If I want to start a small car rental business with about 5 to 10 cars, just like auto rental agencies, how can I protect my personal assets?

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If I want to start a small car rental business with about 5 to 10 cars, just like auto rental agencies, how can I protect my personal assets?

What is the best business type for this kind of business with minimum taxes and liability?

Asked on June 12, 2015 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

The best form would be a limited liability company (LLC). It will protect your personal assets from business-related liabilty, so long as you "respect" the separate existence of the LLC (e.g. don't mix or comingle its money and your money; have a separate bank account for it; keep track of its expenses and profits; etc.). As long as the LLC has its own existence and is legitimate, it, not you, is responsible for business related debts, liability, and obligations.

(Note: you can still be personlly sued for things you personally--i.e. not purely as a member of the business--do. For example, say you are driving one of the cars to the shop or car wash and run into someone; you can be sued because you are a driver who ran into another person.)

An LLC taxed as a partnership will avoid double taxaction (e.g. the business being taxed on its profit, then you being taxed again any money paid or distributed to you). A sub-chapter S corp. has the same liability protection and tax benefits, but is generally more complicated to set up and maintain.


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