How to Start an LLC for DoorDash (Step-by-Step Guide)
Starting an LLC for your DoorDash business can streamline your operations and provide crucial legal protections. This step-by-step guide will walk you through the process, ensuring you cover all necessary aspects.
Starting an LLC for your DoorDash business can streamline your operations and provide crucial legal protections. This step-by-step guide will walk you through the process, ensuring you cover all necessary aspects.
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In today’s gig economy, being a delivery driver for DoorDash is common. Whether you’re a part-time “Dasher” or rely on it full-time, you’re an independent contractor. This means employee protections are your responsibility. Setting up your delivery business as an LLC can provide essential protection and ensure proper operation.
How to start an LLC for DoorDash
1
Choose a business name
The first step in forming your LLC is choosing a business name. Your business name must be unique and distinguishable from other registered business entities in your state. While you can choose a name that is directly about food delivery, it isn’t required; many gig workers have an umbrella LLC for all of their jobs.
To ensure your desired name is available, conduct a search on your state’s business registry. You can also reserve your business name for a small fee, which typically holds the name for 30 to 120 days, depending on the state.
2
Appoint a registered Aagent
A registered agent is a person who receives official mail, such as tax notices and legal documents, on behalf of your LLC. The registered agent must have a physical address in the state where your LLC is formed and be available during regular business hours.
For DoorDashers, acting as your own registered agent is a convenient option. Since you’re likely doing deliveries from home and are available during the day, you can list yourself as the registered agent.
However, using a registered agent service ensures you stay on top of any official correspondence related to your business while saving you time.
3
Register your LLC
To officially form your LLC, you need to file Articles of Organization (also known as a Certificate of Formation or Certificate of Organization) with your state’s Secretary of State office. This document includes basic information about your LLC, such as its name, registered agent, and business address. Filing fees vary by state, typically ranging from $50 to $500.
Some states offer online filing options, making the process quicker and more convenient.
4
Obtain an Employer Identification Number (EIN)
If you start an LLC, it’s a good idea to get an Employer Identification Number (EIN) for several reasons:
- DoorDash requirements: To register your LLC with DoorDash, they will ask for your EIN.
- Open a bank account: An EIN is necessary to open a business bank account, which helps keep your personal and business finances separate.
- Pay taxes: You’ll use your EIN to pay taxes related to your business.
- Hiring subcontractors: If you decide to hire subcontractors under you, you’ll need an EIN for tax reporting purposes.
Getting an EIN is quick and easy. You can apply online through the IRS website, and it’s free. You only need to do it once, and it provides a clear way to manage your business finances and tax obligations.
5
Tax considerations for Dashers
As a DoorDasher, understanding your tax obligations is crucial since DoorDash does not withhold taxes from your earnings. Instead, DoorDash provides a 1099-NEC form to Dashers who earn $600 or more in a year. This form summarizes your earnings and is essential for filing taxes.
Whether you have an LLC or not, DoorDashers are considered independent contractors, meaning you are responsible for paying self-employment taxes. This includes both Social Security and Medicare taxes, which total 15.3%.
For LLC owners, your business profits are subject to pass-through taxation. This means profits are taxed at your personal income tax rate, avoiding double taxation. You can also file a number of potential tax deductions, including:
- Mileage
- Vehicle expenses like gas, maintenance, and insurance.
- Phone and data costs.
- Tolls and parking.
- Supplies, like insulated bags and backpacks.
- Health insurance for self-employed drivers.
Remember that both cash and non-cash tips are taxable and should be reported on your tax return. Tips are considered part of your income and are subject to federal income taxes.
Other considerations for DoorDash business owners
After your LLC is formed, the work may not necessarily be done. Depending on the specifics of your business, you may need to consider all or some of these additional steps.
DoorDash protections
While setting up an LLC offers significant benefits, DoorDash provides several protections to support and protect its Dashers:
- Occupational accident insurance: Covers medical expenses, disability, and survivor benefits if injured during a delivery.
- Auto insurance: Provides contingent liability coverage for accidents during active deliveries, secondary to personal auto insurance.
- Incident support: Assistance with insurance claims and resources for handling accidents or disputes.
- Background checks: Ensures safety for drivers and customers by conducting thorough background checks on all Dashers.
- Health and safety supplies: Offers items like masks, gloves, and hand sanitizers to protect Dashers during deliveries.
Outside of these protections, forming an LLC provides additional benefits such as personal asset protection, potential tax benefits, and enhanced professionalism, ensuring comprehensive protection for your delivery business.
Business bank account
After forming your LLC, opening a business bank account is highly recommended. While not legally required, it helps separate personal and business finances, simplifying accounting and ensuring clearer tax records. This separation also maintains your LLC’s liability protection.
DoorDash offers payment in two forms: weekly direct deposits to your account, and FastPay debit cards that are loaded daily for a small fee. While the debit card offers quicker access to your money, a dedicated business bank account provides comprehensive tracking and protects your LLC status.
Insurance requirements
DoorDash offers several types of insurance protections for its drivers, but additional coverages can enhance your safety and security. DoorDash offers the following:
- Occupational accident insurance: Covers medical expenses, disability, and survivor benefits if injured during a delivery.
