How to Start a Taxi Business in United States: A Beginner’s Guide

Considering the increasing demand for taxi booking platforms, a taxi company could be a profitable venture with substantial growth potential. If you’re eager to learn how to start a taxi business in United States but don’t know where to begin, we have this step-by-step guide for you.

Along with the guide, you will also explore a comprehensive, data-driven analysis of the USA taxi business market and its future growth potential. So, without any delay, let’s get started.

Why Start a Taxi Business in the United States? Understanding the Market Landscape

The taxi business market in the United States has experienced a massive transformation driven by increasing urbanization, changing lifestyles, evolving customer expectations, and the adoption of digital apps. The USA taxi market is already a multi-billion-dollar economy in 2025, which is estimated to reach USD 368.40 billion by 2033.

Despite widespread dominance of ride-hailing apps like Uber, there’s still significant room for new startups, due to higher market demand. Besides this, there are several other reasons why starting a taxi business in the United States could be a rewarding venture.

Business Assistance:

The Small Business Administration (SBA) offers resources like counselling, training, and loan programs that can help entrepreneurs access guidance for starting their taxi startups.

Flexibility and Scalability:

Taxi businesses can start with a small fleet of vehicles and gradually expand as the business grows and demand increases. This approach allows entrepreneurs to test the market, refine their services, and manage the initial investment costs effectively.

Lucrative Revenue Potential:

The potential for revenue generation with a taxi business is substantial, especially if you establish an online ride-hailing platform like Uber or Lyft. Since an increasing number of customers are adopting digital platforms to book taxis, building an online taxi business in the USA can he a profitable feat for you.

Legal Requirements for Starting a Taxi Business in the United States

The USA taxi industry is highly regulated. Entrepreneurs who want to establish a taxi service must comply with its diverse regulations to run their business legally.

Vehicle Standards

One of the most crucial factors for starting a taxi service in the United States is ensuring that your vehicles are legally approved and meet all the necessary requirements. While the standards vary from city to city, here are some basic ones that you must follow:

• The vehicle’s life should be 7-10 years (may vary based on states or cities)
• Must be a 4-door sedan, minivan, or SUV capable of safely transporting people
• Must pass a comprehensive vehicle test
• The taximeter must be certified and sealed by a local Weights and Measures Department.
• Roof lights and city-specific colors or branding of a taxi company.
• Annual or biannual inspection of the vehicle for roadworthiness.

Driver’s Criteria

All drivers, whether they’re contract-based workers or employees of your taxi company, must abide by these legal requirements:

• Valid driver’s license approved by the USA authorities
• Additional Chauffers license (in some cities)
• 1-3 years of driving experience
• Clean criminal background check
• Clean driving record
• Must pass DOT (Department of Transportation) medical exam or hold a physician’s certificate to prove physical and mental fitness.
• English language proficiency

Permits and Licenses

In order to start a taxi business in the United States, you may require several permits and licenses mentioned below:

• A general business license issued by your local county or city.
• Taxi business license or Operator License issued by your local city transportation department or licensing board.
• All the taxis must be registered as commercial vehicles by the Department of Motor Vehicles (DMV).
• Taxi medallion (for cities like New York, Boston, and Chicago)

Necessary Insurances

Purchasing essential business insurance can provide a safety net against accidents and potential lawsuits. Here are some necessary insurances you should consider:

• Commercial Auto Liability Insurance: This insurance covers injury and property damage to others.
• Personal Injury Protection (PIP) or Medical Payment (MedPay): Covers medical expenses for drivers and passengers, regardless of fault.
• Insured/Uninsured Motorist Coverage: Protects you and passengers if hit by someone uninsured.
• Comprehensive & Collision Insurance: Covers theft, vandalism, fire, and weather damage.
• Workers’ Compensation Insurance: Required if you hire drivers as employees (not independent contractors).
• General Liability: A basic and all-encompassing type of insurance. It covers all essential business elements, from property damage to bodily injury.

Fare Standards

Fare standards in the USA vary by location and are generally regulated by local authorities. So, you may have to explore fare pricing regulated by the specific city or state in which you want to start your taxi business. Here’s a brief explanation of different fare pricing components.

Base Fare

An initial fixed cost that is applied at the start of a ride, regardless of how far you travel or how much time it takes. Base fares could range from $2 to $5, depending on the city. For example, New York has around a $3 base fare, while Miami has $2.9.

Distance tariffs

These charges are based on the distance traveled during a ride. They are calculated per mile and may vary depending on the region you serve.

Time-based charges

Time-based charges are applied when a taxi is moving slowly due to traffic congestion, waiting times, or extended travel periods.

Surcharges

Taxi businesses levy several surcharges, such as

• Airport surcharges: Fees for pickups and drop-offs at airports.
• Congestion surcharges: Fees that are implemented for travel within congested areas.
• Late-night surcharges: Common for rides between midnight and six AM.

Extra charges

Some transportation partners may also charge extra fees for routes that involve toll booths or passengers carrying additional luggage.

Dynamic pricing

Ride-hailing platforms usually increase fare pricing during periods of high demand.

