 2:25

You will have one legal address, that's it. You're going to have an address and every. You're not going to have one parent address in every state. That's just not true.

Speaker 2: 2:33

And that's why I think the beginning of this question right. It says our company is registered in Delaware. Most companies or corporations are registered in Delaware because they have the most lenient.

Speaker 1: 2:44

I think they Most companies or corporations are registered in Delaware because they have the most lenient they're tax friendly to businesses is what it comes. I don't have the exact math on it, but it's well known that it's they're tax friendly to businesses. So, yeah, where, like where you register your company is simply like if you go to the FMCSA website, that's the address that the brokerage will show. Simply if you go to the FMCSA website, that's the address that the brokerage will show. The brokerage that I work for shows Tennessee, but I am in New York State. Nowhere in the FMCSA is Pierceville Wild Logistics, registered in Orchard Park, new York. I can tell you that much.

Speaker 2: 3:19

Yeah, here's the answer. By the way, 65% of all Fortune 500 companies and more than half of US publicly traded companies are incorporated in the state of Delaware. One of the main reasons why companies incorporate Delaware is the legal and liability protection of established corporate laws. Delaware's well-established and business-friendly legal framework is designed to provide a clear and flexible environment for businesses to operate.

Speaker 1: 3:46

Yep, there you go. So that's where your company is registered with the FMCSA. That's the first part. The next thing that was mentioned is wherever you're doing business, where are your customers located? So there is a form that you fill out called a BOC3, and that's your list of your process agents and, correct, as a freight brokerage. You need to have a process agent designated in every state that you plan to do any kind of business in. So, since we're the kind of industry that is all over the country there's process agent companies. They physically keep a person in an office in all 50 states and they will happily charge you a one-time fee to list all their process agents on a form and you can have it filed with the FMCSA when you start your company. Say, when you start your company, what are those process agents there for um, they can receive legal um, basically they can be served on your behalf. So if I'm located in tennessee and someone wants to serve me with a lawsuit in oregon, there's a process agent in oregon. So that's the whole. Where are you doing business? Which? Which states? Now, employees, okay, yes, you will need to have. If your company has employees in various states, you will need to have, you will need to set up with that state's department of taxation, and every state's going to be different, naturally, but I dealt with this myself.

Speaker 1: 5:24

The company that I work for is in Tennessee. There's employees in Tennessee, there's employees in Florida. Florida and Tennessee don't have state income tax. New York State does and I live in New York State. So, as an employee, the company had to register with the New York State Department of Taxation to withhold payroll taxes or for them to pay payroll taxes on my behalf, as well as, obviously, set up my deductions. What else do we have here? I think that covered all of them.

Speaker 1: 5:54

But the let me just double check here. Where you have employees, so we covered employees, right, you got to be registered with those states for payroll and taxation purposes. But your actual company registration it in a certain state, don't try paying, like if you've got employees, don't try saying that that person, like for my case in New York, right, if they tried to say I lived in Tennessee so I don't pay payroll tax, it doesn't fly. If I got audited or the company got audited, I'm in New York State, new York State would be knocking on the door asking for their money. So at one point.

Speaker 1: 6:44

In the past I worked for a trucking company in Pennsylvania. I had a residence in New York and in Pennsylvania, but all of my work primarily happened in Pennsylvania. I had to pay Pennsylvania state income tax on those earnings, so every state might be a little bit different. Producer, steven put a little thing in here. 181 calendar days out of the year this is actually a good one. My parents are snowbirds where they, like you know, they live in Florida but they come up to New York. They have to spend 181 days in Florida to keep Florida residency and, have you know, new York State's tax hands off of any of their income.

Speaker 2: 7:20

So yeah, and his other point right of their income. So yeah, and his other point right. He said now we were talking about this before it was just that for hybrid employees that live in and it was similar in yours, like you know, in Cincinnati but work in both Ohio and Kentucky, they have to account for both States, typically.

Speaker 1: 7:39

Yeah, that probably became a disaster when COVID hit right and people started to work from home. And if they live, think about New York City right, if you've got Jersey, a lot of the people come in from Jersey to work in New York City. And if you went remote, you went back to Jersey.

