[2 Minute Read]

Short-term rentals are a great way to generate income. They’re in demand, more accessible than ever. They’re also easy to market with platforms like Airbnb

In this short post, we’ll explain to you why you should create an LLC for your vacation rental and what’s the easiest way to do it. 

What’s An LLC?

LLC stands for limited liability company. It’s a business structure.

In human terms, it’s just a way of officially defining how you’re taxed for the profit you make from your vacation rentals. 

You’re probably thinking ‘why would I choose to do that?’

Forming an LLC for vacation rental income will offer you great benefits. 

Let’s make a list.

Limited Liability for Vacation Rental Owners

Limited liability means that if a lawsuit is filed against you in relation to your rental property, and the suing party wins, you’re not going to be paying out of your pocket. 

This is because the moment you set up an LLC, is the moment you put a clear divide between you and the business. 

In a scenario where you’re not an LLC, but are a sole proprietorship, your assets and business assets are in the same pot. So when it’s time to pay up, there’s no distinction. 

As a vacation rental owner you have to keep the place safe, and so on. But, accidents happen and you’re not there to prevent them. 

Having this additional layer of protection means that you can sleep easy. 

Less Tax Thanks to Write-Offs

An LLC can claim expenses. Think about any costs associated with the running and maintenance of your rental property. Interest on loans, bookkeeping fees, license fees, payment processor fees, Airbnb fees, and so on. 

Make sure to double-check the expenses before writing them off. You can do this with your accountant or by following official guidelines. 

Finances Under Control 

Having a bank account for your LLC is a requirement in most cases. 

This is useful for keeping your finances organized. You can track the expenses and profits easier because your finances are separated from your business’ finances. 

Normally, if you don’t keep the expenses and income separated, you’ll have a hard time remembering which transactions related to your business and which were personal. 

Credit Building for Your Rental Property Business

Maybe in the future, you’ll want to expand your business and get more properties on board. The moment you set up an LLC you can start building credit for your vacation rental business. This will make financing easier in the long run. 

How to Create an LLC for Rental Property 

LLC needs to be created with the state. There are state filing fees and specific documents that need to be filled out. You’ll also have to set up a registered agent for your LLC. 

We understand that the process can be time-consuming. If you want it done right without having to waste time on understanding all the paperwork, and navigating the different processes. Then simply hire us to incorporate the business for you. 

In exchange for a small fee, you can have everything set up stress-free.

Click here to learn more.