By Emily Peters
Starting an independent travel agency takes guts—but when it comes to figuring out your business structure, things can get tricky.
I just love travel and inspiring others to see the world, you might be saying. I don’t want to deal with all this legal/financial/taxes stuff!
While we applaud your enthusiasm for spreading the travel bug, we’re here to tell you that the latter is necessary for the former to function. If you’re currently hemming and hawing over whether you should be an LLC vs. sole proprietor as a new travel business, we’re here to help.
Consult a Professional Who Knows Your Business
Let us preface all of the following by saying that these tips are subjective. For objective advice on the perfect fit for your unique travel business, you should ALWAYS consult a tax professional who can guide you appropriately.
What is a Sole Proprietorship?
A sole proprietorship simply means that you and your business are one being. As the owner of the business, you are responsible for any of its expenses and debts. You can work under your own name, or set up a fictitious business name like “Johnny’s Great Travel”—but either way, the business isn’t a separate legal entity.
- Pros: Easy and cheap to set up. Simply register your business name, pay the necessary licenses/fees and you’re on your way. You can also mix your business and personal spending without the IRS getting ticked off about it.
- Cons: If someone sues your business, that means they’re suing YOU. Basically, your savings and assets are at risk in case an unhappy customer comes after you.
What is an LLC?
An LLC is a limited liability company—which means that you and your business are separate beings. If anything happens, this distinction allows the business itself to be responsible for any of its expenses and debts instead of you personally.
- Pros: Protects your personal savings and assets from being accessible if your business is sued, goes into debt, goes bankrupt, etc., affords you more legal protection and makes it somewhat cleaner to hire employees/bring on independent contractors.
- Cons: More expensive and paperwork-heavy to set up, must keep your personal and LLC expenses and funds explicitly separate from each other, taxes are a bit more complicated. Not a huge deal with a reputable and savvy CPA.
So which structure is right for you? Most new independent travel professionals will begin as sole proprietors and ultimately change to an LLC as their assets grow and business becomes more established. Again—chat with your favorite smart, reputable tax attorney or CPA to select the right choice for you. We can’t wait for you to begin your career as an independent travel professional!
Are you ready to start your independent travel business with MTravel? We are here to help! Contact us here or call us at 800-870-5799. Be sure to check out our website at www.MTravel.com and follow us on Facebook, LinkedIn and Instagram.