Speaker 1: 7:54

So, yeah, that makes sense to have to account for it. So a little bit long-winded there. But when in doubt, ben, you and I are not tax professionals Check with your CPA on the tax side of things, and if you are a small company that doesn't have a seasoned HR professional who understands state law for payroll, I would suggest you hire some sort of consultant or a third-party HR firm that can help you navigate the different states laws when it comes to how you need to set up for you know employee purposes in each state, because there are certain things that Pierce has to pay for New York State that they're like we've never heard and not even related to taxes, like certain like insurance policies that New York state has for unemployment and whatnot.

Speaker 2: 8:47

But yeah, and that's a really good point, and I wanted to take a little bit of a segue into that too. Right, and it's that always comes down, especially for smaller businesses or new business owners. You basically have a choice with a lot of things exactly like this and some other similar ones I want to just briefly talk about. One is like, okay, just accounting Like I went to school for accounting, like got a major in it and practiced accounting Just because I learned it and could do it at one time does not mean I am anywhere close to as good at it as somebody that does this for a living and is up to date on what is changing and what is new and what are best practices, right. So even if you can, that doesn't necessarily mean you should. Like, I defer everything to my accountant because he sees things that there's no way I would be able to find without spending dozens or hundreds of hours, and that means I'm not doing something else. So it makes way more sense Specialize, right, he's specialized in accounting. I can understand what he's saying to me, but he's definitely better at it than I ever will, right, and a few of the other things that I've learned.

Speaker 2: 9:50

We were talking a little bit about this off air, just like setting up a new company. Like a lot of companies don't have really good support for other things, whether it's a phone system, whether it's a CRM or just a tool. One of the things I found most helpful is going through like a system like Upwork and finding somebody that is actually just a paid per hour consultant that works within that specific issue or niche. Right, and I found that, like one, it saves me a ton of time for a little cost, right. Like I set up, just as an example, hubspot last year with a company, it took me like two weeks almost to learn everything, to be able to do it, to work through the issues that didn't work. And then, when I did it the second time, I worked with a consultant. I think we paid him like 75 bucks an hour. He set the whole thing up. It costs us like $300 and I spent no more than two hours.

Speaker 2: 10:41

Well, my time prospecting and bringing business in is far more valuable than me learning a tool that I got to set up one time. So it makes a lot more sense to find somebody that does this all day long. Pay them a smaller cost, because the time is the thing, I think the thing that most people overlook the cost of Like oh, I'll just throw more of it at it, but what you're probably not taking into account is the opportunity cost, what you would have been doing otherwise and for people in our industry it should be prospecting right, bringing customers. You can set up the best tech package for anything and the best accounting suite and the best you know, whatever, but at the end of the day, if you've got no customers, you have nothing right.

Speaker 2: 11:26

So it's something that I think it reminded me of on the accounting side. But something that you should just think about, no matter what you're putting together, is how much time are you willing to invest? And then also multiply that by two, because we all underestimate how long it actually takes and then see what you would pay to get that time back. And if it's a pretty low number and someone else can do it, it's probably better to do that. Agreed.

Speaker 1: 11:44

That's a very good point, all right. Our next question Is there a website or somewhere a broker can go to bid on freight from a shipper? I want to first say, if this is asking, where do I, where's my freight load board that I go to as a new broker? Those don't exist. But yes, there are a lot of shippers that use online bidding systems. Um, so, like some examples.

Speaker 1: 12:10

One of the examples that I've seen is a website or a company called you route. Uh, now, you route is just the website platform for the bidding. Um, and they, like your customer would have. You would have to add your customer or get approved by your customer on a website like ViewRoute. There's other, there's tons of third-party systems like this where they'll have a list of all their available loads and you can go in and place an offer, a bid, on that specific shipment if you want to, and that's like they could have a spot board like that. Another option would be if there's an annual bid or maybe a mini bid for a month or a quarter and they want you to submit your pricing. A lot of times that's done online through a third party website instead of a spreadsheet.

