How to Start a Shipping Company
A shipping company handles the transportation of merchandise from its source to its destination. It also performs warehousing and other logistics services.
The business structure of a shipping company can vary depending on its needs. Some options include a partnership, C corporation or S corporation. Regardless of its legal structure, it is important to develop a sound business plan.
Legal Structure
The legal structure of a shipping company determines the type of taxation that it has to pay. Typically, LLCs are taxed like partnerships, while C corporations are taxed at corporate levels. Choosing the right legal structure for your company will depend on your business model, budget, and future plans. For example, an LLC framework offers flexibility in management and pass-through taxation, which may be beneficial for a shipping company with high growth potential.
The internal actors’ coalition of two shipping companies that are managing tanker and bulk carrier ships have been analysed with the 5 key organisational features (Apex, Middle line, Technostructure, Support staff and Operating core) shown in Figure 3. The Apex element incorporates the board of overseas shipping service directors and the chartering department while the middle line of the organisational structure includes the finance, HSQE, crew and operations departments.
Finally, the technical department operates the fleets of vessels within the company and is supported by the technostructure element which consists of the senior superintendent engineers and port captains. These teams handle the day-to-day maintenance of the ship fleets.
External stakeholders include the charterers and the ship chandlers that supply spare parts and equipment onboard. These are closely influenced by the market conditions and price fluctuations that affect the daily rate of hiring a vessel. Furthermore, they are also impacted by the shipping company purchasing decisions and ordering of new fleets and repairs.
C Corporation
If you want to start a shipping company, you need to register it with the Internal Revenue Service (IRS). You will need an Employer Identification Number (EIN) so that you can open bank accounts and hire employees. It’s also important to get a business credit card so that you can separate your personal expenses from those of the shipping company.
The most successful container companies are diversified and have multiple functions that support their core business. They may provide logistics, transportation, warehouse management and other services. They can even act as 3rd party logistics (3PL) systems that connect raw material suppliers with manufacturers or manufacturer’s customers.
As a general rule, the bigger the shipping company, the more comprehensive their service offering will be. Maersk, for example, is an integrated transport and logistics firm that owns a global fleet of ships and terminals. Its cargo liner ships travel to 76 countries across all major continents. Other big container shipping companies include China Ocean Shipping Company alias COSCO, which has one of the world’s largest fleets of ships, and German transport company Hapag-Lloyd, which operates a fleet of more than 515 modern ships.
The biggest shipping companies have the latest, most fuel-efficient ships and a wide range of routes. They also offer multimodal services, which means that they can ship goods by sea, road or rail. Moreover, they can handle different types of containers. In addition, they can offer storage and inventory management solutions.
S Corporation
Shipping companies are a vital part of the global supply chain. They overseas shipping service connect raw material suppliers to manufacturers and retailers to their end customer destinations. In addition, they perform various logistics tasks in-house and deliver services to customers that are value-added. These additional functions include warehouse fulfillment, warehousing and logistics management.
The best international shipping and logistics companies are well-versed in all aspects of supply chain logistics. They manage the transportation of cargo from airports to ocean ports, railway warehouses to truck depots and more. They also coordinate supply routes that are based on optimum transit times and cost effectiveness.
Professional and experienced full-service shipping companies tailor their in-house functions to the unique needs of their customers. For example, warehouse fulfillment is a service that provides storage space to customers who have limited or no facilities at their manufacturing or distribution centers. They help them reduce inventory levels and keep a consistent turnover rate. Warehouse professionals use state-of-the-art WMS technology to process inbound inventories quickly and accurately. They also minimize manual entries on receipts and shipments.
Other logistics services offered by shipping companies include customs and duty clearance, door-to-door cargo delivery and air freight. Some specialize in handling special cargo, such as oil. This is a vital commodity that is used for lubrication of developed machinery, burning in boilers and industrial plants and operating engines.
Funding
To operate a shipping company, you need to secure funding arrangements. This can come from a variety of sources, including banks and private investors. It is important to prepare a business plan before approaching funders, as this will help you understand your market and focus your efforts on building a successful enterprise. The business plan will also be useful in obtaining tax exemptions and attracting employees.
The shipping industry is one of the most capital-intensive industries, with a CAPEX-to-Assets ratio that is above the average for all sectors. As a result, the average major shipping firm is highly debt-driven. This is particularly true for deep-sea freight transport, where investment is predominantly associated with vessel purchases.
In a typical ship finance loan, the lender takes on the risk of loss or damage to the underlying asset in the event of default. For this reason, the loan is typically secured by a mortgage or other security. The lender is also likely to require insurance coverage for the underlying asset in excess of the loan amount.
As exogenous disruptions continue to impact the shipping industry, it is imperative that companies transform and leverage technology to increase resiliency against volatility and reduce costs. This requires a strong digital foundation and fit-for-purpose organizational setup and capabilities. In addition, it will be necessary to have a clear understanding of the current and future cost-to-performance metrics that are most relevant to the business model.