Different Types of Taxi Services in the United States

In the USA, taxis have significantly evolved to offer a wide range of options. Here’s a breakdown of all the different types of taxi services in the United States.

Traditional Taxis

These are the classic, metered taxis that can be hailed directly on the streets or booked by phone. They are often regulated by city or state authorities and primarily operate in urban areas like NYC, San Francisco, and Chicago.

Ride-Hailing Services

Ride-hailing services use mobile apps to connect passengers with drivers who use their own personal vehicles. These taxis are less regulated in some areas than traditional taxis, but are subject to heavy supervision and monitoring by the government.

Specialized and Niche Services

Some taxi companies also offer niche services that cater to a specific type of passenger.

• Airport taxis and shuttles: For traveling to and from an airport.
• Luxury car and chauffeur services: For passengers who prefer premium services.
• Accessible taxis: For passengers with disabilities.
• Green taxis: For eco-conscious travelers.
• Non-emergency medical transportation: For transporting patients to and from medical centers for their non-emergency medical needs.
• Long-distance and one-way taxis: For travelers who need transportation for intercity or interstate trips.

Hybrid and Other Services

• Hybrid taxi services: Apps like Curb and Arro bridge the gap between traditional taxis and modern passengers. It allows passengers to book rides with licensed, professional taxi drivers through a mobile app, combining the convenience of technology with the safety regulations of traditional cabs.
• Autonomous vehicle services:Companies like Waymo have started fully autonomous, driverless taxi services, where self-driving cars pick up and drop off passengers.

A Stepwise Guide on How to Start an Online Taxi Business in the United States

If you don’t know how to start an online taxi business in the United States, navigating the entire path can be a bit challenging. To ease your job, we’ve broken down the process in a step-by-step guide here.

Step #1: Research Target Audience and Competitors

Starting a taxi business in the United States begins with researching your target audience in that country. Find out who your ideal customers are and what their needs are. This involves taking surveys, discussing with focus groups, and also analyzing consumer data.

Subsequently, you should also peek into your competitors. Learn what they are doing to stay relevant in the market. Your focus should be on identifying the market gaps so that you can tailor your services to fulfill them and gain a competitive edge.

Step #2: Select the Right Business Model

Selecting the right business model is one of the crucial steps in learning how to start a taxi business in United States. Here are some prevalent business model options you can go for:

Traditional Taxi Model

The traditional taxi model involves owning your vehicle fleet and hiring drivers as in-house employees to facilitate transportation services. These taxis are often hailed on the street or pre-booked via voice call or other communication mediums.

Franchise Model

Owning a franchise of a well-known taxi company can be a viable option if you want to start your taxi business instantly. The franchising company offers extensive support, from establishing to marketing, making business operations effortless.

Partnering with Ride-Hailing Operators

If you want to take your business to the digital landscape but lack enough funds to build your app, this model could offer a cost-effective entry into the market. Here, you can join hands with popular ride-hailing businesses like Uber to leverage their platform for growing your business digitally.

Ride Aggregation

In this model, you own an app like Uber or Lyft that connects independent drivers with passengers, facilitating online ride-hailing services. This option could be the most profitable if you can take calculated risks and effectively counter the growing competition.

Step #3: Create a Legal Entity

Now that you’ve decided on the business model for your taxi venture, it’s time to move things forward. Your next step is to select the right business structure. This includes:

• Sole Proprietorship

A sole proprietorship is a form of business that is owned and operated by a single person. In this form, there’s no distinction between the business and the business owner. And that’s slightly riskier since the owner himself will be liable in the event of lawsuits or debts.

• Partnership

A partnership structure enables two or more entrepreneurs to share profits, losses, and responsibilities. Your partner may also offer different expertise that helps your business grow.

• Corporation

This business structure can provide several benefits to your business, like limited liability for owners, enhanced access to capital, and a professional image. However, it also comes with disadvantages, including increased costs and complex regulatory requirements.

• Limited Liability Company (LLC)

An LLC structure can simplify tax processes and offer liability protection for business owners. But keep in mind that there might be other drawbacks, such as potential self-employment taxes and compliance requirements.

Step #4: Register Your Taxi Business

After deciding on your business structure, your next step is to register your business. Here’s a detailed guide on how to register your taxi business in the United States.

Choose and reserve a business name:

To register your business, you must first choose and reserve its name. Your business name must be unique in your state. You can check your desired name’s availability on your state’s Secretary of State (SOS) website. Some states also allow online name reservation, making it convenient for you to register your business.

Register your business with the Secretary of State:

If you’ve chosen LLC or corporation (also partnership in some states) as your business structure, you will need to register your business with the Secretary of State. You need to file Articles of Organization (for LLC) or Articles of Incorporation (for Corporation). This is an official registration document you will need to establish a business.

For this, you will typically need to provide:

• Business name and address
• Registered agent information
• Business Purpose
• Names of members (LLC) or directors/officers (corporation)
• Duration of the company

File online via your state’s Secretary of State (SOS) website, or by mail/in person. Pay required filing fees, which are usually $50-$500, depending on the state.

Registering a Sole Proprietorship

Entrepreneurs establishing a sole proprietorship business need to register their business name as a Doing Business As (DBA).

