LLC For Airbnb 2024: How To Form One For Your Business?

LLC For Airbnb
Airbnb hosts should think about creating an LLC for their business. Photo: zeljkodan/Shutterstock

As an Airbnb host, you welcome guests from all over the world to stay in your home for a short period. Because of visitor reviews and robust rental agreements, you can usually trust that the individuals who rent a home or apartment will look after it. However, as any seasoned landlord knows, an accident or misunderstanding with a visitor will surely occur. While these scenarios are uncommon, having an extra layer of security on top of the tax benefits can help you sleep easier at night while also allowing you to keep more money through tax savings.

At the very least, Airbnb hosts should think about creating a limited liability company (LLC) or sign up for a legal business framework. This is specifically true for company owners who have expanded their rental properties to include many apartments. Of course, you’ll earn more money with more units, but you’ll also be taking on greater danger. We lay out all you need to know about forming an LLC for a short-term rental business in this article, so you know what you’re getting into.

How To Start An LLC For An Airbnb 2024?

  • Choose a registered agent
  • Choose a name for your LLC
  • Register your business with the state
  • Develop an operating agreement for your LLC
  • Obtain an Employer Identification Number (EIN)

LLC For Airbnb: 5 Steps To Form An LLC

The specifics of starting an LLC vary by state, but the following are the essential steps:

Choose A Name For Your Business

The LLC’s name serves as a brand for your company and is crucial for consumer awareness. It will display on everything, so make sure it promotes your company while still adhering to the criteria for LLC names. These regulations differ by state, but the name must generally be distinctive and free of obscene or vulgar phrases. You also can’t use words linked to another business or indicate government involvement.

LLC names are usually chosen on a first-come, first-served basis, which means that another LLC might steal your name until the state has legally authorized it for your usage. Some states, however, enable you to reserve your name for a little charge until you’ve finished forming your LLC.

Most states have a website where you may look for available LLC names, but you can also request a name check by mail. In addition, other government offices, such as the US Patent Office, Department of Revenue, Secretary of State, or Trademark Commission, may be required to do further checks for certain business kinds.

Choose Your Registered Agent

Legal paperwork and tax notices will be accepted on your LLC’s behalf by your registered agent. Therefore, when you submit your LLC’s Articles of Organization, you’ll need to include your registered agent.

Hiring a registered agent service has a lot of advantages, such as privacy and peace of mind.

File Articles Of Organization

Regardless of your state, you’ll need to file Articles of Organization before you can take bookings for your Airbnb hosting business. This document is used by state governments to generate and keep track of important information regarding your LLC, such as its name, ownership, purpose, and contact information. The material included in the Articles of Organization differs significantly between nations.

Create An LLC Operating Agreement

An LLC operating agreement is a legal document that defines who owns your business and who has what responsibilities.

The name of the LLC and the addresses of its major business office and first registered office are all included in its identifying information.

The declaration of purpose guarantees that the operating agreement follows your state’s legislation. Additionally, it provides the date on which the business will resume regular operations after the state has received all required papers.

The nature of the business is described by the LLC’s business purpose. It should also include a clause that says “and for any other authorized business purpose,” so you may expand without having to establish a new operating agreement.

Obtaining An EIN

The Internal Revenue Service (IRS) of the United States uses an Employer Identification Number (EIN) to identify and tax firms. It’s simply a business’s version of a Social Security number. Therefore, it is free to apply for an EIN[1] directly with the IRS.

What Is An LLC?

In the United States, a limited liability company (LLC)[2] is a corporate structure that shields its owners from personal accountability for its debts or liabilities. LLCs are hybrid businesses that combine the advantages of a corporation with those of a partnership or a sole proprietorship.

Limited liability companies (LLCs) are a straightforward and low-cost solution to safeguard your personal assets while lowering your tax bill. However, when your firm faces risk and/or might benefit from tax benefits and a greater reputation, you should consider forming an LLC.

Do I Need An LLC For An Airbnb Business?

Yes. An LLC will provide you with personal liability protection against any business dangers, as well as greater tax alternatives and legitimacy for your organization. Moreover, compared to the benefits given, forming and maintaining an LLC[3] is very affordable and uncomplicated.