- Auto insurance: Provides contingent liability coverage for accidents during active deliveries, secondary to personal auto insurance.
- Incident support: Assistance with insurance claims and resources for handling accidents or disputes.
You may consider adding general liability insurance on top of your own commercial auto insurance.
What if I get hurt during a delivery?
If you get hurt during a delivery, DoorDash’s occupational accident insurance will cover your medical expenses and provide disability benefits. Be sure you seek immediate medical attention and promptly notify DoorDash about the injury to begin the claims process.
Annual compliance
As an LLC owner, you will need to do more than just drive LLCs must adhere to annual compliance requirements, which vary by state. This generally includes filing an annual report and paying any associated fees. It can be helpful to set up an annual calendar reminder so you don’t miss this deadline.
Hiring subcontractors
DoorDash allows you to use subcontractors if you choose. You would pay these people to make deliveries on your behalf for a portion of your funds, but they must also be registered Dashers. While subcontractors have less requirements than employees, it is still important to have the proper contracts in place and provide 1099 forms to each individual.
What is the best business structure for DoorDash drivers?
When formalizing any business, entrepreneurs have the choice of what kind of business entity they would like to start. Each has its own benefits and drawbacks, as this designation can impact things like tax treatment, privacy, and personal asset protection for the owner. The most common that you may hear of for a DoorDash business are a sole proprietorship, corporation, or limited liability company (LLC).
An LLC is a flexible business structure that combines benefits of both sole proprietorships and corporations, making it a great choice for small businesses like DoorDash driving operations. LLCs can have only a single owner, which is known as a single-member LLC, or be a multi-owner LLC if you want to distribute profits and losses among members. Forming an LLC can provide personal asset protection and potential tax advantages while maintaining simpler administrative requirements compared to corporations.
Why DoorDashers set up an LLC
Dashers can operate as a sole proprietorship and avoid the setup costs of an LLC. However, there are significant benefits to forming an LLC.
An LLC provides liability protection, which means your personal assets are safeguarded if something goes wrong, such as a car accident resulting in a lawsuit. This ensures that your personal finances are not at risk.
LLCs can also offer potential tax breaks. Depending on your specific situation, you might be able to deduct business expenses, such as vehicle maintenance, mileage, and other operational costs. Additionally, LLCs benefit from pass-through taxation, avoiding double taxation and potentially reducing your overall tax burden.
Can you register on DoorDash as an LLC?
Yes, you can register on DoorDash as an LLC. Before registering on DoorDash, you need to officially form your LLC and complete all the associated steps.
- If you already have a DoorDash account, you can update your profile with your new LLC information. Go to your account settings and update your legal name, business name, and EIN.
- If you are registering for DoorDash for the first time, you can enter your LLC information during the signup process. Ensure you use your LLC’s name and EIN in the appropriate fields to properly register your business entity.
Be prepared to provide documentation proving your LLC’s formation. DoorDash may require this information to verify your business entity status.
Pros and cons of an LLC
Pros of an LLC
- Limited liability protection: Protects your personal assets from business debts and liabilities.This means that things like car accidents, injury to others, and property damage could be covered under your LLC instead of your personal name.
- Simplicity: Easier to set up and manage compared to a corporation. This gives you more time to drive and earn money, without worrying about administrative tasks that come with corporations.
- Pass-through taxation: Every cent you earn as a DoorDasher is taxable income. In an LLC, this is treated as personal income for your tax returns. This means you can pay your individual tax rate, not what corporations pay.
Cons of an LLC
- Cost: Higher setup and ongoing fees compared to a sole proprietorship. While this will come out of your pocket, setup costs are one-time and ongoing costs are low.
- State regulations: Compliance requirements and fees vary by state, which can complicate management if you operate in multiple states. This work means more time doing paperwork and less time behind the wheel.
FAQs
What are the requirements to become a DoorDasher?
– Vehicle requirements: Depending on your city, you can use a car, scooter, or bicycle to make deliveries. Each vehicle type has specific requirements like driver’s license, insurance, and a clean driving record.
– Smartphone: You need an iPhone or Android smartphone to use the DoorDash app for accepting and managing delivery orders.
– Background check: DoorDash will conduct a background check to ensure you have a clean criminal and driving record.
– Identity verification: You will need to provide a social security number and consent to a background check.
– Signup process: Complete the online application, attend an orientation (in-person or online), and activate your DoorDash account.
How much does it cost to form an LLC for DoorDash?
What kind of insurance do I need for my DoorDash LLC?
Can I hire employees with my DoorDash LLC?
What are the disadvantages of forming an LLC for my DoorDash business?
Can I use personal vehicles for DoorDash deliveries under my LLC, and what are the implications?
Can I drive for DoorDash and other services under one LLC?
Can you register on DoorDash as an LLC?
If you already have a DoorDash account, you can update your profile with your new LLC information. Go to your account settings and update your legal name, business name, and EIN.
If you are registering for DoorDash for the first time, you can enter your LLC information during the signup process. Ensure you use your LLC’s name and EIN in the appropriate fields to properly register your business entity.
Be prepared to provide documentation proving your LLC’s formation. DoorDash may require this information to verify your business entity status.
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