Those who have been daydreaming about launching a vacation rental business for several years may find the prospect both exhilarating and terrifying. It is essential to approach a new business venture, particularly renting vacation properties, like a business rather than a hobby or a second job. In launching a company, you should form a corporate structure. You must maintain separate business accounts from your personal accounts to protect the assets and money coming in. Additionally, you will be thankful to yourself when it comes time to file your taxes. In addition, if something unfortunate occurs and someone sues you for damages, establishing an independent firm can help reduce your personal exposure.
You have heard this from us, your friends and family, and most significantly, from the signs plastered all over the place: vacation rentals are here to stay. People’s perspectives on travel have seen a dramatic transformation in recent years. Take a look at our post on “How to Start a Vacation Rental Business!” if you want an overview of the ten steps involved in the process.
Why is launching a company the first step?
The straightforward response is that some amount of time is required. Launching a company might take anywhere from one to six months to complete. As a result, founding a company right at the beginning of the process is critically vital. The legal existence of a company can be established in several distinct ways. This is something that has to be done to create accurate financial records. When purchasing a property with limited liability, it is essential to have an established business already. At this point in the game, the most crucial reason to create a business is so that you can keep records. As time passes, you will become aware of other motivations to launch a business.
Why does everything cost money when launching a company?
According to the Small Business Administration, small firms are responsible for producing fifty percent of the gross domestic product and private sector jobs. Although the company might not appear very profitable to you, others may see massive potential in this industry. Before we started Relaxing Condos, we had been accustomed to the many consumer freebies, such as free bank accounts, free web hosting, free email addresses, and free VOIP phones.
Unfortunately, companies are not eligible for freebies of this nature. Everyone has their prices for all business-related activities. Even though $25 each month might not appear too much, it quickly adds up. We spend around $3,000 per year on all of the necessary services. We put forth a lot of effort to balance providing customer-friendly services and the amount of money it takes to deliver those services. Throughout this blog, we will discuss the many different goods and services we use for our company. As a side note, it’s worth noting that many companies, such as banks, give discounts to military personnel and first responders.
How to choose a name?
At first, we believed that having a memorable name and internet domain was essential, which is how RelaxingCondos.com came to be. We discovered, however, that its usage in day-to-day operations is quite limited. The one exception to this guideline is if you want to accept bookings directly through your website. Your company name is buried deep inside your listing on platforms like Airbnb, VRBO, bookings.com, and others. Most of the time, they will call you by your first name anyway. Check out my post on “What’s in a Name and How to Protect It” for further information on how to name your company.
The cost of launching a company
Check read my post on “Starting an e-business” if you’re looking for some pointers on how to launch your own company. The cost of registering a business might easily exceed $12,000 under certain circumstances. This is the sort of business that is often mentioned if you have ever attended a “free” beginning a business seminary. They would gladly assist you in getting started for a little thousand-dollar coaching fee.
You may launch a company in Ohio for as little as $50 in initial investment. There is a wide variety of commercial enterprises. Each one has a unique initial investment as well as ongoing operating expenses. To begin, a company is founded under and through the guidance of a state. There is a significant disparity between the costs of doing business in each state.
The laws of each individual state govern the process of starting a business. In Ohio, for instance, the initial cost of forming a limited liability company is $100, but there is no ongoing maintenance charge. In comparison, starting the same kind of business in Nevada would set you back $425 in addition to the $350 annual charge.
One of the easiest types of businesses to establish and keep running is a limited liability company, sometimes known as an LLC. This is a great place to start, therefore I highly suggest it. See the piece that We wrote on the many “Types of Businesses” for an in-depth discussion on the many various types of company opportunities.
Protection from piercing the corporate veil — Sounds Scary!
Imagine the following scenario: you have spent the money to establish your limited liability company (LLC) or corporation; you are sued for something, and the court decides to confiscate your personal assets; you lose the lawsuit. But wait, you would object; the very purpose I established the corporation in the first place was to shield my own assets from liability.
The term for this approach is “Piercing the Corporate Veil.” The inability to maintain a distinct “person” identity from that of the corporation is the most typical cause of piercing in the context of a small firm. Note that a sole proprietorship does not deal with this item since there is no legal distinction between the individual running the business and the business itself. In addition, you may be held personally responsible for any fraudulent activity. To safeguard against this, you need to set up distinct business accounts for things like email, banking, etc. In a subsequent post, further in-depth discussion of this topic is planned.
What is business banking?
As a business, your bank or banks will be a key partner in your future. It is important to consider all aspects of banking as you choose a bank. Do you need one near you? How much do checking and savings accounts cost? Do they offer business credit cards and loans? What is their online banking like? I use a different business bank than my personal bank because they offer better rates and more business services. It is important to consider how your bank and accounting software will interact. As mentioned above, most banks charge extra for this connection to your accounting software. For more on business banking, see my post title, “What do I need to know about Business Banking?”
Finally, what are business digital hosting services?
This is a rather broad subject. My post titled “Business Digital Hosting” will cover the specifics of setting up the electronic side of the business, including answering questions such as “how do you obtain a domain name, website, email address, and phone number?” In contrast to banking, activities of this nature are not fundamental but optional. In addition, keep an eye out for my next piece on “Acceptable Business Deductions 101,” which will cover subjects such as costs incurred for a home office, automobiles, and advertising, among other things.
You’ll be motivated to start your own company with any luck. Please feel free to provide additional thoughts or questions in the comment field. “Finding a Location” will be the subject of my next piece in this series. Furthermore, look at our post on “How to Start a Vacation Rental Business!” if you want an overview of the 10 steps involved in the process.
Recall that Relaxing Condos offers Business Coaching Services to help you get started with any of your vacation rental business needs if this all seems overwhelming. Please use the buttons below to spread the word about this article if you found it useful. Join our mailing list so we can deliver our free cost estimation guide and a monthly newsletter with special headlines on our latest articles, blog posts, and news tips to your inbox.
— Jake