Why Starting An LLC For An Airbnb Business Is Important?

Why Starting An LLC For An Airbnb Business Is Important?
Forming an Airbnb LLC has many advantages. Photo: NDAB Creativity/Shutterstock

Taxation

One of the most significant benefits of an Airbnb host LLC is the capacity to pick the exact kind of taxes that apply to your business, making it significantly more accessible and less expensive than a non-corporate structure. Let’s look at the various tax alternatives in more detail.

C-corporations

A C-corp structure means that the business’ earnings are taxed first as a corporation. Then all of the entity’s members are taxed separately depending on their profit shares.

You can decide to have your Airbnb business taxed like this. However, this is a less popular option for many LLC owners because of the double taxing procedure, which can be rather expensive.

Pass-throughs

Passthroughs enable you to submit taxes independently from rents and fees, and Airbnb offers a range of tax settings. For example, when incorporating an Airbnb hosting LLC, you can have it taxed using the ordinary flow-through approach by sole proprietorships, S-corporations, general partnerships, and LLCs. By removing taxes from your base pricing on Airbnb, you may decrease the overall price displayed on the primary listing page, making your properties more appealing to visitors. Single-member LLCs will be taxed as sole proprietorships. At the same time, multi-member LLCs will be taxed as general partnerships.

Credibility

An LLC structure might help your Airbnb hosting business get legitimacy as an entrepreneur. Informal business enterprises often do not have exclusive assumed business identities and operate in the owner’s personal name.

Of course, this is less of an issue with Airbnb rentals because the public opinion of these houses is usually more aligned with the parent company than with the individual host. Even yet, it’s indisputable that forming a formal corporate structure will make your workers (like your cleaning staff) and business clients consider you more seriously.

LLC Benefits For An Airbnb Business

Tax Flexibility

LLCs provide you with some flexibility in how you file your taxes. Still, it’s important to understand that the IRS will treat your Airbnb as a sole proprietorship if you don’t incorporate an LLC or another business organization. This implies that the profits from your firm flow through to you, and you declare them as personal income. As a result, a 15.3 percent self-employment tax, as well as state taxes, will almost certainly be applied to that income.

This is where creating an LLC comes in handy. After incorporating an LLC for your Airbnb, you may apply for S-corporation (S Corp)[4] status with the IRS. Assuming your Airbnb business is profitable enough to support this strategy, deciding to be taxed as an S-corporation will necessitate paying yourself a respectable wage for the services you perform for the company. You may reduce your self-employment tax by dividing your income between W-2 earnings (your salary) and distributions by paying yourself a modest salary (dividends). Self-employment taxes apply only to W-2 wages; thus, you effectively lower your tax burden.

Credibility

An LLC structure might help an Airbnb hosting company gain the trust of consumers. However, because it often works under the owner’s own name, an informal business like a sole proprietorship lacks a distinct business identity.

Because a customer’s opinion of these homes is often based more on Airbnb than the individual host, this issue is less of a concern with Airbnb hosting than with other businesses. However, if your company has a formal structure, such as an LLC, vendors, and business clients, they are more likely to take you seriously.

Liability Protection

Liability Protection
Business assets will be separate from your personal assets. Photo: Rawpixel.com/Shutterstock

The main advantage of forming an LLC for your Airbnb property is that you will have an extra layer of liability protection if your firm encounters legal action or possible debt. A Limited Liability Company (LLC) is a form of business entity that protects the personal assets of its owners from debts or litigation that the company may face. We live in a litigious society where individuals are fast to file lawsuits. So it’s understandable that your clients—those who live, dine, and sleep on your company’s property—might suffer bodily harm or property loss and want to hold you accountable. A limited liability company (LLC) can protect your personal assets.

Increased Privacy

You may not want to reveal your name or personal address as an Airbnb homeowner. If you own the house in your name, guests may readily find out who owns it by looking up public tax records, for example. This may allow disgruntled visitors to learn where you reside, which isn’t always good.

When visitors research the property and the property owner they will find the LLC company name rather than your personal name, which provides you an extra degree of anonymity. 

