LLC for Vacation Rental?

Question

Hi All,

My husband and I just purchased a home and are planning to rent out half of the house on Airbnb. Based on the market we're hoping to collect at minimum $2000/mo but could be higher. Our mortgage is higher than our income on the rentals will be (since we're also living in a large part of the house). We've been advised to start an LLC to protect our assets. My questions are...

-Is it advisable to create an LLC or should we go with a good umbrella policy?

-How much does it cost in California to start and maintain an LLC? Obviously we would reach that $800/year tax, does this mean it would be free to maintain?

-If we do our research, can we set it all up on our own, or do we really need to hire a lawyer and/or an accountant to go through it with us (I know we're not the first to do something like this, so it seems like we could just follow the lead of everyone else doing the same thing as us)?

Any other tips as we start this process are greatly appreciated! Thanks!

Blair Russell · Answer

An LLC can be a great asset for multiple reasons including liability protection. But California LLCs can be quite expensive (at the same time so is a lawsuit). Lots of people suggest umbrella policies as an alternative but you have to be even more careful there as the exceptions on the policies may completely void it in the case of a rental, especially an Airbnb. The reality is if you're going to set up an LLC do it the right way (with professional advice) or don't do it at all. It takes time, energy, $$$, and effort, and changes the way you have to operate. I'm not even sure how you would go about doing it since it is only part of a house so  definitely get help to see if it is even worth it.

Jo-Ann Lapin · Answer

just keep I. Mind the corp/ LLC can easily be pierced in a situation like that with tennants, workers on the subject I would also look into a umbrella policy ☂️. I hope this helps.