Rideshare businesses offer customers options for transportation via independent contractors. Popular companies, such as Lyft and Uber, have become popular options for customers throughout the world.
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Learn how to start your own Rideshare and whether it is the right fit for you.
Start a rideshare by following these 10 steps:
- Plan your Rideshare
- Form your Rideshare into a Legal Entity
- Register your Rideshare for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Rideshare
- Get the Necessary Permits & Licenses for your Rideshare
- Get Rideshare Insurance
- Define your Rideshare Brand
- Create your Rideshare Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your rideshare. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a rideshare?
The success of a rideshare business often lies in its dispatch app. How customers reach you and request rides is critical. Developing an app could be costly, initially. Starting for as much as $40,000 and ranging upwards towards $100,000. But, once established, the business could pay for that initial investment.
Since drivers are independent contractors, your employee overhead is almost nothing. If you were also a driver, the associated maintenance costs would be another factor.
What are the ongoing expenses for a rideshare?
Most of the costs associated with a rideshare business are the vehicle upkeep costs, which are primarily insured by the drivers. Some rideshare companies might also be paying fees for the maintenance and upkeep of their app design and service.
Who is the target market?
Most customers are either looking for a transportation method that alleviates them driving. Be it they are out of town on business or vacation, are traveling to a crowded event, or are leaving after a night on the town. Therefore, focus on age groups such as 25-45 and 30-60. These are more likely to be active for business during the day and for pleasure after hours.
How does a rideshare make money?
Rideshare businesses profit from the fees charged customers for the distance or time traveling from A to B.
How much can you charge customers?
Current rideshare costs average around $12 per ride. Customers can be charged by time or distance. Customers can also be charged extra for peak ride times.
How much profit can a rideshare make?
Rideshare companies can be profitable, but there is competition, and it takes hard work. As previously stated, independent contractor services are currently very popular. Most independent contractors are supplementing their income with driving jobs. Depending on the size of the business and the percentages paid from the drivers, a rideshare business could make anywhere from $30,000-65,000 annually, but these figures will fluctuate greatly from one location to the next.
How can you make your business more profitable?
Some rideshare companies branch out into delivery or courier services, especially in light of the current national and international conditions.
Rideshare companies might also choose to offer private fares for on-call services.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your rideshare is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an Rideshare business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a rideshare
One of the best and least expensive options for advertising is to create an online presence. Twitter, Instagram, Facebook, and even Linkedin are all great sites to advertise your business.
It is also important to try some of the more traditional methods of print and billboard advertising. With online marketing becoming more small-business friendly, traditional advertisers may be more apt to discuss package advertising and marketing deals, in order to maintain their own revenue streams.
How to keep customers coming back
Ridesharing is all about pleasing and impressing the customer. It’s vital, therefore, to make a great impression.
- Offer a clean ride. Appearance matters.
- Bottled water, candy, or mints are customer perks that might generate a larger tip or repeat customers.
- Be polite and attentive to the customer, but not overbearing.
- Have business cards available, in case customers want to contact you directly.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start a Rideshare in your State
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
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Is this Business Right For You?
Rideshare contractors are usually people who don’t mind working late hours and are familiar with driving in their city or location. Contractors must usually have new, reliable cars and must be people-oriented. Rideshare business owners are often drivers, themselves, as well as someone with a fair amount of business acumen.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a rideshare?
The majority of the business day involves accepting rideshare requests and driving customers where they need to go. Additionally, rideshare contractors may spend time cleaning and servicing their vehicles.
What are some skills and experiences that will help you build a successful rideshare?
As stated previously, ridesharing is currently a popular service. Therefore, it may be necessary to offer some added perks to each customer’s experience in order to stand out.
Experience in the restaurant or hospitality industries may prove helpful. Knowing how to interact with the general public is important.
You should also be familiar with the areas you are driving. Using map systems is great, but also understanding the street layouts of a city will help you make better driving decisions on the fly.
What is the growth potential for a rideshare?
Ridesharing is currently very popular. Many rideshare contractors have embraced the freelance nature of the business and enjoy the freedom of operating their own small business. As an owner of a service, the same can be said, as the market for this service is ever-growing. For both owners and contractors, the future market looks promising.
Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a rideshare?
First and foremost, do your market research. Make sure there are enough customers for a healthy rideshare ecosystem.
Focus on peak ride times, when customers are most likely to request your service. For instance, as downtown nightlife begins to shut down, expect higher call volumes, and position accordingly.
Advertise heavily at the beginning of your business startup. Get your name out to local businesses, such as night clubs and bars, establish an online presence, and be available as much as possible initially.
How and when to build a team
As mentioned previously, initial market research is essential for this type of business. It is advisable to start small and see what a couple of months of business looks like. Track the number of calls coming in and the number of driver opportunities not taken, if possible. Factor in the need for additional team members, accordingly.