The Top 2 LLC Services for Airbnb Hosts

Some claim that locating the best LLC service is pretty simple. But do they mean all you have to do is go to the internet and skim through a few pages?

Wrong. Finding a reputable service is no easy feat if you don’t know what to look for. The businesses on our list will do more than simply handle your paperwork. They will also help your business grow by saving you time and money.

These are our best recommendations!

ZenBusinessIncFile
AwardBest LLC ServiceFastest Processing Speed
DetailRead Review Read Review
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ZenBusiness

Our top choice is ZenBusiness. They managed to steal the show with outstanding features, reasonable costs, and a lengthy list of delighted clients. There are over 6,200 online customer reviews, and the majority of them are favorable. This is tremendous, especially given they’ve only been in business for six years.

Zenbusiness has a starting bundle ($49.00) out of the three available LLC creation packages (starter, pro, and premium). It takes roughly 4 weeks to complete its process.

However, even though the registered agent service is free for the first 12 months, you’ll have to spend $119.00 to use it, if you renew the package. Nonetheless, you’ll receive all of the necessary features at a reasonable price.

IncFile

If you don’t want to spend a fortune registering your LLC, IncFile is the place to go. They provide LLC creation services for as little as $0. You simply have to pay the state costs.

As a result, approximately 250,000 business owners have used this service to formally establish their company.

Final Thoughts

You can hire a business lawyer (which is more expensive) or file for your business on your state’s website (which is more complicated if you don’t have any legal background). However, with a company like Hosting, we recommend registering an LLC somewhere to protect your personal assets. Again, the advantages outweigh the small outlay, and the fees are tax-deductible as a company cost.

Frequently Asked Questions (FAQs)

How much does it cost to form an LLC for an Airbnb business?

The cost of forming an LLC is determined by the state in which it is formed. The state filing fee is the most expensive part of incorporating an LLC. Depending on your state, this cost might range from $40 to $500.

Is an LLC required for an AirBnB hosting company?

Although it is not legally needed to run an Airbnb company as an LLC, it is strongly suggested due to the possible liability of permitting visitors to remain in your home. In addition, continuing to operate as a sole proprietorship or general partnership exposes you to the possibility of a lawsuit that might jeopardize your assets.

Is it necessary for my LLC to create a business bank account?

Personal asset protection necessitates the use of a distinct corporate banking account. When you combine your personal and business accounts, you risk losing your assets (such as your home, vehicle, and other valuables) if your LLC is not filed.

Does LLC pay taxes directly to the IRS?

The good news is that your LLC doesn’t pay taxes or file federal tax returns. Instead, you report the income you earn or the losses you incur from your LLC on your personal tax return (IRS Form 1040). If you earn a profit from your LLC, that money is added to any other income that you’ve earned.

Do I need a lawyer or legal counsel to start an LLC?

There is no legal requirement to hire an attorney to form an LLC. Most states allow LLC formation by registering the business entity on your secretary of state’s website and with the Internal Revenue Service (IRS). LLCs provide advantages over sole proprietorships and general partnerships.

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ABOUT THE AUTHOR

ABOUT THE REVIEWER

Marie Still has 19 years in digital & brand marketing, fiction author with 3 books under traditional publishing contract, editor (fiction/nonfiction). She has an MBA in Marketing.

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Bizreport Advisor adheres to strict editorial integrity standards avoids using tertiary references. We have strict sourcing guidelines and rely on peer-reviewed studies, academic research. To ensure the accuracy of articles in Bizreport, you can read more about the editorial process here.

  1. Irs.gov. (2017). Apply for an Employer Identification Number (EIN) Online | Internal Revenue Service. [online] Available at: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
  2. Irs.gov. (2017). Limited Liability Company (LLC) | Internal Revenue Service. [online] Available at: https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc.
  3. corporations.utah.gov. (2022). Considerations in Forming a Limited Liability Company – corporations.utah.gov. [online] Available at: https://corporations.utah.gov/business-entities/considerations-in-forming-a-limited-liability-company/.
  4. Irs.gov. (2017). S Corporations | Internal Revenue Service. [online] Available at: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations.
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