Delaware is taking the opposite approach of California in classifying Uber drivers. Insurance Journal reports officials in numerous Delaware cities mandated that all Uber drivers must carry a business license, which would make these drivers small-business owners. If you recall, California recently ruled that one Uber driver is an employee – a stark contrast to this interpretation. Read more about that decision here: "Uber Ruling: Driver Is Employee, Must Get Workers' Comp."
The report also states business licenses cost $109 a pop in one town. Though each driver must carry one, the report notes there is still some deliberation about whether the drivers must carry a license for each city. The cost might be untenable for many drivers.
There's still no word on whether Uber must pay for a license in each of the municipalities it operates in, according to the article. That precedent could have serious consequences for the company, especially if other states follow Delaware's lead.
This decision does make an interesting statement about what it means to be a small-business owner. One could argue that if you make money doing something on your own, you're automatically a business owner. Given the economy's shift toward share-based services, that might not be a bad assessment.
What Does It Mean to Be a Small-Business Owner?
As we discussed in "Another Day, Another Worker Classification Lawsuit," the share economy has effectively blurred the line between employee and independent contractor. That's a problem for a couple reasons. For starters, people might enter into share-based work relationships thinking it's just a little extra spending money, not a "real" job. That misconception means…
- They may not know they are considered independent contractors per most share-based business models.
- As independent contractors, these workers are required to pay their own taxes and can be fined for not paying.
- They are liable for accidents or losses their work causes – and the company may not help pay for those damages.
You don't have to do work for a tech startup like Uber or Lyft to fall prey to these same misconceptions. If you offer services or products on your own in exchange for money, you may be legally considered a business owner.
That also means you may be…
- Liable for physical injuries or financial losses your products or services cause, which is why carrying small business insurance is a good idea.
- Required to pay income and self-employment taxes (more on that in "Did You Freelance This Year? Now Is the Time to Focus on Small Business Taxes").
- Required to carry a business license.
Regardless of your long-term plans, it's smart to start thinking like a business owner for the sake of your finances. Rather than thinking of money in as income, think of it as revenue. That way, you can plan for your tax obligations so you're not penalized when you file your annual return, and you can invest in insurance so you're not up a creek without a paddle when you're hit with a lawsuit.
This proactive planning for expenses and revenue streams can help make sure your business doesn't run into any unnecessary legal or financial hitches. To learn more about managing money while your business is just getting off the ground, read "4 Risks from Irregular Income (and How to Beat Them)."
For more detail about the risk profile unique to rideshare drivers, check out the Obrella article Three Need-to-Know Personal Car Insurance Tips for Uber Drivers.