For this, you may need to submit:

• Your proposed business name
• Your legal name (e.g., Mark Matthew, Sarah Jones)
• Business address
• Type of business
• Signature (may need notarization in some states)

Visit your county clerk’s office to file a DBA form. Some counties even allow for online filing. You may need to check with your local authorities for specific regulations.

Apply for an EIN number

Get an Employer Identification Number from the official website of the Internal Revenue Service (IRS). This registration is essential for:

• Hiring employees
• Filing taxes
• Opening a business bank account

To get the number, you will be asked several questions. If your answers seem legible, they approve and issue your EIN immediately online. This is free of charge, and anyone who wants to set up their business in the USA can issue it.

To apply, you will need:

• Your business entity type
• The Social Security Number or Taxpayer ID number of an individual who handles the company
• A signed authorization, in case you’re a third-party designee

Once the registration is completed, ensure you obtain the necessary permits, licenses, and insurance to comply with your local regulations.

Step #5: Register With Your State’s Tax Authority

To ensure your taxi business is legally compliant, you should register with your state’s tax authority. Failing to register can result in penalties, interest, or even business shutdowns.

You may need to register for:

• State Income Tax Withholding Account
• Unemployment Insurance Tax

Employer-Related Tax Proceedings

To finish your employer-related tax proceedings, you may need to classify your drivers first. If your drivers are

• Employees: You must withhold taxes, pay employer taxes, file payroll tax forms, provide pay stubs, and submit annual forms.
• Independent Contractors: You need to send 1099-NEC forms in case they are earning $600+ per year. You may also need to submit copies to the IRS.

File Business Taxes

Business taxes are filed differently based on business structures.

• Sole Proprietorship: Use Schedule C with your personal form
• LLC: You may either have to use Schedule C or the 1065/1120 form, depending on the setup.
• Corporation: You will need to file the Form 1120.

Additionally, don’t forget to maintain records of receipts, invoices, driver logs, mileage records, payroll records, insurance, and licensing expenses for smooth tax filing.

Step #6: Secure Funding Before Starting a Taxi Company

Funds are an essential part of any business. While you may start off with bootstrapping, more financial resources are needed to get your business up and running and, ultimately, growing.

There are several ways you can gain funding, including bank loans, SBA-guaranteed loans, government grants, and approaching investors. But before you proceed with your loan, make sure you’ve considered all the factors where you’ll need money.

The major cost-affecting factors differ by the type of business model you choose. For example, if you opt for the franchise model, your significant expense would be purchasing a franchise. Similarly, if you want to build your own platform, the cost of developing an app will be a major expense for you.

Taking these and other factors into account will help you determine the accurate amount you need for your business, ensuring smooth and efficient growth operations.

Step #7 Prepare Fleet & Drivers’ Team

If you’re building a traditional taxi business, you might need to prepare your fleet and driver team before launching a business.

Depending on your business needs and funding availability, you may purchase or lease vehicles from reputable dealerships. Make sure your vehicles adhere to all the specified standards to comply with local and federal regulations.

Once done, focus on building a team of vetted drivers for safer taxi services. Thoroughly check their background and evaluate their services before hiring.

Moreover, you might need to join local taxi unions based on your location and type of work. While this seems like an option, becoming a member of a union can provide access and ease of operations for both you and your drivers.

Some notable Major USA taxi unions include the New York Taxi Workers Alliance (NYTWA). If you’re operating somewhere else, you might need to check for local unions.

Step #8: Build and Launch Your Ride-Hailing Platform

This is a crucial step for entrepreneurs who want to launch their own taxi platform. If you plan to build a ride-hailing app like Uber or Lyft, ensure you find a reputable taxi app development company with a proven track record of successful apps.

Once you decide on your tech partner, your job is to receive regular reports and provide feedback on the development process. Ensure the application aligns with your business needs. After rigorous testing and quality assurance, your application will be deployed on the Google Play Store and/or App Store.

Step #9: Promote with Multi-Channel Marketing

When it comes to starting a taxi company in the United States, remember that you’re competing with well-established industry giants like Uber and Lyft. To stand against them, you need to build a strong brand, which is only possible by creating robust marketing campaigns.

While billboards and pamphlets can give you significant exposure, learning about social media and email marketing strategies can also help you effectively promote your company on the digital landscape. Therefore, ensure that you incorporate both physical and digital marketing methods to maximize your exposure.

So these are some crucial steps for establishing a taxi company. Now that you have ample knowledge about how to start an online taxi business in United States, simply get into action and capitalize on this growing sector with a successful taxi startup.

Conclusion

With the right planning and execution, operating a taxi company in the USA can be an effortless endeavor. We hope this guide has provided a detailed answer to your question: how to start a taxi business in United States. If it has, now is the time to implement these tips and build a taxi company with a robust tech solution.

At Elluminati, we offer a cutting-edge white label taxi app that can ensure smoother and faster entry into the USA ride-hailing market. Our solution offers advanced features and functionalities that support a wide range of business operations, delivering an exceptional user experience. Consult our experts to learn more about our products.

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