How to Start a Taxi Business

How to Start a Taxi Business


So you want to know how to start a taxi business? Great choice! This entrepreneurial venture is a wise way to become a business owner because up-front costs can be low, while demand is almost always high.

Even so, there are a lot of variables to consider before you’re helping your community of choice get from their starting point to their drop-off point. Luckily, we have the industry know-how to help you get your taxi out of the garage and onto the streets.

As more people move into the suburbs on a daily basis, and young people are taking advantage of lower rent prices to move into major urban markets, demand is increasing for taxi drivers to give people rides in markets all over the country. 

If you consider some of the best places to start a business in the U.S. and perform proper competitive analysis in your market of choice, you’ll be able to break into a market with low barriers to entry. You’ve got a solid chance to start earning money quickly with your cab service.

You can start a taxi business by following these steps.

1. Create a Business Plan

As with most startups, you’ll want to kick things off by writing a business plan. That’s a standard but vitally important way to clarify your business idea on paper. Address the issues you’ll focus on solving, and the problems that may arise.

This is also an opportunity to identify your target market, understand your customer, and determine which types of insurance and registration you’ll need. Considering all of these items will be extremely helpful as you take action on getting started and manage your time moving forward.

2. Choose Your Taxi Business Structure

Before you can accelerate, you need to choose a business structure. Typically, this means picking from a limited liability company (LLC) or a sole proprietorship. Sole proprietorships are the most simple method to start a business, and don’t cost anything to establish. Usually, people who opt for sole proprietorships do not have any employees. 

While launching a sole proprietorship may be easier, you’ll need to consider business taxes and structuring. Opting for an LLC comes with many more legal and tax advantages. With sole proprietorships, the business is not considered separate from the business owner.

That means the business owner reports profits and losses on their personal tax return, and that if someone sues the firm, they can go after the owner’s personal assets and property. With an LLC you won’t be personally on the hook if someone sues the business, hence the “limited liability.” If you’re starting an Uber taxi business, look at this guide to taxi LLCs vs sole props.

If you still have questions and you’re wondering how to establish an LLC or how much it costs to apply for an LLC, ZenBusiness and its expert support staff are here to help.

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3. Determine Your Business Costs

As you get your taxi service startup squared away, calculating your small business startup costs is vital to your launch strategy. Consider which vehicle(s) you’d like to purchase. You can find a taxi unit at an average of $15,000 dollars, or you can consider local car dealerships if you’re vying to get a used vehicle. If you buy new, consider using a deferred payment plan in order to avoid paying a substantial amount up front. 

Also, consider the cost of accessories you’ll need, vehicle maintenance costs, and potentially the cost of storing your fleet. Insurance and registration costs will vary from state to state, but factor them into your monthly expenses to at least support the bare minimum commercial and vehicle coverage. 

The more cars you buy, the higher these costs will be. Keep this in mind as you add more vehicles and hire more full-time or part-time drivers. Also consider the cost of renting an office space if you opt not to work from home. 

How do you fund your startup costs?

There are several different ways you could go about funding your business. They include:

  • Government assistance: As the United States continues to deal with the global pandemic, there are government resources available such as low-interest loans. However, these loans may be tougher to get as a new startup compared to an existing business.
  • Credit card: You could utilize a credit card to purchase all of the necessary equipment to launch your business. But if you’re unable to pay it back fast, the interest on your purchases could quickly add up.
  • Loan: You can go to a local bank and acquire a commercial loan. Similar to a credit card, you can easily acquire these funds, but it’s important to consider the interest rate and how long it will take you to pay back. 
  • Friends & family: If you’re willing to ask, friends and family could help you raise the capital you need to get your cabs on the road. Make sure you have a solid business plan and payback plan finalized before pitching the concept to them.

Need more information about figuring out startup costs? This helpful guide will walk you through business cost calculation and more.

4. Create a Name for Your Taxi Business

In order to make your business official, you’ll need a name. When considering how to name your LLC, make sure the name is completely unique from any other LLC in your state. You can use both Google and your local secretary of state website to make sure no one else is using the name. It also helps to check existing trademarks via the U.S. Patent and Trademark Office. 

You’ll want your name to be catchy and eye-grabbing, so get creative! Also, consider working with a graphic designer to craft a sleek logo for your taxi cabs to show off once they’re on the road.

5. Register Your Taxi Business and Open Financial Accounts

Once you officially form your LLC, you can register for your taxi cab business license under the same name. From there, you will receive your employer identification number, can get the necessary licenses, zoning permits, and decals (which vary by state), and purchase general liability insurance for the company, as well as workers compensation insurance if you’ll be hiring employees. Also, it will finally be time for you to open your business bank account!

6. Purchase Equipment for Your Taxi Company

Once you select the perfect vehicles for you and your drivers to use, consider the following pieces of equipment for your taxi cab business: 

  • Taxi meters: This mechanical device is used in most taxis for the drivers and customers to transparently keep track of how much the passenger’s fair is from point A to point B. 
  • Dispatch system: Taxi dispatch software is helpful in automatically creating and scheduling routing strategies for you and your drivers. 
  • Rooflight: In order to let people know when your cabs are available for pick up, acquire a rooflight (otherwise known as a taxi light or top light) to place on top of your vehicles.

To purchase the above items and consider other accessories your business needs, look into working with a taxi industry vendor.

7. Market Your Taxi Business

Before you wow your local market and have returning customers, it’s important to make a name for yourself. Consider using digital marketing to promote your business by setting up social media profiles for your company on Facebook, Instagram, Twitter, and Linkedin and running advertisements.

Join relevant Facebook and LinkedIn groups in your geographic market. Also consider print advertising and business cards to reach as many eyes as possible if it’s within your set budget.

It’s important to also purchase and register a domain name to host a website for your company. Look into implementing a search-engine-optimization (SEO) strategy for your site, too, so people can find you more easily on Google and other search engines. From there, get a Google My Business account so you pop up in searches related to your market. Lastly, make sure you’re in relevant directories across the Internet to build more brand awareness. See our guide to taxi business marketing for more in-depth marketing advice.

There are so many different business models to consider as you pursue your own taxi company. 

  • Traditional taxi business: If you’re entering a populous area like Los Angeles or Manhattan, you can take advantage of the heavy foot traffic.
  • Ride-sharing companies: With these companies, like Lyft and Uber, you operate as a contractor. Starting an Uber taxi business can be a great way to make money in your spare time, though it cuts into your profits.

There’s also always the option of narrowing the scope of your business idea and choosing a specific niche like these:

  • Shuttle services at airports
  • Pet taxi services
  • Senior taxi services

Whether you opt to start a traditional local taxi service or create the best pet transportation business on the planet, just know that the potential is there along with low barriers to entry and plenty of opportunities for growth.

1 All prices and services presented above were reviewed and verified as of 11/2/19.
2 The Starter plan is $49/year the first year and increases to $119/year after that
3 This chart does not include state fees because those will vary in each state.

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