Are you ready to take the driver’s seat in your own business venture? Starting a taxi business could be your ticket to success. With estimated startup costs ranging from $10,000 for a small local service to over $1 million for a larger fleet with premium vehicles, you’ll need strong local area knowledge, fleet management abilities, and top-notch customer service skills.

While rideshare services like Uber and Lyft have increased competition, there is still moderate demand for traditional taxi services, particularly in urban and tourist-heavy areas. With average profit margins ranging from 10% to 20%, the potential for a lucrative business is there for the taking. Let’s explore the route to establishing your own taxi business.

Considerations Before Starting a Taxi Business

Initial InvestmentEstimated startup costs can range from $10,000 (small, local service) to over $1 million (larger fleet with premium vehicles).
Skills RequiredKnowledge of the local area, customer service, fleet management, and general business skills.
DemandModerate demand, with competition from rideshare services like Uber and Lyft.
LocationUrban and tourist-heavy areas are ideal, with high foot traffic and demand for transportation services.
HoursCan operate 24/7, with peak hours during evenings, weekends, and special events.
Permits and LicensesBusiness license (in some areas), taxi license, and compliance with local transportation regulations.
Profit MarginOften ranges from 10% to 20%, depending on the location, fleet size, and competition.
ChallengesCompetition with rideshare services, vehicle maintenance, and managing a fleet of drivers.

How to Start a Taxi Business

1. Create a business plan

As with most startups, you’ll want to kick things off by writing a business plan, an 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 now will help you manage your time moving forward.

2. Choose your taxi business structure

Before you can kick your taxi company plans into gear, you need to choose a business structure. Often, this means picking from a limited liability company (LLC) or a sole proprietorship. Sole proprietorships are the simplest method to start a business and don’t cost anything to establish. Usually, people who opt for sole proprietorships don’t 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 a traditional or Uber-style taxi business, look at our guide to LLCs vs sole proprietorships.

If you still have questions and you’re wondering how to establish an LLC or how much it costs to apply for an LLC, our expert support staff is here to help. We offer business formation services that can keep your expenses low.

3. 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’s 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.

4. 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’ll receive your employer identification number (EIN) and can get the necessary licenses, zoning permits, and decals (which vary by state). Then, you’ll want to purchase general liability insurance for the company, as well as workers’ compensation insurance if you’ll be hiring employees.

Obviously, a taxi company will likely need some form of commercial auto insurance as well. Also, it’ll be time for you to open your business bank account.

5. 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 buy a new taxi starting at around $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 to avoid paying a substantial amount upfront.

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: There are government resources available, such as low-interest loans for startups.
  • Credit card: You could utilize a credit card to purchase all of the necessary equipment to launch your business. But if you can’t 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’ll take you to pay back. 
  • Friends and 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.

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: These mechanical devices are used in most taxis for the drivers and customers to transparently keep track of how much the passenger’s fare 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. 
  • Roof light: In order to let people know when your cabs are available for pick up, acquire a roof light (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 attract 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.

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 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 Business Profile 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 business marketing for more in-depth advice in this area.

There are several 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. Or, if you’re in a smaller town, there may not be much competition in the market.
  • 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 an airport shuttle service, senior transportation company, or pet taxi service.

Ready to start your taxi company?

Whether you opt to start a traditional local taxi service or create the best pet transportation business on the planet, the taxi business can have relatively low barriers to entry and plenty of opportunities for growth. If you want to keep your startup costs low, remember that we can form your taxi LLC for free (+ state fee).

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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