Do You Need an LLC to Drive Uber? What to Know About Uber LLCs

Driving for Uber has become a popular side hustle or even a full-time job for many people.

However, there is often confusion about whether or not it’s necessary to form a separate business entity while driving for the ride-sharing platform.

Setting up a limited liability company (LLC) with doola can help you limit your personal responsibility for debts and legal liabilities.

In this article, you’ll learn whether you need an Uber LLC and how to start your ride-sharing business.

Requirements to Drive an Uber

To drive for Uber, you must be at least 21 years old, have a valid U.S. driver’s license and auto insurance, and pass a background check. These are the basics. However, when it comes to establishing a business structure, does one need an LLC?

While some drivers choose to form an LLC for their ride-sharing business, it is not a requirement. Many drivers will operate as a sole proprietor to keep the legal structure of their business a simple as possible.

As an LLC, you have alternative legal forms as an independent contractor, including sole proprietorships, partnerships, and corporations.

Ultimately, choosing a business structure depends on factors such as personal liability protection, tax implications, and administrative requirements.

Depending on your goals and current situation, It’s important to consult with a tax professional or attorney to determine the best option for your individual circumstances.

Benefits an Uber Driver Gets When He Applies for LLC

Since an Uber driver is not required to form an LLC, why bother applying for one?

Although the government does not officially require you to have an LLC for your ridesharing business, there are reasons why it may be smart to obtain one.

Drivers are at high risk of accidents, so it’s in their best interest to protect themselves from liability.

If an accident occurs, an LLC ensures the driver’s personal assets will be protected in the event of a lawsuit.

In addition, an LLC also provides better organization and greater opportunities for growing your business, especially if you want to increase your income!

Below are some of the key benefits of having an LLC as an Uber driver.

Protection Against Personal Liability

An LLC can protect drivers from personal liability because the LLC is considered a separate legal entity from the business owners.

This means that as a member of the LLC, you are not personally liable for lawsuits, debts, or judgments against your LLC, aka your business.

As mentioned above, driving can be incredibly dangerous, so it’s best to have all the insurance and legal protection you can get in case of an accident.

Moreover, an LLC provides protection from personal liability and can also serve as a formal business entity that helps you build a professional image, increasing your credibility in the eyes of customers and business partners.

Tax Advantages

One advantage of an LLC is the flexibility it offers regarding taxation. Depending on the business structure and the needs of the driver, an LLC can be taxed as a corporation, partnership, or sole proprietorship.

This means that the LLC owner can choose the method of taxation that best fits his or her individual circumstances, maximizing tax deductions and minimizing the overall tax burden.

In addition, business owners may report their share of the company’s income or loss on their personal tax returns and pay taxes at their individual income tax rate.

This is called pass-through taxation and is a big benefit for small business owners who wish to have flexibility on how they want to be taxed, which is one of the benefits of an LLC.

More Organized Approach to Running an Uber Business

Another benefit of having an LLC is how it can help keep the business organized and running smoothly. An LLC is considered a separate legal entity from its members, which means that the business’s assets and liabilities are separate from those of the owners.

This structure allows you, the business owner, to protect your personal assets from potential legal action and ensures that the business operates more professionally.

Additionally, organizing finances and operations through an LLC can help drivers better manage costs, expenses, and income in a more structured way.

This makes it easier to keep the business organized and to track business finances in a systematic manner.

Greater organization also helps ensure that all business activities comply with local and federal regulations, which is important for avoiding potential legal and financial problems.

In short, setting up an LLC structure can strengthen your ability to manage and grow your business.

Steps in Applying for LLC as an Uber Driver

Let’s go over the various steps to applying for an LLC and what legal documents you’ll need as an Uber driver. 

Choose a Business Name

The first step in forming an LLC is to choose a business name that complies with state regulations.

The name chosen must include the phrase “limited liability company” or an abbreviation such as LLC, and it must be unique and not already used by another business in the same state. E.g. UberWheels LLC.

You must do enough research on existing business names to ensure that the name you choose is available and not already in use by another business. To do this, you can check the Secretary of State’s database or conduct a search of trademark databases.

In addition, the driver should consider whether the chosen name is easy to remember and represents the nature of the business, as this can help improve the LLC’s visibility and recognition.

Once you have selected a suitable name, you can register it with the state and proceed with the next steps in the formation process.

File the Articles of Organization within the State

After you have chosen a business name for your LLC, the next step is to file Articles of Organization with the appropriate state agency.

The Articles of Organization is a legal document that officially creates the LLC and must contain certain required information, such as the chosen name of the LLC, the address of the business, and the name and address of the Registered Agent.

It’s important to note that the Registered Agent must be a resident of the state where the LLC is formed and have a physical address.

Filing the Articles of Organization is usually simple and can be done online or by mail. Once the Articles of Organization are filed and accepted, the LLC is officially recognized as a separate legal entity.

However, you may need to create and submit more LLC formation documents to ensure your LLC can handle any situation.

Create an Operating Agreement

Once the Articles of Organization are filed, the LLC must execute an Operating Agreement.

This legal document sets forth the structure and operation of the LLC, including the rights and obligations of the members.

It serves as a roadmap for the management and operation of the LLC and helps ensure that all parties agree on how the LLC will be managed.

The Operating Agreement should include information such as the LLC’s management structure, the allocation of profits and losses, and each member’s responsibilities. 

A well-written Operating Agreement can help avoid member disputes and ensure that the LLC runs efficiently and effectively.

Obtain a Federal Employer Identification Number (EIN)

Obtaining an EIN is a crucial step in the process of forming an LLC, as it allows the LLC to conduct business and file taxes as a separate legal entity.

To be clear, an EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS) that is used to identify the LLC for tax purposes.

An EIN is required to file taxes, including payroll taxes, and open a business bank account. It’s essentially the equivalent of a Social Security number for an individual but for a business entity.

It’s important to note that even single-member LLCs taxed as sole proprietorships should obtain an EIN if they have employees or if they are required to file certain tax returns.

Obtaining an EIN is simple and can be done online or by mail. The LLC must provide information such as the name of the business, its location, and the name of the person who will be responsible for managing the LLC’s finances.

Once the EIN has been obtained, it must be used on all tax forms, including the annual tax return, and for any other legal or financial activities that require an EIN.

Get Started doola to Roll Out Your Uber LLC

Starting a business as an Uber driver is an exciting venture, but deciding whether to form an LLC can leave you on the fence.

If you’re overwhelmed by the legal aspects of starting an LLC, doola can help you get started with just some basic information. 

Get started with our business formation services to reap an LLC’s benefits, such as protecting personal assets and potential tax benefits.

That’s not all. Our bookkeeping solution allows you to automate financial record-keeping, connect multiple bank accounts, send and track invoices effortlessly, and categorize transactions easily.

Book a consultation with our experts to learn how setting up an Uber LLC can help secure your business’s future!

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