Can you buy an established MC? Is it legal? If so, how? What are the benefits and risks involved? Well, read on.
The answer is, yes you can buy an established MC authority, but with stipulations. Per FMCSA, transfer of authorities can be done. However, MC authority can only be transferred if it’s linked to a business and not to the person (ie., their social security number). Therefore, an owner operator may not transfer their authority but a business – an LLC, INC. CO. etc. – may.
Why sell your MC authority?
An MC authority can be treated as an asset. If you are a trucking business that’s winding down, it may make sense to sell it instead of forfeiting it and be rewarded for the work you’ve put in to stay reputable and maintain a good standing. Proper FMCSA protocol must be followed to ensure a complete legitimate transfer of authority to avoid any liability following the transfer for the seller.
Why buy an established MC?
There are merits to buying an aged MC as opposed to getting a new authority. It, of course, depends on what your business goals are and what your financial situation is. A new MC authority generally faces higher insurance rates, higher factoring rates, less frequent, perhaps even lower paying hauling opportunities and reluctance from established truck leasing companies for leasing trucks or financially costlier terms of payments if they do lease to a new MC authority.
The downside, however, is that it may cost significantly more upfront to buy an established MC versus getting a new one for $270 – $300. Most reasonable sellers arrive at a dollar value for their MC’s based on a rough estimate of how much their MC may save a buyer in terms of recurring insurance costs, factoring costs, leasing terms and obtaining better broker deals particularly in the first few years of operations.
In most cases, if you crunch the numbers, a buyer can leverage the virtues of an old MC in different ways to save recurrently through costs of operations and maximize earnings on account of the age and reputation of an established MC. Basically, a good investment in many ways.
What are the factors that I need to consider when buying an MC authority?
To make the most out of an established MC authority, a buyer must consider the age of an MC, its operating status, safety record and reviews from brokers and clients as these are the main factors that may influence your ability as a business to raise loans, lease from trucking companies, get better insurance and factoring rates and get more frequent, better paying hauls from brokers. It’s vital and in your best interest to do independent research before you buy an MC authority. The best place to start is Safer (https://safer.fmcsa.dot.gov/CompanySnapshot.aspx) where you can view the age of the MC, activity status, revocation history, insurance history, and violation history. Additionally, there are third party services that may be able to help you dig deeper into the performance, history and reputation of an MC and the associated business.
Where can I buy an established MC?
You may find listings for MC’s sporadically on the web. However, a good personal network, an attorney or a consultancy/consultant specializing in trucking may be your safest bet to find a reputable, legitimate seller with a well established MC.
Are there any risks associated with buying an aged MC?
As mentioned earlier, it’s in your best interest to do due diligence, ask all the relevant questions to the seller, and not take the seller for their word and seek proof of worthiness. Buying an MC with a bad safety record, for example, would quite obviously be a sunk cost and counterproductive for your business. It is also critical to follow FMCSA protocols (https://ask.fmcsa.dot.gov/app/answers/detail/a_id/241) to ensure a legitimate and proper transfer of authority and safeguard yourself and your business legally before entering into an arrangement with a seller.
Disclaimer: The contents of this article are not to be construed as legal advice in any way. Please visit the FMCSA website/ contact the FMCSA for regulations regarding transfer of authority and/or consult an attorney to consider your options.
