Airbnb Hosting and Business Structures
Your Airbnb hosting LLC can be taxed as a sole proprietorship or general partnership. An LLC is the best choice for most small business owners because LLCs can protect your personal assets.
A sole proprietorship is the simplest and most common way people set up a small business. It’s an informal, unincorporated entity that is your business’ “default setting”. With this setup, there’s no distinction between you as the owner and the business itself.
If you’re a business host located in the EEA, consumer protection law requires you to clearly show:
- Your full name
- Your business address and contact details
Whether you need an LLC for your Airbnb hosting business depends on various factors, including your specific circumstances, location, risk tolerance, and long-term business goals.
Tax Implications and Airbnb Operation
A sole proprietorship is considered a small business which gets filed on Schedule C. Airbnb and VRBO provide the average number of nights. If you are a host on Airbnb, creating a Limited Liability Company (LLC) can provide legal protection and potential tax benefits.
Becoming an Airbnb Host
Airbnb lets you generate passive income from your home or spare room. Hosts are paid out based on guest stays.
Do I need a business account for Airbnb?
Your Airbnb business needs a separate bank account to collect rental fees and pay expenses. You may need an EIN for tax purposes, depending on local laws and regulations.
It is recommended to familiarize oneself with local regulations and requirements before hosting. The biggest barrier to entry is often legislation, such as certain cities prohibiting rentals for less than 30 days.
An LLC will give liability protection and more tax options. When you rent out your home, the IRS may treat you as self-employed, so you have to pay self-employment taxes.
Frequently Asked Questions
Does running an Airbnb count as a business?
Running an Airbnb can make you a small-business owner in the eyes of the IRS. You will receive a Form 1099-K if you earned more than $600 during the calendar year. Running an Airbnb involves providing accommodations for a fee, making it a short-term rental business.
The IRS may treat you as self-employed in the vacation rental business, requiring you to pay self-employment taxes and income taxes. An LLC provides liability protection and tax options for an Airbnb business.
Airbnb is free to sign up and list your home, but charges a service fee for hosts, generally 3%, to help cover operating costs. You may need to register, get a permit, or license before you list your property or accept guests.
In most cases, the ATO treats Airbnb income as investment income. Whether you legally count as a business depends on local laws and regulations. Since Airbnb requires active management, it is an active trade or business. The average monthly Airbnb income is $924.