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This question is about tow truck operator.
How to start a repo business
To start a repo business, you need to learn about your local repossession business laws, apply for your repossession license, and acquire licenses, permits, and business insurance. For details on these steps and others you can take to start a repo business, use this guide:
Learn about your local repossession business laws. When it comes to laws governing the repo business, every state is different.
Certain states require you to take a training course and pass an exam before you can start a repo business. Others only require you, and your drivers, to have Commercial Driver's Licenses (CDLs) in order to operate legally.
You should also try to familiarize yourself with your state's laws regarding repossession.
Apply for your repossession license. This also depends on the state in which you plan to operate your repo business in.
Certain states require a repossession license, while others do not. So you are going to need to research the requirements in your specific area.
However, even if you aren't required to obtain a repo license in your state, you are still going to need to apply for a business license.
Typically, a business license costs between $50 to $60.
Write up a budget for your business plan. You need to carefully plan your business budget so you know you have enough capital to make the purchases required to start a tow truck business.
Here are some of the most common costs associated with starting and running a repo company:
Licenses and permits
Purchasing tow trucks
Commercial tow truck insurance
Employee wages and salaries
Business insurance
Marketing expenses
Vehicle maintenance
Gasoline
Your specific costs in this area will depend on the size of your business and if you choose to hire additional tow truck drivers.
Determine what equipment you need to purchase or rent. Buying a new tow truck can be quite expensive, they can cost up to $100,000, or more in certain cases.
You can also look into purchasing a used-tow truck or a fleet of used tow trucks. Just be sure to take truck maintenance and repairs into consideration when calculating these costs.
Here are the most common tow trucks used in the industry:
Flatbed trucks are by far the most common. They have long beds with flat tops, which makes it easy to navigate a car or vehicle in place and secure to the bed of the tow truck.
Integrated tow trucks are heavy-duty tow trucks. They often have additional axles for towing extra-large vehicles, like other large trucks or even buses.
Hook and chain tow trucks used to be the most common tow trucks, until the popularity of flatbed tow trucks grew. This kind of tow truck is most often used for towing wrecked or totaled vehicles to an auto repair shop or junkyard.
Register your repo business, and obtain an EIN. You need to register your repo business and obtain an EIN if you want to hire employees and operate legally.
You might want to consider applying to become a limited liability company (LLC). If you operate as an LLC, your personal and company information is entirely separate.
While this changes your tax status, it does protect you from personal losses based on the company's performance.
You should then get a Federal Tax ID number. This helps you get a license to run your business. This is also referred to as an EIN or Employer Identification Number. To hire drivers, you must obtain your EIN for tax purposes.
Acquire the necessary licenses, permits, and business insurance. These are all mandatory requirements for starting a repo business.
You and all your drivers must have a valid CDL license to operate and drive your tow truck(s).
CDL licenses fall into three different categories:
Class A
Class B
Class C
A Class B license also clears you to drive straight trucks, box trucks, and large passenger buses.
Trailer gross weight rating restrictions separate Class A and Class B. Class A license allows you to drive tractor trailers, while A Class C license allows you to drive smaller vehicles, like passenger vans and certain delivery trucks.
Now we'll look at some permits you might need to obtain for your tow truck business:
Indictment management permit to tow vehicles without consent when requested by law enforcement is a permit most tow truck businesses must have.
Private property permit to tow vehicles without consent when requested by the parking facility owner. This comes into play if you lend your services to specific apartment buildings or commercial establishments.
Consent to tow permit to tow vehicles with consent by the vehicle owner. This permit mostly refers to roadside assistance.
Oversized vehicle permit to operate a tow truck that exceeds a certain weight load. The necessity of this permit depends upon the type of tow truck business you are starting.
Next up is insurance. Here are some common auto insurance plans for tow truck businesses:
Auto-liability insurance covers you or your driver when you or they are at fault in an auto accident, and your business must cover the other driver's medical and property expenses.
Physical damage insurance covers any necessary repairs to your tow trucks during auto accidents.
Comprehensive coverage is useful when your vehicle is damaged outside of an auto accident, such as a fire, theft from your tow truck or theft of the truck itself, falling debris or objects, or hitting an animal.
On-hook coverage is needed for protecting your business if any vehicles become damaged while hooked up to your tow truck.
Uninsured motorist insurance covers any injury to you, your drivers, or a passenger of your tow truck, caused by a driver who doesn't have insurance or in the event of a hit-and-run accident.
Secure a motor vehicle record (MVR). This step is fairly simple in most states, but you should still do the proper planning in the event of delays.
In most states, there is a fee you must pay to get a motor vehicle record. In certain states, you can also accomplish this online and get a digital version. In other states, drivers may need to pick up a physical copy or have it mailed to their home address, or to your business address.
Apply for a DOT number. A DOT number or Department of Transportation number is a requirement for certain kinds of tow truck businesses and can be a little more challenging than other steps.
You should first determine if your type repo needs a DOT number in your state, then look into obtaining one if necessary.
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