Speaker 1: 13:00

But again back to our original thing. There's no like magic website where a new broker just goes to and registers to get access to all these different loads. You can easily call a bunch of you know lumber and steel companies that put you on a load list like anybody else and you can bid that way off of their emails each day. But the takeaway here is there's a lot of hard work and time that has to get dedicated into building relationships with customers. There's no easy shortcut button or magic pill you take that all of a sudden gets you access to all this business, because by the time you use an online platform to bid on one of your customers freight, you've had to be invited to it through building relationship with them and them trusting you to say, hey, um, go register your brokerage on this website. You'll see all of our available loads updated throughout the day on there. You can bid on that stuff in real time. Any thoughts?

Speaker 2: 13:55

there. That was literally what I was thinking, and what I was going to say is that, like yeah, there no load board, but lots of shippers have this it makes it easy for them, right?

Speaker 1: 14:04

It takes a lot of the human discussion out of. You know everything right here, yeah.

Speaker 2: 14:09

The point that I would make right is like in order to get access to them, you typically need to be onboarded with them, which means you need to prospect them like any other shipper, making phone calls, building trust and relationships. Once they approve you, then you get access to that. You know internal load board. If you will the other ones that I know that I'm aware of. Right, the military has one that's similar to this and my mind's blanking on the name of it, but it goes through the SDDC and basically all the loads show and then you put in bids for it and then they get awarded through that system.

Speaker 1: 14:44

Yeah, samgov is. Is that the website you're talking about?

Speaker 2: 14:45

Yeah, no, that's one and yeah, you need a number. Like there's a whole process you got to go through. But once you have gone through that process, you have access to their internal kind of loads that you can bid for and change these bids. And there's lots of them and you change them all the time and they also send them out, send out load lists, just like any shipper for troop movements and things. The thing I would say for anybody that then listens to this and goes, oh, that's great, like I'm going to go spend all the time and effort to go work with the military to get access to easier freight.

Speaker 2: 15:15

It's extremely price competitive, which means, even when you win them like there's so many people that bid on it that the prices are usually very close to pay truck or even below. So for a broker in the past we've not found much opportunity for brokered freight because it doesn't really fit how the needs that we provide. We talk about this a lot like time urgency. Those are the things that shippers are willing to pay for in order for us to do that quickly. The way these systems work is it's intentionally a long way out so they can get lots of bids and schedule it to get the lowest price and again we talked about this in the last episode. They got three criteria quality, right Like service price, and my mind just blinked.

Speaker 1: 17:10

Oh, you had it.

Speaker 2: 17:11

Quality, price and time and time right, they care most about price, like they don't care as much about service, so like there's not a lot of opportunity other than to just move some freight.

Speaker 1: 17:23

Yep, good, good point there. Next one what should I do if a carrier goes out of business while the freight is in transit? That's a good one. Well, here's the reality. Like this happens this did happen quite a bit and like, think about when, who's the big LTL carrier that shut down? Yellow, not yellow, central? Was it yellow? Yeah, yeah, but you'll see it like in smaller companies too.

Speaker 1: 17:54

There's no like doctrinal answer here, but I can give you a few pieces of advice and considerations to look at. Number one is going to be communication across the board with everybody. Right, your customer, obviously, because this is their freight. But the driver, like, how did you find out they went out of business? Is it an owner-operator that just shut down and they're parking their truck and leaving Because you know, at some point you get into a situation where, like, the actual freight on board could be considered held hostage by somebody if they're not going to do something with it.

Speaker 1: 18:30

But you know, is it a company driver who is told via email that they don't have a job anymore because they shut down and to go park at the nearest, whatever, and they just decide to ditch their trailer somewhere? Like, find out the best that you can. And then you've got to figure out how to pick up the pieces, because ultimately you'll have to get the equipment, you have to get the freight moved to where it needs to go to, and if you can get people to cooperate with you, it's going to be a lot easier than if you have someone that's not responding to you and you just have a locked trailer sitting at a truck stop. But now you have to take certain legal actions to get possession of the freight out of it.

Speaker 1: 19:11

So there's no like the but you just gotta, you gotta communicate, communicate, communicate often and early and um, because your customer might have some kind of direction for you to go into right for sure you just tell them like it's not your fault, but you're gonna do the best you can to help them get through this and here's the thing right.

