How to Start an LLC for Uber, Lyft, DoorDash Drivers (Step-by-Step)
So, you’re driving for Uber, Lyft, or DoorDash and probably wondering if forming an LLC is a smart move for you as a driver.
Let’s face it—turning your rideshare or delivery business into a legitimate business can pay off. Not only can you unlock some fantastic tax benefits and deductions, but it also gives you a little extra credibility.
Who wouldn’t want to show off a professional side?
Knowing the steps to start your LLC can make your journey smoother and set you up for success in your driving adventures.
Let’s dive into it!
Should You Set up an LLC as an Uber, Lyft, or DoorDash Driver?
If you earn a significant amount, such as $50,000 or more annually, as an Uber driver, you might want to consider forming an LLC.
An LLC can help protect your assets. For instance, if you were in an accident while driving for work, your personal belongings could be at risk without this protection.
Additionally, having an LLC can make tax time easier. You can open a business account and separate your expenses, simplifying tracking expenses like gas, maintenance, and other costs.
Some drivers report feeling more professional with an LLC. It can lend credibility, especially with clients or for tax purposes. Make sure to weigh these factors based on your situation.
Why form an LLC as an Uber, Lyft, or DoorDash Drivers?
Forming an LLC has several advantages for drivers of services like Uber, Lyft, and DoorDash.
Now, let’s take a closer look at the benefits:
Personal Asset Protection
One of the main reasons for forming an LLC is personal asset protection. If your rideshare or delivery business faces a lawsuit or debts, your assets, such as your home and savings, are generally safe. So, if an accident occurs while you are working, creditors usually cannot pursue your personal property to cover business liabilities.
Pass-Through Taxation
LLCs offer pass-through taxation, which can save you money. You report your income, and any expenses can be deducted, which can reduce your taxable income. It can be especially helpful if you have high operating costs like vehicle maintenance and fuel.
Enhanced Credibility and Professionalism
Having an LLC can enhance your credibility. Customers and platforms like Uber and DoorDash may see you as a more professional driver. This could lead to better ratings and more consistent work. An LLC adds a level of seriousness to your business.
Flexible Management Structure
The management structure of an LLC is flexible. You can choose how to run your business and make decisions without much red tape. As a driver, this flexibility is valuable. You can operate as a sole member, which keeps things simple.
Proof of Independent Contractor Status
Forming an LLC can prove your status as an independent contractor. This is important when dealing with tax authorities or in legal matters. When you have an LLC, you demonstrate that you are not an employee but running your own business.
How to Create an LLC for Uber, Lyft, DoorDash Drivers
Here’s a straightforward process to help you navigate the steps needed to start your Uber Driving LLC.
1. Choose a State to register your LLC for Your Uber Driving
Your first step is selecting a state to register your LLC. For most drivers, it is best to register in the state where they live and operate. Check the specific requirements of your state’s business filing agency to find the right information.
2. Choose an LLC name
Next, you must choose an LLC name that reflects your rideshare or delivery business. Ensure it’s unique and not already used by another LLC in your state.
You can usually search online through your state’s business registry for availability. The name should end with “LLC” or “Limited Liability Company.” This shows the legal status of clients and protects your brand.
3. Appoint a registered agent
A registered agent is an individual or business that receives legal documents for your LLC. You can be your registered agent, or you might choose a service.
If you do it yourself, make sure you have a physical address in the state where your LLC is registered. The agent should be available during regular business hours to receive important documents.
Best Registered Agent Service: Northwest
Our top recommendation is Northwest Registered Agent. Unlike other services charging $300/year, Northwest offers the first year FREE for new LLCs. Enjoy registered agent service for your rideshare or delivery business, email forwarding, privacy protection, free business address and expert support.
4. File Articles of Organization
Filing Articles of Organization officially creates your LLC for Uber, Lyft, or DoorDash drivers. This document usually includes your LLC name, address, and registered agent’s information.
