If you are sued for anything, you’ll be personally responsible for the debts and liabilities. It’s the simplest business structure but also the riskiest. The government will send you a Form 1099 based on your social security. That means all income, expenses and other financial matters will be reported on your tax return, and you’d have to pay that tax accordingly. You and your enterprise will be regarded as the same entity. With this setup, there’ll be no distinction between you as the owner and the business itself. It’s an informal, unincorporated entity that will become your business’ “default setting” if you decide not to create a more formal structure. Not your wealth.Ī sole proprietorship is the simplest and most common way people set up a small business. That includes your home, car, bank account, even retirement savings.Īlthough Airbnb has a liability protection program that covers a host’s liability in an injury, property damage, or any untoward incident during a guest’s stay, a legal business framework will give you added assurance that it’s only your company’s or corporation’s assets that would be liable. Without the protection of a company or corporation, your personal assets could be placed at risk.
They may decide to pursue legal action by filing a negligence or personal injury claim.
You’ll want to protect your hard-earned money from lawsuits or anyone who might come after your assets.įor example, one of your guests gets injured while staying at your airbnb. Short-term renting is a lucrative industry and you’re likely going to generate a lot of income. And operating a short-term rental is no different. Whenever you operate a business or own real estate, you expose yourself to risks. The main reason you’ll want to formalize your business entity is that you want to protect your personal assets.
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