Keep Trucking, Broker Units Separate, Attorneys at ATA Conference Advise
By Jonathan S. Reiskin, Associate News Editor
This story appears in the July 4 print edition of Transport Topics. Click here to subscribe today.
PHOENIX — Trucking companies with brokerage units should organize the two divisions separately, a panel of attorneys said at a recent meeting here.
The educational session was part of an American Trucking Associations conference for the group’s National Accounting & Finance Council in late June.
“The motor carrier’s assets are at risk if the brokerage and carrier names are the same,” said Andrew Light. “There are costs involved to incorporate the two separately, but they’re not too significant.”
In the current legal environment, plaintiffs and their lawyers seek to find as many defendants as possible for a given lawsuit, the lawyers said. Light said the easiest way for a trucking company to do brokerage is just to do it, without any separate legal organization.
The first level of insulation would be a “doing business as” — or d/b/a — arrangement where the freight brokerage has a similar but not identical name. Ultimately, though, Light recommended that the two operating companies should be incorporated separately, probably under a common holding company.
Brokerage activity is tricky from a business-legal analysis, said attorney Gregory Feary.
“From a legal standpoint, brokers want to be pure conduits, where everything passes through,” Feary said, meaning that brokers use shippers’ money to pay carriers — less the broker’s commission — and all legal liability attaches to either of those parties, but not the broker.
Although he said that the best legal advice for a broker is to use the pass-through, or conduit model, Feary conceded that a number of brokers actually seek out risk and responsibility for business reasons, namely as a selling point to shippers.
Feary also warned that carriers should avoid situations where contracts and supporting documents conflict with each other.
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