Should I start an LLC for my Vrbo business?

Starting a limited liability company (LLC) for your Vrbo business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a Vrbo business, lawsuits can arise from things like property damage disputes, nuisance complaints, and guest-related injuries.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your Vrbo business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Should I start an LLC for my Vrbo business?

Do I Need an LLC for a Vrbo Business?

Even if you started your Vrbo account as a hobby, one viral video can quickly gain you thousands of followers (or more). More attention on your videos can create potential risk that you might not have considered. LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Vrbo Business

By starting an LLC for your Vrbo business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Vrbo businesses will often benefit from liability protection because there can be a high amount of risk involved in operating home rental properties like a Vrbo property.

Example 1: When one of your guests falls down a flight of stairs and suffers from a serious head wound, a medical damages lawsuit is filed against your Vrbo business. Presuming that you didn’t personally act negligently, your personal assets will remain safe from the claimant even if your business is unable to compensate them.

Example 2: You apply for a large business loan in order to acquire a new property and rent it out to your Vrbo guests. When you’re unable to pay it back in a timely manner, the lender sues you. Since your business is an LLC, this will ensure that the lending party will not be able to seize your personal assets in order to seek reimbursement.

Example 3: A guest decides to host numerous loud house parties during their stay. As a result, a neighbor files a nuisance lawsuit against your LLC. Regardless of how the lawsuit progresses in court, the claiming party will not be able to use your personal assets as compensation, even if your business’s assets are unable to pay them.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Vrbo Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a Vrbo business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Vrbo businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance and commercial property insurance for your LLC.

The costs of starting a VRBO business will depend on whether you are using a pay-per-booking or a subscription listing model.

If you are operating with the annual subscription model, you will need to pay an annual fee of $499 per year, whereas you will need to pay an 8% fee each time a booking is made on the pay-per-booking listing model.

You will also want to purchase general liability and commercial property insurance in order to safeguard yourself from property damage and personal injury claims.

Regularly re-stocking amenities in your rental(s) and periodically updating towels and linens will constitute a portion of your expenses. Any repairs, cleaning services, taxes, or maintenance fees will be incurred, as needed.

Vrbo businesses make money through the rental of houses or apartments. Renters will pay a daily rental fee. Some renters may choose to charge different rates for weekdays and weekends or for extended stays as opposed to just a few days.

A Vrbo business provides an alternative to hotels and other traditional places for guests to stay by renting out apartments or houses. How long a guest may stay varies depending on the business owner, but it usually ranges from a few days to a couple of weeks.