To start a travel agency, you decide whether to work under a host agency or operate independently, form a business entity, get a federal Employer Identification Number, secure industry accreditation (or use the host’s), register as a Seller of Travel in the states that require it, and put tax, insurance, and federal advertising compliance in place before you book your first client. The host-versus-independent choice comes first because it determines how much of the rest you handle yourself and how much upfront capital you need.
Host Agency or Independent
A host agency is the fastest way in. The host already holds accreditation with the Airlines Reporting Corporation and the International Air Transport Association, so you book under their credentials and earn commissions without securing your own certification.1International Air Transport Association. Travel Agent Accreditation You split a percentage of each commission with them in exchange. Most first-year agents take this route because it lets them start selling almost immediately.
Going independent means securing your own accreditation, meeting strict financial criteria, passing industry exams, and posting bonds or cash deposits. The overhead only makes sense once your sales volume justifies it.
One thing to sort out before you sign a host agreement: your tax status. When you work under a host, the IRS almost certainly treats you as an independent contractor rather than an employee. The determination weighs whether the company controls how you do the work, whether it controls the financial side of your job, and the overall nature of the relationship.2Internal Revenue Service. Independent Contractor (Self-Employed) or Employee? If you set your own hours, use your own equipment, and serve multiple clients, contractor status is likely. Getting it wrong creates tax problems for both you and the host.
If you earn $600 or more in commissions from a host during the year, the host must report the payments to you and the IRS on Form 1099-NEC by January 31 of the following year.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC You owe tax on that income whether or not the form arrives.
Form the Business Entity
Most travel agencies organize as limited liability companies because the structure shields personal assets from business debts without the formality of a full corporation. You file Articles of Organization with your state’s Secretary of State. Filing fees typically run between $35 and $520, averaging around $139 nationally. A few states add publication requirements that can tack on several hundred dollars.
The filing requires a business name distinguishable from other entities already registered in your state, a registered agent authorized to accept legal documents and lawsuits on the agency’s behalf,4Legal Information Institute. Agent for Service of Process a principal office address (a home address works for home-based agencies), and a note on whether members will manage the LLC directly or appoint managers.
Standard processing usually takes one to three weeks. Once the state approves, draft an operating agreement even if your state doesn’t require one. It spells out how profits and losses split among members, what happens if someone leaves, and who has authority to sign contracts or take on debt. For a multi-member agency, address commission splits and each member’s capital at risk specifically. Skipping this step is where partnerships quietly fall apart when a disagreement finally lands.
Get an EIN
Every travel agency needs an Employer Identification Number from the IRS, whether or not you have employees. You’ll use it to open business bank accounts, file tax returns, and complete accreditation applications.
Apply online through the IRS using Form SS-4. The form asks for the entity’s legal name and the responsible party, typically the owner or managing member.5Internal Revenue Service. Form SS-4 – Application for Employer Identification Number The online application takes about 15 minutes and issues your EIN immediately. The IRS then mails a confirmation notice called CP 575, the only official copy they issue. Keep it. You’ll need it for ARC accreditation, bank accounts, and future IRS correspondence. Make sure the legal name on the EIN exactly matches what you filed with the Secretary of State, or you’ll have trouble later with tax filings and banking.
Industry Accreditation
Two organizations control access to airline booking systems and supplier networks in the United States: the Airlines Reporting Corporation (ARC) and the International Air Transport Association through its domestic affiliate, IATAN. If you’re joining a host agency, you operate under their credentials and can skip this section for now. If you’re going independent, accreditation is mandatory before you can issue airline tickets or access negotiated supplier rates.
ARC
ARC accreditation requires a nonrefundable $2,300 application fee and a financial instrument (a surety bond, letter of credit, or cash deposit) of at least $20,000. You must designate an agency manager, and at least one staff member has to pass the ARC Specialist certification exam. The application also requires your articles of incorporation or organization, an IRS confirmation letter or W-9, valid business licenses, bank verification, a lease or title for your operating location, and prior-year business tax filings.6Airlines Reporting Corporation. Become an ARC-Accredited Travel Agency You need the entity, EIN, and bank account already in place before you can apply.
IATAN
IATAN accreditation carries a $280 annual fee for a head office location and requires proof of financial standing, qualified staff, and state and local licensing. IATAN also lists errors and omissions insurance as a requirement, though agents with at least two years of experience or certain professional certifications (such as a Certified Travel Associate designation or ASTA Verified Travel Advisor) can request a waiver.7IATAN. Requirements and Fees The unique accreditation code either organization issues identifies you to suppliers worldwide.
Seller of Travel Registration
A handful of states require travel agencies to register as a Seller of Travel before doing business with their residents. These laws demonstrate financial responsibility and protect consumers from fraud. If your agency solicits residents of one of these states, you may need to register there even if you operate from a home office in a different state.
Specific requirements vary, but common elements include annual registration fees from as little as $15 to several hundred dollars (often charged per location), surety bonds typically between $10,000 and $50,000 depending on the state and sales volume, dedicated trust accounts at federally insured banks for customer payments in some states, mandatory participation in a consumer restitution fund in at least one state, and disclosures of ownership, financial history, and officer or partner details.
