How to Transform a Vacation Rental Property Into an LLC

How to Transform a Vacation Rental Property Into an LLC

Choosing the right business structure is crucial for any vacation rental property. 

Given that these are short-term rentals and often seasonal businesses, it’s important to protect yourself from any risks. Also, the type of business structure affects a lot of things like taxation, asset protection, profit distribution, transfer of ownership, etc.

Therefore, you need to carefully consider your options and choose the best business structure for your vacation rental property.

Alternatively, you can heed our advice and go with the most popular and useful option—an LLC.

Transforming your vacation rental property into an LLC has numerous advantages and is fairly easy to achieve. In this post, you will learn both the benefits of forming an LLC and the process for doing it.

Let’s get started.

Why Should You Make Your Vacation Rental Property an LLC?

There are many benefits of choosing an LLC as the business structure for your vacation rental business. 

If you form an LLC, here are some of the advantages that you will gain:

  • Your personal assets will be protected from the financial liabilities of the company
  • If you own multiple vacation rental properties forming LLCs can keep those businesses separate
  • It allows you to keep your personal and business expenses separate
  • You get the flexibility to get taxed as a Sole Proprietorship or a Corporation

When you form an LLC, you create a separate legal entity and you are not personally liable for it. This is the biggest reason why you should transform your vacation rental property into an LLC.

How to Register Your Vacation Rental Property as an LLC

Now that you have a clear understanding of why LLC is the best entity type for a vacation rental property, let’s discuss the actual process of forming one.

Here is the step-by-step process to register your vacation rental property as an LLC.

1. Choose a Name

If you want to convert your vacation rental property into an LLC, you will need a unique and memorable business name.

This will require two steps: shortlisting a name and cross-checking the state database to ensure that no other business is operating under the same name. 

Once you choose your business name you need to register it with the state in which you will be conducting business. For that, you will also need to check your state’s LLC naming guidelines and comply with those. 

For example, some states may want you to add the word LLC in your name, while others won’t. So check the naming convention and then register your official business name.

If you feel that your official name is too long or boring, then you can always choose to do business under an assumed name or fictitious name. To do that, you simply need to file for doing business as (DBA) and select a short and memorable name for your business.

2. Select a Registered Agent

Every LLC needs to have a registered agent who will be responsible for receiving all legal notices and documents on behalf of the LLC. This means that the registered agent needs to be present at the official address during all weekdays and work hours.

You can, of course, choose to be your own registered agent and give your personal address for all correspondence. 

However, if you feel that it is too restrictive and you can’t possibly be available all the time, then you should pay someone to be a registered agent. The best option is usually to go with a lawyer who can take care of all legal formalities on behalf of your LLC.

3. Create an LLC Operating Agreement

This is one of the necessary steps for forming an LLC. 

An LLC operating agreement has official guidelines for how the business will operate including:

  • Profit and loss distribution
  • Roles and responsibilities of members
  • Day-to-day operations and processes
  • Succession planning
  • And a lot more!

Remember, it is best to put together an operating agreement before starting the business to ensure a smooth flow of operations.

4. File the Articles of Organization

Another important step for registering your vacation rental property as an LLC is to file the articles of organization. This is the key step in registering your business with the government authorities.

The document is the legal foundation for your business and will have all important details like:

  • Name of the business
  • Official address
  • Name of the members
  • Registered agent’s name and address
  • And more!

To file for the articles of organization you simply need to fill a form on the Secretary of State website. Alternatively, you can take help from third-party service providers like GovDocFiling who can expedite the entire LLC creation process for you.

5. Obtain Licenses and Permits

Even after you have registered your vacation rental business as an LLC, you still need more permits to start operating. 

Though these requirements will differ from state to state, some things like a general business license and a short-term rental license will remain common.

Check your local and state government’s website for details about all the required licenses and permits that you need for your vacation rental property. It would also be prudent to check the local zoning laws before you start a vacation rental property business.

Ready to Transform Your Vacation Rental Property into an LLC?

That does it: now you know everything about how to turn your vacation rental property into an LLC. Hopefully, this post would also have convinced you about why LLC is the best business structure for your vacation rental business.

Use this post as your guide to creating an LLC and starting your vacation rental property business on the right foot. All the best!