Each state has its filing fee, which ranges from $45 to $500. Check with your state’s business office for the fee and process for submitting this form.
5. Obtain an Employer Identification Number (EIN)
An EIN is a unique number assigned to your business by applying at the IRS website. It’s required for tax purposes and opening a business bank account. You can apply for an EIN for free through the IRS website. The process is straightforward and usually completed online in a matter of minutes.
6. Create an operating agreement (optional)
While not all states require it, drafting an operating agreement is a good practice. This document outlines your LLC’s management structure and the members’ rights.
This agreement can help prevent future disputes. It clarifies how profits and losses are shared among members. Outlining your plan can provide structure even if you’re the sole owner.
7. Handle licenses and permits
Understand your LLC’s tax obligations. As an Uber, Lyft, or DoorDash driver, you might be considered self-employed and need to file taxes accordingly.
Many states require a Business License or a Sales Tax Permit for rideshare and delivery services. If you’re delivering food, you might also need a Food Handler’s Permit or a Health Department Permit, depending on local regulations.
8. Open a business bank account
Opening a business bank account is smart for your rideshare or delivery LLC. By keeping your personal and business finances separate, you’ll have a clearer picture of your earnings and expenses, making tax time much easier.
Additional Resources and Other Considerations for Uber, Lyft, DoorDash Drivers LLC Owners
Get an LLC Formation Service to Ease the Entire Process
Starting an LLC for Uber, Lyft, or DoorDash drivers can be complex, but using an LLC formation service can simplify it. Northwest Registered Agent is popular because they offer personalized service and help with filing paperwork.
They can assist you in choosing a unique name for your LLC and ensure that you meet all state requirements. Besides filing the Articles of Organization, they can provide registered agent services essential for handling legal documents.
Best LLC Service: Northwest
We recommend Northwest for your rideshare or delivery business LLC ($39 + State Fees) as the overall best business formation service because of its affordability, privacy and record-breaking customer support. The sweet part? Their registered agent service is free for the first year, saving you up to $300 in formation fees.
Annual Compliance (Annual Reports, Franchise Taxes, BOI etc.)
Once an LLC for Uber, Lyft, or DoorDash drivers is formed, annual compliance is key to maintaining it. Many states require you to file an annual report. This report keeps your information current and demonstrates that your business is active.
You might also need to pay franchise taxes, which are fees states charge for the privilege of doing business there. Additionally, some states may have Beneficial Ownership Information (BOI) requirements, which require you to disclose who owns or controls the business.
Falling behind on these requirements can lead to fines or even dissolution of LLC for Uber, Lyft, or DoorDash drivers. Set reminders for deadlines to stay compliant.
Insurance for Uber, Lyft, DoorDash Drivers
Having the right insurance is crucial. As a gig driver, standard personal auto insurance may not cover you during rides or deliveries. Companies like Progressive or Geico offer specialized policies for rideshare drivers.
Consider getting a rideshare endorsement on your policy, which provides additional coverage while you’re online and waiting for rides. If you drive full-time or depend on your vehicle for business, you may also want to look into commercial vehicle insurance.
Get Expert Advice When Needed
Navigating business regulations and requirements can be daunting. Connecting with experts like accountants or legal advisors specializing in gig economy work can be a game changer. They can provide tailored advice based on your specific situation.
Use resources like Small Business Development Centers (SBDCs) or local workshops focused on small business management. Surrounding yourself with knowledgeable people can save you time and money and ensure that you make informed decisions that benefit your LLC.
What business structure is best for Uber, Lyft, DoorDash drivers?
When choosing a business structure for your driving gig, you have several options. The most common are sole proprietorship, LLC, and corporation.
A sole proprietorship is the easiest to set up. You keep all profits, which is appealing to new drivers. However, a significant downside is that you are liable for debts and issues. This can put your assets at risk.