Speaker 2: 19:31

As a broker, I know you brought likely wouldn't know that and you'd be caught out of the blue and it would be unexpected. The shipper may not see it that way and may look at it like, well, you hired this company and that's your responsibility to resolve it. And at the end of the day, it is still your responsibility to fix it, even if you didn't, cause it is the really important piece, right? And some of the things like you said, like I totally agree with, like you've just got to kind of think on your feet and find a way to work the situation out right. The two that come to mind the quickest are talking to the driver and seeing what options you have to either transload it or to maybe have another carrier come and pick it up somewhere that is accommodating to the driver if they really want to ditch it. And they go like, hey, look, I want to turn my keys and I want to park this thing and get out of it as soon as I can, because I don't even know if we have insurance or whatever they're saying. Or maybe they're just irritated because they just found this out this way and they like are just angry.

Speaker 2: 20:23

And who wouldn't be right. So I'm going to first try to understand the driver very well, ask lots of questions and really try to help the driver in this and say, look, what do you want to do and how do you want to do it? And if that is to ditch the truck, I'm going to try to have them ditch it somewhere where I can transload it if possible. So I'm going to probably spend as quick as I can try to bird dog a place where they can take the truck and have it transloaded so that I can get the other truck there, even if they do leave the the other thing. And I'm curious your thoughts if this would work, because I literally just thought of this but I'm like I don't know. There's maybe even a way to calm, check that driver a good portion I was gonna say you usually gotta incentivize them, right?

Speaker 1: 21:02

exactly, they're not gonna get their last check. You're not gonna have to pay that motor carrier anyway, right? Hey, let's say I was to make wrong numbers. If it's's a thousand dollar load, they get cut halfway through. You know, hey man, I'll work with you here, I'll. I'll pay you directly 500 bucks. Just, I'm going to have another carrier to meet you and at a you know cross dock and we'll swing the load on their trailer and they'll take it Whatever that looks like, right?

Speaker 2: 21:29

I would do whatever I can If I worked at a bigger company. I would go right to management or operations and go what are my options here? Can I PayPal this guy? Can I Venmo him? What can we do to get this load delivered? And most companies will be behind you and support you in trying to work this way out, because the biggest priority at that point now is just keeping the cargo safe and getting it to where it's supposed to be, and I would look at any and all options to be able to do that after I've talked to the driver. And if you create conflict with the driver and start yelling at him after he just got let go from an email in the middle of a load, like you're probably not going to have him work with you very much and he's probably not going to be very helpful, right? So you want to start by understanding and listening far before you get to the problem solving Exactly.

Speaker 1: 22:14

All right. Last question If a shipper is first come, first serve, how should I handle detention for drivers? Well, I would say rule of thumb is your customer is likely going to have, if they're first come, first serve facility, they're likely going to have some sort of detention policy. I think what we normally see is they'll have maybe two hours that are free, meaning that, hey, your driver can expect to wait for up to two hours before we're going to start paying them for their time spent. It can vary from company to company.

Speaker 1: 22:51

Thing two is just because a shipper has a certain policy doesn't mean that you need to limit yourself to that policy. Minute one, right, or you know whatever it is Like. If you get there and you waited 30 minutes, I'm going to compensate you for that 30 minutes. The customer's not paying me, but that's what I do to take care of my carriers and that's why they're loyal to me. You can absolutely do that as a value add. Um, but I mean you're going to see varying.

Speaker 1: 23:25

I got Steven Strom in the comments here that what he's seen four hours after arrival, two hours after closing, kill plants won't pay detention because it's an expectation usually within 24 hours. I mean so. I mean, you know it's going to vary from location to location. It's going to vary from location to location. Make sure you find out, though, if there's layover as well, if someone's going to have to wait until the next morning or the next day, for whatever reason, to get loaded. Is there a compensation for that? But yeah, I mean I would. I would say it depends on the, on the customer, and it does. What do you think, ben?

Speaker 2: 24:06

But I think there's some framework, right. And the thing I want to point out is right, this is what pisses drivers off, right, when they go to pick up a load from a broker and they're told, hey, it's an easy load or it'll be real quick, and they sit there for five hours and then they request attention. And then you tell a carrier like, oh, they don't pay attention to after four hours and the carrier's like what in the world is going on? He burns a whole day, right, like this stuff happens all the time. But there's a lot of simple things that you just outlined you can do and guess what? They're all before this happens, not after it happens, right.

