Should I Start an LLC for My RV Rental Business?

Starting a limited liability company (LLC) for your RV rental business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For an RV rental business, lawsuits can arise from things like mechanical issues with your RVs due to poor maintenance or failure to disclose a unit’s defects to a customer before renting.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your RV rental business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for an RV Rental Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for an RV Rental Business

By starting an LLC for your RV rental business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

RV rental businesses will benefit from liability protection because of the risks associated with operating an automobile and property damage.

Example 1: A customer rents an RV, and while on their trip, the RV is found to have a mechanical issue that causes an accident. The customer sustains injuries in the accident and decides to sue the business for damages. If found liable, limited liability protection will ensure that the owner's personal assets are protected from any compensation awarded in the lawsuit.

Example 2: An employee is injured while performing maintenance on an RV and decides to seek financial compensation through legal action. Limited liability protection will ensure that the owner's personal assets are not at risk, even if the business is found to be liable for the employee's injuries.

Example 3: A worker is injured while cleaning an RV and decides to sue the business for damages, claiming that the RV was not properly maintained. If the business is found to be liable for the worker’s injuries, limited liability protection will help to protect the owner's personal assets from the lawsuit.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for an RV Rental Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if an RV rental business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

RV rental businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Insurance can benefit an RV rental business by protecting against financial losses due to damages or accidents involving rented vehicles.

Common Situations Business Insurance May Cover for an RV Rental Business

Example 1: As you show a customer the different RVs you have for rent, she trips over a cable, breaks an arm, and decides to sue your company for damages. General liability insurance would pay for your legal defense and any required settlement.

Example 2: A local competitor sues your business for libel. While you disagree with the claim, you know you need a lawyer right away. General liability insurance would cover your legal defense costs and any required settlement.

Example 3: While entering your restroom, a customer slips on a wet floor, injures himself, and demands you pay for his medical treatment because you didn’t mark the wet floor. General liability insurance would cover the cost of his medical care.

Other Types of Coverage RV Rental Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all RV rental businesses should obtain:

Product Liability Insurance

While you strive to keep your RVs in good repair and hope your customers enjoy them, there’s always a chance someone might decide your product caused them injury. In the event of a lawsuit, product liability insurance would cover your legal fees and any required settlement.

Commercial Property Insurance

You made a major investment in your RV inventory as well as the other equipment, supplies, and real estate needed to run your business. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building and grounds as well as the business materials stored there.

Workers' Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for your part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a workplace accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance and commercial auto insurance.

Read our RV Rental Business Insurance article for more info.

If you are opening a new business, your costs may be substantially higher, as you’ll need to purchase RVs. If you take over an existing business, though, the costs may be lessened. Either way, you will need to invest in at least a few RVs to get started.

Visit our How to Start an RV Rental Business guide to learn more about the costs of starting and maintaining this business.

The ongoing expenses of running an RV rental business includes advertising, vehicle maintenance, insurance, screening renters, and coverage for roadside assistance.

Learn more about running an RV rental business.

RV rental businesses make money by charging rental fees for their RVs. Rental fees will vary depending on the size of the RV and its amenities.

Learn more about starting an RV rental business.

With the increase in RV booking platforms on the internet, RV rental businesses are seeing significant growth. This business is typically seasonal, but with relatively low barriers to entry, there is excellent profit potential.

On average, RV rental businesses can earn $16,000 on a single RV. Depending on the type of vehicle and the frequency of rentals, that number can increase to about $60,000.

Learn more about starting an RV rental business.