A Limited Liability Company (LLC) offers personal liability protection. This structure allows you to separate your personal and business finances. The filing process is generally easier, with costs typically ranging from $50 to $200 for formation. This makes it accessible for many drivers.
A corporation provides strong protection for personal assets. However, it comes with added complexity and cost. Maintaining a corporation usually requires more paperwork and formalities. This can be overwhelming for new business owners.
Frequently Asked Questions
What is an LLC, and why should I consider forming one as a rideshare or delivery driver?
An LLC, or Limited Liability Company, is a type of business structure that protects your assets from business debts and lawsuits. As a rideshare or delivery driver, forming an LLC may help limit your liability while providing credibility and potential tax advantages.
What are the costs to start an LLC for Uber, Lyft, DoorDash drivers?
Starting an LLC typically involves several costs. These may include state filing fees, which range from $45 to $500, and potential additional costs for a registered agent or business license. Also, consider ongoing fees, like annual reports or renewal fees required by your state.
What liability risks do Uber, Lyft, DoorDash drivers face?
Rideshare and delivery drivers face various risks, such as accidents, injuries, or property damage. Without an LLC, your assets could be at risk if you face lawsuits or claims related to your business activities. An LLC may help protect you from these liabilities.
Do I need an operating agreement for my rideshare or Delivery LLC?
While not always required by law, having an operating agreement is recommended. This document outlines how your LLC will be run, including member roles and responsibilities, profit sharing, and procedures for changes or dissolution. It can prevent future disputes among members.
What kind of insurance do I need if I form an LLC?
While forming an LLC provides some liability protection, you should still have insurance. Rideshare and delivery drivers typically need liability insurance as well as commercial auto insurance. This coverage helps protect you from losses related to accidents while driving for business purposes.
Can my LLC name be different from my business name?
Yes, your LLC name can differ from your business name. You may choose a distinct name for your LLC when registering it with the state. However, it is important to ensure that both names comply with state regulations and are not already in use.
What annual fees are associated with LLC for Uber, Lyft, and DoorDash drivers?
Annual fees for an LLC can vary by state. Common fees include state franchise taxes, annual report, and renewal fees. It’s essential to stay informed about your state’s requirements to avoid penalties or unwanted liabilities.
Can I operate as an LLC while driving for multiple platforms?
Yes, you can operate as an LLC while driving for multiple platforms like Uber, Lyft, or DoorDash. Your LLC can cover various business activities, allowing you to maintain liability protection no matter your platform.
What are the tax benefits of forming an LLC for Uber, Lyft, and DoorDash drivers?
An LLC for your Uber service can offer tax advantages, such as pass-through taxation, meaning the LLC’s income is reported on your tax return. Additionally, you may have the option to choose S-Corp status, which can lead to further tax savings by reducing self-employment taxes.
Can I still use my vehicle if I form an LLC?
Yes, you can use your vehicle for your LLC. However, you should keep detailed records of business-related expenses. This includes gas, maintenance, and insurance, which can be deducted from your taxes.
Can I serve as my LLC’s registered agent?
Yes, you can serve as your LLC’s registered agent. However, you must have a physical address in the state where your LLC is registered and be available during business hours to receive legal documents.
Why should I hire an LLC service when I can form my own LLC?
Hiring an LLC service can simplify the process and ensure that all legal requirements are met. They can handle filings, provide document templates, and offer support, saving you time and reducing the risk of errors.
Are permits or licenses required for my LLC?
Depending on your location and the nature of your business, you may need permits or licenses to operate legally. Check local and state regulations to comply with any requirements before starting your rideshare or delivery business.
Disclosure: We may earn commissions if you buy via links on our website. Commissions don’t affect our opinions or evaluations. We’re also an independent affiliate of many platforms, including ClickFunnels, Kartra, GoHighLevel, Podia, Northwest Registered Agent, and others. We’re not employees of these services. We receive referral payments from them, and the opinions expressed here are our own and are not official statements of these companies.
