STR- Business and/or Title as LLC?

Question

Hello! Looking for advice on putting a STR into an LLC.

- Why is this recommended?

- Does the title and business need to be in an LLC or can just the business be in an LLC?

- What are the advantages and disadvantages?

- What professional is best to seek advice from- attorney? accountant?

Thanks in advance!

Collin Hays · Answer

The biggest advantage of an LLC for a vacation rental is personal liability protection. The owners are not personally responsible for the debts or lawsuits of the company. HOWEVER, you've got to be very vigilant on running the LLC as a true company - separate banking accounts, credit cards, books, corporate records. If there is a claim, the plaintiff may attempt to pierce the corporate shield and demonstrate that the LLC was set up only to facilitate negligence on the part of the owner.

Zach Edelman · Answer

Would reach out to @learnlikeaCPA aka Ryan Bakke who is an STR specific CPA that can likely help with the tax implications of this.

Sarah Kensinger · Answer

You would want a real estate attorney to answer these questions. Accountants are more for taxes and on this forum, you'll just become more confused. The following YouTube links to our business real estate attorneys offer valuable info that'll help you answer all the above questions. You can also join a free session on Saturdays that teaches about entities and taxes.

Anderson Business Advisors

Clint Coons

Toby Mathis---The Tax Guy

Andrew Steffens · Answer

In that case personally I would turn into LLC and run it all as a business.  You get some negligibly protections in an LLC too, and possibly tax.

Allison Martychenko · Answer

@Andrew Steffens thanks for your response. We own the property outright so getting financing for it won’t be affected. This was our vacation home, and we are turning it into a STR. Thanks for the advice!

Andrew Steffens · Answer

Hi this is asked quite often in here so I recommend you search for some additional info.

Long story short...

I recommend financing in your own personal name if you qualify for the purchase you are trying to make.  You will get almost always get better terms using conventional financing.  You can properly operate the STR in your personal name to include the financing, proper insurance, etc.  You can also run your STR in your personal name or elect to start a company that operates the STR i.e. branding.

If you do not qualify or for some other reason do not want or cannot qualify for conventional financing, you will likely have to go to some sort of DSCR or other business purpose loan route, and they will actually require you to put it into an LLC.\

I own 9 STR's, some are in my personal name.  Some are in an LLC.  All are operated by management company.

I hope that makes sense!

STR- Business and/or Title as LLC?

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