Speaker 2: 24:37

So anytime you've got a new customer, you need to know those two questions what do you pay for detention? What is your detention policy? What is your layover policy? What qualifies as a layover? What goes between? There's usually a line between detention and layover, right? If they're there for an hour at the end of the day and they lay over, that's maybe one fee. If they're there for five hours from noon close at five, then load the next morning, like it's usually a different fee and they usually don't pay detention and layover, right.

Speaker 2: 25:03

Most shippers have this outlined, hopefully, in their agreement. But even if it is in the agreement, like you, should just make it a habit and if you haven't done this, ask every one of your customers as soon as possible. Hey, can you just confirm your detention policy, what your rates are and when it becomes a layover, and what your policy is for that right? And, on the same end, if you're doing this with your shipper, you want to be very clear with every carrier you're working with and it should be in your rate cons, in your special instructions for that shipper and that location, which every TMS can do. This detention policy applies to this facility right, two hours free, four hours free, whatever that is, be very transparent and make sure the carrier knows prior to it, not after the fact, because that's going to save you a lot of these headaches and the back and forth later.

Speaker 1: 25:51

Yeah, the other scenario too is like a missed if someone's appointment and they're, if they have an appointment, they missed the appointment. Understand the consequence Like this this customer, this shipper does appointments and if you miss your appointment you go into the queue and there's no attention paid for that because you're working now.

Speaker 2: 26:12

And here's where I've seen that blow up right, because you might say, oh, that's pretty simple, they either make the appointment or they don't get detention right. But then you'll have this scenario where the driver pulls in, is on the property, pulls over to the loading dock and it's not clear where they check in at. It's not visible on the sign.

Speaker 1: 26:28

You didn't tell the driver, or it's too congested and they can't get to where they're trying to go.

Speaker 2: 26:36

Yeah, or you didn't make it clear where they check in at and when that process happens or where they need to go, or there's a line in front of them and they're literally in the street waiting to get onto the property and their GPS and they send it to you like I've been here for a half an hour before my appointment. I didn't get on the property until an hour and a half later. They didn't check me in until two hours later. They want to start the clock when I checked in, but I've been physically here for two hours. This stuff happens all the time and you need to also talk with your shipper to see how those are handled. When do they consider it a check-in? When is the driver considered there? Because some facilities are very large and they literally need to go and sign in. Sometimes they go through like a toll booth and they check them in there, right. There are lots of changes not changes, but like variances and how this is handled from company to company.

Speaker 1: 27:21

I went to. I visited with the customer customer last um summer and they had two different like loading locations across town. It was like three miles apart and what they would have is that they had like their own yard jockeys that would would move trailers from one facility to the other um, but it was like the good thing about being there was to be able to see and take pictures and videos, to like say, hey, when you, this is the one you want to be at, like to share with the driver, this is when you want to be at. When you get here, turn right, because the one facility was just theirs and the other one across town a couple miles away, was like a joint industrial park and they just happen to have like 20 dock doors um, with their own location there. But it like does detention start?

Speaker 2: 28:07

when I got to the first place, or do I have to go over here Like it's yeah, there's all kinds of goofy stuff there, so I used to get that a lot where, I would say it, most common, like military bases, and some of them have clearly multiple entrances. Right, you know, the drivers show up at one, and it wasn't maybe even because, like they didn't read the directions, it's because they came off like an interstate from the other side and like there wasn't literally a way to get to the other side. Sometimes I like literally drive around town and come back in the other and they're like I was here.

Speaker 1: 28:38

One game is closed. It's supposed to be open. Their gps isn't going to tell them how to get to the other one or where the other one is exactly. Yeah, it gets messy for sure. Cool, great questions Contain to send them our way and we will keep answering them. On that note, ben. Any final thoughts?

Speaker 2: 28:56

Whether you believe you can or believe you can't.

Speaker 1: 28:59

You're right, and until next time, go Bills.

About the Author

Freight 360
Freight 360

Freight 360 was born from a vision to share knowledge about transportation with everyone.

To read more about Freight 360, check out full bio here.