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Forming an LLC?

Do You Need an LLC for Turo or any Car Rental Business?

I’m going to cut to the chase—the short answer is no, you don’t need an LLC, but maybe you should start one. I’ll explain below why I think you might consider starting an LLC for your car rental business, whether through Turo or not.

As mentioned above, you are not legally required to have an LLC to rent cars through Turo or for your own rental business. You can operate your business as a sole proprietor, without forming an LLC. However, you will not have personal liability protection if you don’t have an LLC. If your business is sued, the plaintiff can go after your personal assets in addition to your business assets.

Should you get an LLC for Turo or a car rental business?

Yes, absolutely. Having an LLC offers several benefits, including personal liability protection and the ability to deduct business expenses from your taxes.

To give you a better idea, I will give you a few hypothetical scenarios where a person who owns a Turo LLC business (or a private car rental business) benefits from having an LLC business in the examples below:

👉 Example 1

A customer gets into an accident while driving one of your rental cars and sues for damages. If you have a sole proprietorship, your personal assets could be at risk. However, if you have an LLC, your personal assets are protected and only the assets of the LLC are at risk. This can help protect your personal savings, investments, and other assets from being seized to pay for any damages awarded to the customer.

👉 Example 2

A customer alleges that they were injured while using one of your rental cars due to a mechanical failure or defect. If you have a sole proprietorship, you could be held personally liable for any damages awarded to the customer. However, if you have an LLC, your personal assets are protected and only the assets of the LLC are at risk.

👉 Example 3

You are sued for breach of contract by a customer who claims that you did not deliver the rental car they reserved. If you have a sole proprietorship, you could be held personally liable for any damages awarded to the customer. However, if you have an LLC, your personal assets are protected and only the assets of the LLC are at risk.

The above are just a few scenarios where having an LLC can be beneficial for someone who owns a Turo or private car rental business. By forming an LLC, you can help protect your personal assets and limit your liability if something goes wrong.

Real-life example: Turo power host lawsuit

The discussion about liability protection isn’t merely theoretical. Take, for example, the case of a Turo power host who faced unexpected legal challenges despite years of operation.

llc for turo

After being involved in a lawsuit due to an accident with a rental car, the host discovered that personal insurance might not always shield you from third-party claims, as shown in the screenshot from a Turo community discussion below. This underscores the critical nature of ensuring your business has adequate insurance coverage and that you understand how policies function in the event of an incident. The reality of operating a rental business can bring surprises, which is why forming an LLC and having comprehensive insurance is not just a formality, but a necessity for asset protection and peace of mind.

If you’re considering starting an LLC, checking our picks for the best LLC formation services can be a smart first step in establishing your company.

What is an LLC?

An LLC is a business structure that can offer you personal liability protection. If your business is sued, the plaintiff can only go after your business assets and not your personal assets. This is important because it can help you separate your personal and business finances.

Will I pay more taxes as an LLC?

No, you will not pay more taxes as an LLC. Limited Liability Companies qualify for what’s called pass-through taxation. This means that the business itself is not taxed. Instead, the business owners (known as members) are taxed on their share of the LLC’s income on their personal tax returns. You can learn more about other pros and cons of having an LLC here.

Piercing the corporate veil

One important note – even if you have an LLC, your personal assets are still at risk if the court decides to “pierce the corporate veil.” This happens when the court believes that you’ve used your LLC to commit fraud or engage in other illegal activities. If this happens, your LLC will not offer you any protection and you could be held personally liable for your business’s debts and liabilities.

To avoid this, make sure to follow all the LLC rules in your state and don’t use your LLC to engage in illegal or fraudulent activities. You can also speak to an attorney to learn more about how to protect your personal assets with an LLC.

Switching to an LLC structure

If you’ve started your car rental business as a sole proprietor, know that you can transition to an LLC at any time. And if you’re just getting started, I recommend that you form an LLC from the outset. It’s a simple process and well worth the peace of mind that comes with personal liability protection.

If you decide that you do want to form an LLC, below are a few things you’ll need to do to get started.

Forming an LLC for Turo

Forming an LLC for your Turo business is a process similar to creating an LLC for any other type of business, and it largely depends on the regulations of your state. The general steps for forming an LLC include:

  1. Choosing a Name for Your LLC: Ensure it meets state requirements and is distinguishable from existing business names.
  2. Filing Articles of Organization: Submit the necessary paperwork to your state’s LLC filing office.
  3. Designating a Registered Agent: Appoint an individual or service to receive legal documents on behalf of your LLC.
  4. Creating an Operating Agreement: Outline the management structure and operating procedures of your LLC.
  5. Obtaining an EIN: Apply for an Employer Identification Number from the IRS website. You will need this number to open a dedicated bank account.

Remember, these steps can vary based on your state’s laws. Additionally, if you prefer a more streamlined approach, consider using an LLC formation service.

Single-member or multi-member LLC?

If you are the only owner of your car rental business, you can form a single-member LLC. If you have one or more business partners, you will need to form a multi-member LLC.

Distinguishing personal and business assets

To safeguard your LLC’s integrity and protect your personal assets, it’s crucial to avoid mixing personal and business finances. A practical approach is drafting a lease agreement between yourself and your LLC for the use of personal vehicles in your Turo operations.

Dedicated bank account for your turo LLC

After forming your LLC, opening a business bank account is a recommended step. This is important because it will help you separate your personal and business finances. Once you’ve obtained an Employer Identification Number (EIN), you’re equipped to establish a business banking account.

