Do I need to form a company for my vacation rental?
Another friend of mine and her husband are buying their first rental home. Her first question to me was "do I need to form a company for this, and if so, what type - Sole proprietorship, S-Corp, LLC...". I'm not a lawyer or accountant and while they are the best experts to advise people in this manner, it's nice to at least share what you learned on your own journey. I struggled with the same question back when my husband and I decided to venture into the vacations rental business. I was so excited about my decision and naturally wanted to name the company, get my company formed, print my business cards... Then we got some wise advice from an accountant who specialized in real estate. He said that we didn't need to form a company to start building one. He made the good point that most people who do this may buy one house and after a few years, decide that they can't make money on it and move onto something else. If that happens, you wouldn't have wanted to waste money to form the company and then spend more money to unwind the company. His advice was to not form a company right away, to use a product like Quicken or Quickbooks to track expenses (to separate our personal expenses from business expenses for tax purposes) and then decide in a few years. That's exactly what we did. We started by not forming a company but just separating our expenses and then after a few years when we decided that we were in this for the long term, we then went and formed Mountain Serenity Rentals LLC. If you're trying to decide on the structure of the company, it's best to talk with an accountant about which type best fits your needs. I use an LLC, but others I know have used an S-Corp or a Sole Proprietorship. 0 Comments BLINK...AND YOU'RE AN EXPERT 1/23/2015 0 Comments You don't stop to think while you're in the middle of starting a business about how much you've learned. After a decade of owning and managing vacation rental homes, I've learned a few things. You try something, make mistakes, learn how to do it better, try something new, make more mistakes, learn something new...and repeating the cycle over time, you learn a great deal. I didn't realize just how much I'd learned until friends of ours wanted to get into the vacation rental business and asked me for my advice. Together, we looked at properties and I gave them advice on ones that would make good rentals vs. others. I also advised them on types of furnishings to include, how to position and promote their property online, the art/science of setting rates and fees, how to use local property managers, navigating the world of sales tax and business licenses...The net result was that they were able to get their property up and running in a few short months and are off to a great start. Their rentals already have exceeded their initial projections and are enabling them to operate profitably month to month. It literally took me years to get my first rental to that same place. 0 Comments