How to Start a Rideshare

Start a rideshare by following these 10 steps:

1. Plan your Rideshare
2. Form your Rideshare into a Legal Entity
3. Register your Rideshare for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Rideshare
6. Get the Necessary Permits & Licenses for your Rideshare
7. Get Rideshare Insurance
8. Define your Rideshare Brand
9. Create your Rideshare Website
10. Set up your Business Phone System

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 will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

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

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

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.

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.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your rideshare is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

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!

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.

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.

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.

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.

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.

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.

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.

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.