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How to set up a taxi business

Updated April 17, 2017

Taxi drivers can make a decent living on the road, and the earning potential is even better when it's your own company. While driving for a company as an independent contractor lends enough freedom that you can call it your own business, it is still nothing like starting your own taxi business from the ground up. While securing vehicles and insurance can take some effort, wading through local laws and making sure you are in compliance can be the biggest hurdle to starting a taxi business.

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  1. Decide how big you want to be. Taxi companies can be as small as one car and a cell phone, or large enough to have several hundred drivers.

  2. Find out what kind of insurance you need for your area. This will be a major chunk of your operating expense, and you don't want to skimp here.

  3. Get your vehicles, and bring them up to city taxi standards. These standards may include vehicle age, paint jobs, signage, and a taxi meter. You will want vehicles roomy enough to accommodate four passengers and tough enough to handle 100,000 miles a year.

  4. Decide what fares you will charge. Often that work is already done for you; most cities regulate taxi fares.

  5. Figure out how you will split the fares with any subcontractor drivers. Some companies split fares down the middle, with the driver keeping any tips but paying for gas. Other companies lease vehicles to the drivers by the day.

  6. Learn as much independent contractor law as you can, particularly if you plan to hire drivers. This will save a lot of potential trouble later.

  7. Check your local and state laws governing taxicabs and find out any permit requirements. These laws vary widely by location. Most cities will regulate taxi fares, and most inspect the vehicles regularly.

  8. Get all your permit groundwork done. This may include a criminal check and fingerprints, and sometimes a medical examination. You may need special permits to enter facilities such as airports, shipping terminals or government installations.

  9. Go to your local taxi commission. This varies by municipality; in some towns a city staff member may issue approvals instead of a full commission.

  10. Double-check to make sure you comply with local and state laws, then start hauling passengers.

  11. Tip

    Many taxi companies operate on an independent-contractor basis, and you will basically hold a franchise to the company name, with all the freedom of running your own business. This is a good way to start on a shoestring. Auto auctions are a good source for cars. Most cab companies buy retired law-enforcement vehicles.


    Make sure you comply with all laws; some cities can be very unforgiving about taxi-code violations.

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About the Author

Al Bondigas is an award-winning newspaperman who started writing professionally in 1985. His print credits include the "Mohave Valley Daily News" and "The Mohave County Standard." Bondigas studied journalism at San Bernardino Valley College in California.

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