Moneyflow for multiple LLCs and management LLC
We have 3 LLCs, one of which is a Series LLC. One of the three is the managment company owning no assets. All rents and expenses go through this LLC. The remaining funds are then sent to the other LLCs that own the properties.
We are trying to decide the best way to setup 3 "bank" accounts to hold certain funds and accumulate interest on these funds until needed.
We have Property Tax, Insuruance and Capitlal Expenditures.
If we setup one account with the Managment LLC it would be very simple. I understand the funds sould be at risk if there were issues with the comapny or somthing like the IRS freezing assets.
We could setup an account at the "Parent level of the series LLC and have an intercompany loan agreement between it and the other LLCs in the series.
We are just trying to get some opinions and see how others do this as well. One of the main issues is how does the tax part of it work. If the managment company gets the 1099 and has to report all the capital gains or interest becuase it falls under its EIN , how do you account for this on the other LLCs books? Would you just have a loan agreemnt and the management company would pay the LLCs interest for borrowing the funds and then they would keep the interest or capital gains on their books?
In other words say If in 5 years we have 50 properties and we want to hold property taxes all in one account somewhere to earn interest unitl the end of the year what is the most effiecent and legal way of doing this?
It is all the same members on the the LLCs and the managment LLC as well. It all ends up at with each member at the top level but we want to do it in a manner to keep the assets protected and not appear to comingle funds. We have very detailed books and each LLC and property transactions are seperate along with bank accounts through Buildium. I know most companies do this while having perhaps 100s of LLCs, just not sure how they structure it. Any examples or thoughts on this would be appreciated.
Anyone have thoughts or ideas about this?
Complicated! We are set up kind-of similarly and we also use Buildium. I set up an account in the Manager LLC name and use it for our "Taxes/Insurance" escrow account (we send money here monthly and transfer to the general account when taxes are due so that all expenses come from the main Manager Account) If it collects interest, I would give this to the manager LLC, however I dont have mine in a savings account. I would send this insurance escrow amount to the account before distribution to the owner since the manager is already paying all the expenses.
We have Holding LLC's as property owners that each have a bank account. The LLC owners are actually just my husband and myself, so it's all pass-through taxation.
I came here to find similar information to your question, so I don't have an exact answer for you! We just formed a partnership LLC that will be managed with our existing (husband and wife) LLC's, this is why set up is important! We are in PA.
I would not co-mingle money after taking from the Manager LLC account, but that is just my opinion. Good luck!
#3 Tax, SDIRAs & Cost Segregation Contributor
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#3 Tax, SDIRAs & Cost Segregation Contributor
- Accountant
- San Diego, CA
Depending on your specific situation, a c corp managing things could make more sense from a tax perspective. This C corp and its bank account would receive the funds from the LLCs and serve as a management company. Talk to your tax advisor about this setup!