  • Select a bank that offers business banking services and open a new account in the name of your LLC.
  • Use this account exclusively for all business transactions to maintain clear financial separation between personal and business finances.

Vehicle financing for Turo activities

Exercise caution when discussing your Turo intentions with financial institutions, as this can impact your ability to secure financing. Some lenders might be hesitant or refuse financing if they know the vehicle is intended for Turo use.

Transferring your car under the name of the LLC

If you’re already in business, you may want to transfer the ownership of your car (or cars) to your LLC. This can be done by requesting a title transfer form from your state’s DMV. You will need to list the LLC as the new owner of the vehicle (or vehicles). These are the basic steps for transferring the title of your vehicle to your LLC:

  • Request a title transfer form from your state’s Department of Motor Vehicles (DMV).
  • Complete the form, listing your LLC as the new owner of the vehicle.
  • Pay any required title transfer fees and submit the form to the DMV.
  • Update your vehicle registration details to reflect the ownership change.

Obtaining vehicle insurance under the LLC

You will need to update your insurance policy to list the LLC as the owner of the vehicle (or vehicles), or obtain a new vehicle insurance under the LLC.

  • Contact insurance providers to find policies suitable for business vehicles.
  • Ensure the insurance policy is in the name of the LLC to maintain liability protection.
  • Compare different quotes and coverage options to find the best fit for your business needs.
  • Keep in mind the types of coverage required in your state and any additional coverage that might be beneficial for a rental business.

Umbrella insurance policy

Umbrella insurance provides additional liability coverage beyond what your standard vehicle policy offers. It’s designed to help protect against large and potentially devastating liability claims or judgments.

  • Contact your insurance provider to discuss adding an umbrella policy.
  • Determine the appropriate coverage amount, considering the potential risks associated with operating a rental business.
  • Review the terms of the policy to ensure it covers incidents related to vehicle rentals.

Shifting vehicle loan to the LLC (If applicable)

If you have a loan on the car, you will need to notify the lender of the change in ownership.

  • Contact your current lender to discuss the possibility of transferring your vehicle loan to your LLC.
  • Understand that some lenders may have restrictions or may not permit the transfer.
  • If transfer is allowed, complete any required paperwork and meet the lender’s conditions.
  • Be prepared to possibly refinance the loan under the LLC, depending on lender requirements.

Managing your turo profile with an LLC

Deciding how to manage your Turo profile with your LLC is important. You might opt to update your existing profile with your LLC information or create a new one. This decision will influence how you manage your vehicles and interact with clients.

Do you need a business license for Turo?

Turo does not require hosts to obtain a business license to list their cars. Yet, local regulations differ significantly, and some jurisdictions may necessitate a business license for car rental operations. It’s essential to verify the requirements in your specific area by consulting local regulations or authorities. If you’re unsure about the regulations in your location, feel free to comment with your details (not for legal advice), and I can provide more specific information.

Frequently Asked Question

Can you make a business out of Turo?

Yes, you can make a business out of Turo. Turo is a peer-to-peer car rental company that allows people to rent out their cars to others. This can be a great way to make some extra money, especially if you have a car that you don’t use very often.

To get started, you’ll need to create a listing for your car on the Turo website. You’ll need to provide some information about your car, including its make and model, as well as photos. You’ll also need to set a price and specify the dates and times that you’re available to rent your car out.

How do I start a Turo business?

First, you’ll need to sign up for a Turo account. You can do this by going to their website and creating an account. Once you have an account, you can list your car (or cars) on their platform. Be sure to add lots of photos and information about your car so that renters can make an informed decision about whether or not they want to rent it.

Is Turo considered self-employment?

Yes, Turo is considered self-employment. You must report your business on schedule C as you would any other self-employment activity. This includes income and expenses related to the activity. You may be able to deduct some of your expenses, such as car depreciation and gas, as long as they are related to the business use of your car.

How much do you have to make on Turo to file taxes?

If you’re a single US taxpayer under the age of 65, you need to make at least $12,550 annual gross income to file taxes. So, if you reach or exceed the $12,550 annual gross income mark, you’ll need to file a tax return and pay taxes on your earnings. Of course, this is just basic information and there may be other factors that come into play when determining your taxes. For more detailed information, it’s always best to consult with a tax professional.

Do you need a business license for Turo?

Turo doesn’t mandate a business license for listings, but local laws vary; check your area’s requirements and comment for non-legal specific insights.

The information on this page was last verified on June 8, 2024

6 thoughts on “LLC for Turo”

    • If you switch your car to an LLC, insurance rates often increase since it’s considered for commercial use, which carries more risk. The exact increase can vary, but it’s a common trend. Hope this helps, but it’s best to contact your insurance provider to get more details.

  1. Is it true that when forming an LLC, choosing an industry type of car rental is considered to be a high risk business and less likely to get bank loans?

    • Going for an LLC in car rental isn’t seen as a high-risk move by most banks. The car rental industry has had its challenges, like during the pandemic, but it’s not generally on the high-risk list for lenders. Forming an LLC can actually be a good step, giving you a bit of an edge when you’re looking for loans. It’s not a surefire thing, and banks do differ in their views, but you’re not heading into risky territory with an LLC in car rental. Just check with your bank to get the full picture.

    • Hey Joey, great question. For an LLC on Turo, go with NAICS code 532111, which is for “Passenger Car Rental.” It’s the most accurate match for renting out cars to people on Turo. Keeps things straightforward for tax and regulatory stuff.


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