Registration processing usually takes 30 to 60 days, so build that into your launch timeline. Operating in a Seller of Travel state without registering can bring cease and desist orders and administrative fines. Some jurisdictions allow agencies to apply for a bond waiver after several years of complaint-free operation, but that isn’t universal.
Even in states without a Seller of Travel law, you still need whatever general business license your city or county requires.
Federal Advertising and Refund Rules
The Department of Transportation regulates how travel agencies advertise airfares, and the rules apply nationwide regardless of state registration status. Getting them wrong invites enforcement for unfair or deceptive practices.
Every advertised airfare must reflect the total the customer will pay, including all taxes and mandatory fees. Displaying a base fare without taxes violates 49 U.S.C. 41712. You can break out components like a tax line item, but no component can appear more prominently than the total. If a one-way fare is only available as part of a round-trip purchase, disclose the round-trip requirement clearly near the price, and don’t label it a “one-way” fare.8eCFR. 14 CFR 399.84 – Price Advertising and Opt-Out Provisions
Optional services such as travel insurance or seat upgrades cannot be pre-checked or auto-added. The customer must affirmatively opt in.8eCFR. 14 CFR 399.84 – Price Advertising and Opt-Out Provisions
On refunds, if your agency is the merchant of record (your agency name appears on the customer’s card statement), you’re responsible for processing refunds when an airline cancels or significantly changes a flight. The airline made the decision, but the customer’s financial relationship is with you. One boundary worth knowing: the federal rule requiring a 24-hour hold or full refund after booking applies to airlines directly and does not extend to tickets purchased through travel agents, though you can offer a similar policy voluntarily.9U.S. Department of Transportation. Refunds
Tax Obligations
If you operate as an independent agent or sole proprietor, the biggest surprise is self-employment tax. It covers both the employer and employee portions of Social Security and Medicare because no employer is splitting the cost. The combined rate is 15.3%: 12.4% for Social Security on net earnings up to $184,500 in 2026, and 2.9% for Medicare on all net earnings with no cap.10Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax11Social Security Administration. Contribution and Benefit Base This is on top of your regular income tax.
Because nobody is withholding from your commission checks, you owe quarterly estimated payments using Form 1040-ES. If you owe $1,000 or more at year-end and haven’t paid at least 90% of your current-year tax liability (or 100% of last year’s tax), you’ll face an underpayment penalty.12Internal Revenue Service. Topic No. 306, Penalty for Underpayment of Estimated Tax Quarterly due dates are April 15, June 15, September 15, and January 15 of the following year.
Setting aside 25 to 30% of every commission for taxes from day one is the simplest way to avoid a large April bill plus a penalty. A separate bank account for tax reserves keeps the money from quietly disappearing into operating expenses.
Sales tax is a separate layer. Whether your agency has to collect and remit depends on the services you sell, the state you operate in, and whether you’re the merchant of record. Lodging markups, service fees, and certain tour packages are taxable in some jurisdictions and not others. Talk to a tax professional who knows travel industry transactions before you start collecting payments.
Errors and Omissions Insurance
No federal law requires E&O insurance for travel agencies, but operating without it is a serious gamble. E&O primarily covers the cost of defending you when a client sues, even when the lawsuit has no merit. Legal defense alone can run into tens of thousands of dollars, and a standard policy covers those fees regardless of whether the client wins.
What policies exclude matters as much as what they cover. Common exclusions include pricing errors, misrepresentation of what a travel insurance policy covers, violations of consumer protection statutes, and debit memos from suppliers. Annual premiums generally run $700 to $800, varying with coverage limits and business volume.
IATAN lists E&O as an accreditation requirement, and some host agencies and supplier contracts require proof of coverage before they’ll work with you.7IATAN. Requirements and Fees Even where nobody mandates it, having a policy signals financial seriousness to partners and clients.
Client Agreements and Records
Getting customers to agree to your terms and conditions before you book their travel significantly reduces your legal exposure. A disclaimer stating your agency is not liable for a supplier’s failure (a hotel overbooking, an airline schedule change, a tour operator’s bankruptcy) creates a documented boundary around your responsibility. The critical detail is verifiable agreement: a signature on a form, a click on an “I Agree” button linked to the full terms, or a reply email confirming acceptance. Simply posting terms on your website without asking the customer to acknowledge them is unlikely to hold up if challenged. Once a client has agreed, you don’t need to repeat the process for future bookings with that same person.
On records, the IRS requires you to keep revenue and expense records for three years after filing the related return, and withholding tax records for four years after the tax is due or paid. If you claim a bad-debt deduction, keep those records for seven years. Records tied to asset purchases like office equipment, software licenses, or furniture should be kept for three years after you sell or fully depreciate the asset. Incorporation documents, operating agreements, meeting minutes, and ownership records are permanent. Scanned digital copies are acceptable for most document types, so you don’t need to warehouse paper.