How to Start a Rideshare

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.

Learn how to start your own Rideshare and whether it is the right fit for you.

Start a rideshare by following these 9 steps:

You have found the perfect business idea, and now you are ready to take the next step. 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.

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:

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 very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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After registering a domain name, consider setting up a professional email account ( Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free

STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your rideshare is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

Check out the Top Business Formation Services from our friends at StartupSavant.

You should also consider using a registered agent service to help protect your privacy and stay compliant.

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!

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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?.

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

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.

Read our Best Banks for Small Business guide to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.

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Recommended: BlueVine is an online bank with free business checking and no hidden fees. Great for businesses who do not often deal with cash.

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.

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.

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:

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.

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.

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

Start A Rideshare In Your State

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Select your state below for an in-depth guide on completing each of these steps in your home state.

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.

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Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

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.

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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.

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:

  • Funding
  • Events
  • Guides
  • Support

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.

Next Steps

Get more ideas with our Business Ideas Generator.

Check out our How to Start a Business page.

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