Attention Future/Current Airbnb Hosts: Why Start as an LLC?

Injured guests, damage to yours or neighboring properties, and unpaid taxes are just one of the few issues that you might deal with as an Airbnb host. Hence, it is pivotal to familiarize yourself with the local laws that govern home rentals, as well as tax consequences involved.

First, you need to choose the right business structure to minimize your risk exposure. One of the most common choices is a Limited Liability Company (LLC), as it is simple to maintain, particularly for a single member Airbnb owner. The biggest advantage is protection from liability. This means that members are not personally liable for debts incurred by the business (except in rare circumstances). It is vital protection not provided in a sole proprietorship or traditional partnership as it shields the owners from personal liability for the LLC’s business debts or legal liabilities (lawsuits). LLC members enjoy the same protection as shareholders in a corporation, but are not required to maintain the same formalities (e.g. annual meetings, written corporate minutes, etc). In a sole proprietorship or general partnership, you as an owner and your Airbnb business will be legally considered the same, i.e. leaving your personal assets (your home, individual bank account, etc) vulnerable.

Another major benefit to creating your LLC is tax flexibility.  Members of the LLC can determine between two options on how they wish to be taxed. As a single member LLC you can decide to be taxed as a sole proprietor where your income is going to be treated as personal income; or you can choose corporate taxation. As an LLC owner you will also be able to lease your personal assets to your corporation that will allow you to deduct as a business expense and add more income to your household (i.e. your lease agreement may allow your LLC to lease a home office from you creating more household income). You should consult a CPA to confirm.

In short, an LLC is one of the optimal ways of setting up your Airbnb home sharing business as it shields its member(s) from personal liability and offers flexibility in taxation. Call our office at 206-838-8118 to determine if an LLC is right for your Airbnb business.

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