Last Updated: May 10, 2024, 12:30 pm by TRUiC Team

Should I Start an LLC for My Travel Agency?

Starting a limited liability company (LLC) for your travel agency 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 a travel agency, lawsuits can arise from things like a customer’s trip being poorly planned, a customer suffering an injury while at your offices, and complaints that the agency intentionally selected more expensive options.

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

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

Do I Need an LLC for a Travel Agency?

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

You should form 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 a Travel Agency

By starting an LLC for your travel agency, 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.

Travel agencies will benefit from liability protection because of the risk of trademark infringement, financial data breaches, and even things like libel. 

Example 1: The airline you selected for a customer’s trip lost their baggage leading to them missing an important meeting. They are attempting to sue you over this. Since your agency is an LLC, your personal assets are protected with limited liability so they could not be taken in the settlement.

Example 2: While going over flight options in your office, a customer trips over a potted plant breaking their nose in the fall. They ask that you pay for the medical expenses. Your personal assets could not be used to pay for this since they are protected with limited liability.

Example 3: A customer is attempting to sue you after finding out their trip could have been cheaper, claiming your agency deliberately picked more expensive options. Should you be found in the wrong by the court, your personal assets would be protected due to limited liability as an LLC.

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 a Travel Agency

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 a travel agency 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

Travel agencies 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 loansgrants, and credit.

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

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.

Common Situations Business Insurance May Cover for a Travel Agency

Example 1: Going up the steps to your office, a customer trips and fractures their ankle. General liability insurance could cover some or all of the medical expenses for that customer.

Example 2: Backing out of your parking spot after a long day, you fail to check your rear-view mirror and T-bone another car as it passes behind you. The other car’s driver-side door is crushed. The accident occurs on your business’ property, which means that general liability insurance would probably cover some amount of damage to the other driver’s car, as well as any medical payments for which a court found you liable.

Example 3: As you go over itinerary details with a customer in your office, her young child unplugs a computer monitor and pulls it off a desk and onto his head, causing injuries that require medical attention. If found liable, you could probably count on general liability insurance to cover medical expenses or any settlement reached.

Other Types of Coverage Travel Agencies 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 travel agencies should obtain.

Professional Liability Insurance

Travel agents don’t simply book flights and cruises. They can organize and book lodging, tourist activities, and more. A travel agent is not immune to error though. Scheduling errors, bad advice, or poor communication can result in negative customer experience.

While many trips are intended to be relaxing vacations, a travel agent can be found liable in the event that their advice or trip management results in damages to the customer. Keep your agency and your employees covered with professional liability insurance, which will cover workers who accidentally ruin business travelers’ trips or cause injury through poor advice.

Business Interruption Insurance

In the event that your storefront is destroyed or severely damaged, usually through forces like fire or tornadoes, business interruption insurance can help your travel agency get back on its feet. This policy covers estimated losses in revenue during a temporary period of commercial inactivity. Additionally, if your business requires a temporary relocation, this policy may cover the expenses accrued from the move. Business interruption insurance can keep your travel agency alive and kicking as it recovers from a major disaster.

Workers' Compensation Insurance

A growing company’s needs will include more agents to handle an increase in customers. Once you employ part-time or full-time workers, it is legally required to carry workers’ compensation insurance. These policies typically include disability and death benefits in the event that an employee is injured or killed at work.

Data Breach Insurance

Much of the modern travel agent’s work includes digital data entry, including customer itineraries, destinations, hotels, and debit or credit card info. In the event that your devices or network are breached, your business could be found liable and be required to compensate for customer losses of any kind.

Hackers and online scammers continue finding cleverer methods of digital theft, and data breach insurance can protect your company from damaging legal action.

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.

Read our Travel Agency Business Insurance article for more info.

Some sources suggest you can pay a host agency $400 to $1,200 to get started from home. A host agency takes care of all the regulatory and back office requirements and splits the commission with you as the business owner.

To start your own independent agency may cost you between $1,000 and $10,000, depending on the markets you serve and your existing book of clients.

Visit our How to Start a Travel Agency guide to learn more about the costs of starting and maintaining this business.

One of the main operating expenses for a travel agency is marketing costs. Rent can be an additional operating expense if your travel agency has an office.

Learn more about running a travel agency.

Travel agencies make money by researching, planning, and booking travel itineraries for customers.

Learn more about starting a travel agency.

The travel industry has changed dramatically over the last few decades. Today, people are able to find almost all the information they need on the internet and even make their own bookings and reservations.

Despite this, there is still some demand for travel agencies. Some people don’t want to spend the time planning their own trips, while others want assistance organizing a specialized itinerary.

Small travel agencies make around $30,000 to $50,000 per year, but specializing in certain services could lead to more revenue.

Learn more about starting a travel agency.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations


SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business