Starting a rental car Turo business can be nerve-racking, but it doesn’t have to be. In fact, as long as you set up your business properly, and get a GPS car tracker, you should be covered for even the worst-case scenario. I have personally set up LLCs and business bank accounts in several states and it isn’t daunting at all. Currently, I am managing 7 LLC’s and there’s a reason that they are sole proprietors or corporate structures.
As a whole, an LLC will usually be your best choice for setting up a small Turo business for yourself. It is easy to create, reduces your liability in case of the worst-case scenario, helps separate your finances from potential lawsuits, and allows you to deduct business expenses for taxes. Setting up a Turo business can seem confusing, but it doesn’t have to be.
We will cover how to get started with a Turo business from scratch, create an LLC, separate your business finances from your personal, and some other tips to have a successful Turo business. I have been hosting a dedicated vehicle on Turo for about a year, along with managing several LLCs since 2016. No matter if you are starting out or are experiencing it isn’t too late to set up an LLC for your Turo business.
Disclaimer: I am not an attorney or certified public accountant. I am an enthusiast who loves to help people accomplish their side hustles. You should consult your accountant and/or lawyer for your specific situation. I may also receive a commission if you use one of the links below.
Start With Your Own Car
The very first step in setting up your Turo business is starting with your own personal car. As long as there are fewer than 130,000 miles and is 12 years old or less it most likely will qualify for Turo. Unlike other businesses, using your personal car on Turo will eliminate most of the start-up expenses that plague most new businesses.
Renting out a used car is more beneficial than using a new car for several reasons that I go over in this article. In short, hosting a new car on Turo eats away at your profits with car payments. It is good practice to get a used car that is reliable and about 5 years old when its depreciation begins to plateau.
It may be nerve-racking putting your own personal car on Turo but it’s how many hosts get started before scaling their business. Plus, Turo insurance has great plans available to protect your vehicle. Once you have your first Turo car, you are ready to legally set up your Turo business.
Reduce Liability With An LLC
Creating an LLC, or Limited Liability Company, to reduce liability, in my opinion, is the single most important part of setting up your Turo business. Because you will be working with renters who are subject to car crashes and injury, creating an LLC can provide protection from any potential lawsuits. It is important to know that I have never read about any renters suing the host for injuries or damage thanks to Turo insurance. But unfortunately, all it takes is one angry renter and a lawsuit to turn your life upside down.
An LLC can be set up to cover your personal car on the Turo platform and any other cars you eventually add. It’s very easy to set up and allows you to then separate your finances. An LLC will give you what’s needed to create a business bank account and credit card and start to build business credit.
How To Create An LLC
Creating an LLC is very easy but can differ by state. It’s best to consult with your attorney or lawyer when structuring your business, but this is a general guide on how to do so.
First, you should obtain an EIN. This can be done in just a few minutes. Head to the IRS website and fill out and submit the application. Once that is done, you will use that EIN to create an LLC in your state with a tradename or what you want your business to be called. It differs by each state, but you will want to go to your state’s website to register a business online. For example, here in Utah, the website is corporations.utah.gov. I filed my business as an LLC S-corp which is probably best for you, but you should consult your attorney and/or accountant.
Once that is done, which may take a few days for the state to process, you will be ready to legally separate your personal and business finances.
Separate Personal and Business Finances
If your personal and business finances are not separated from each other, then both may be subject to liability or lawsuits. Luckily it’s an easy fix now that your entity is structured.
Business Checking Account For Turo
Most banks like Chase and Wells Fargo offer business checking accounts that work great. However, they usually have monthly fees associated with them. Saving every dollar matters with a small business and luckily there are some smaller credit unions or online banks that offer zero fees.
Novo Bank, an online-only bank, is a phenomenal online business bank with many great resources and customer support. They integrate several platforms such as Shopify and Stripe and have zero fees. Their app user interface is simple and pleasing and we have had zero problems with them. The only reason to avoid an online bank such as Bank Novo is not having access to branches or as many ATMs to visit if needed. It hasn’t been a problem for us so far since we just use our business credit card.
Business Credit Card For Turo
Now that you have a business bank account for all of your deposits from Turo, you need a business credit card to use for your expenses. There are several credit cards that offer low rates and enticing offers, but the best option is to keep your credit card paid off to avoid interest. American Express has several business cards that I have been using for my past side hustles.
The business credit card I use for Turo offers great rewards for expenses like fuel and car maintenance. But other than rewards, a business credit card will be proof that you separated your personal and business expenses if a lawsuit ever occurs. It also makes it much easier to do taxes knowing that all of your expenses can be found on your credit card.
It’s important to know to try to avoid using a business credit card or bank account at all times for personal finances. This will help you immensely come tax season.
Turo Taxes
Tax season can be very daunting but in fact, it can be very rewarding for new small businesses. Because we listed a new car in 2022 that we purchased directly for Turo, we were able to claim section 179 deduction and depreciation which allows you to deduct a large portion of your new vehicle.
Using an accountant may be best if you have questions about what expenses you can write off, but Turbotax Self-Employed version has been very helpful for us for the past several years. An accountant told me that it is better to take the actual expenses in comparison to the standard deduction for your Turo business. Doing so for the 2022 tax year gave us several thousand of dollars in tax returns. Running a Turo is not only a fun side hustle but can also be a great tax deduction.
Going The Extra Mile
Changing the registration name into your LLC to reduce liability even further. This will eliminate your personal ties to the car which leaves even fewer questions to involve your personal finances in case of a lawsuit.
You can change your vehicle ownership to your LLC by reaching out to your local DMV. As fun as visiting the DMV is, it could be worth it especially if you are planning on doing Turo for a long time. I personally don’t have my vehicle registered in my business name but it would be an excellent step to take if you are really worried about liability.
Dallin’s Final Thoughts
Even if you have never set up an LLC business before, following all of these steps above could take you only a few hours or a couple of days to complete. If you don’t want to try any of it yourself, chances are your accountant will give you very direct instructions on how to do so.
Reducing your liability from Turo renters could save you and your family a lot of headaches and finances. Once your LLC is set up, you can focus more on getting your schedule booked and less time worrying about what happens if someone gets injured while renting your vehicle.
