How to start a tow truck business

Register your tow truck business, and obtain an EIN. You need to register your tow truck business and obtain an EIN to operate legally. Also, you should familiarize yourself with the legal requirements for a small business in your city or state.

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.

An LLC is also a good option because once your tow business starts to grow, you'll be able to hire employees to help you.

Another option is to become a sole proprietorship. This is the most simplistic business formation and requires the least amount of paperwork. The big downside with a sole proprietorship is that you assume all liability with your business. It is also a risky move for a tow truck business, considering the inherent hazards and risks that come with operating one.

Your last option is to form a corporation. This is the move you want to make if you are trying to start a towing business and have it grow into a nationwide brand.

This comes with many of the same protections and limited liability as an LLC; however, there is more paperwork to do, plus you would have to create a board of directors and write bylaws. This is also the most expensive route.

After you have this determined, 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.

Your employer identification number (EIN) is critical to starting and growing your business. It helps with matters like opening a business bank account and paying taxes. Essentially it is like a social security number but for your business. In certain states, you may also have to get a tax ID as well.

Acquire the necessary licenses, permits, and business insurance. These are all mandatory requirements for starting a tow truck 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

Class B is the necessary Class of CDL for tow trucks. This authorizes a driver to operate a vehicle that weighs over 26,000 pounds or tow another vehicle that weighs 10,000 pounds or less. 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:

Next up is insurance. There are many different kinds of auto insurance you may want to obtain for your tow truck business. We recommend speaking with an experienced and licensed insurance agent to dig into the details and find out exactly what plans you need.

Here are some common auto insurance plans for tow truck businesses:

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.

Obtain a Transportation Workers Identification Credential (TWIC). These credentials are critical if you want to have variety in the types of loads you can legally haul with your tow truck business.

A TWIC also lets you access secure areas, such as ports and other maritime hauling-related facilities. You should only take this step if it applies to your tow truck business model.

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 of tow truck business needs a DOT number, then look into obtaining one.

Market your tow-truck business. Make use of all of the internet tools at your disposal to market your tow truck business.

Social media is one of the most popular marketing tools currently and can be somewhat useful for tow truck businesses.

However, an even more effective internet marketing tool for tow truck businesses is SEO searches. Tow truck customers are more likely to do a quick Google search for a tow truck rather than connect with your company via social media platforms.

When optimizing your content for SEO, you should look to rank for terms particular to your locality, like "tow truck New York" or "towing service in Florida." You can even narrow it down to your specific region, county, or city.

When locals in your area are searching these types of terms in Google, this increases your opportunity of being found on the first page of their search results.

In addition, you should also make sure you fill out online business profiles on sites like Yelp, Google, and others, to increase the odds of your tow truck business popping up as an option.

Another online resource you need to take advantage of for your towing business is a website. This is relatively inexpensive, and if you have some extra cash, you can hire a professional to do a solid website design for you.

Your website should include your pricing and contact information, as well as things like customer testimonies about your towing services. If your drivers are always on time and hardly ever damage the vehicles they are towing; customers usually won't mind expressing gratitude by writing a quick testimony or review for your tow truck business.

Also, be sure to link your social media business accounts with your website and vice versa.

The last thing you should definitely consider in terms of marketing your tow truck business is to become an AAA contractor. The American Auto Association is an extremely well-known roadside assistance brand. And many of the tow trucks that AAA sends out are local contractors.

If you partner with AAA, your tow truck business will receive a lot of benefits. Many everyday drivers are AAA members and rely on their road assistance services. This means that you will see more business if you partner with AAA because anytime an AAA member calls for a local tow in your area, one of your tow trucks might get dispatched.

Partnering with AAA also boosts your business's credibility and reputation because AAA is a very trusted brand known and used by so many different drivers. Contact AAA or visit your local office for details on how to become a contractor for them.