Investor · Cincinnati, OH · Member since 2018 · 136 posts · 87 votes
Greetings BP Friends!
I am currently having an attorney set up a holding company and an operating company for me. We've discussed various options like Series LLC, land trusts and even setting up LLC's out of state (Texas, Nevada, Delaware), but through his guidance we've decided that staying in Ohio would be best. In essence, the holding company will own Single Member LLC's underneath that own individual properties.
My question would be whether or not I should have a separate bank account for each LLC/property. This feels redundant, but if it's the best way to protect the assets, then so be it. Also, with the operating company, how would the transfer of funds work?
Any info/insight/experience would be greatly appreciated. Thanks in advance!
Lender · Dayton, OH · Member since 2008 · 1k+ posts · 705 votes
7y
Ah, the fun of setting up complex structures for something that is intrinsically simple. Just as the bank accounts seem redundant so do the LLCs.
However, if you set up multiple LLCs, then every LLC should have a bank account, meetings, records, and all those other things that make and keep an LLC valid.
You need to show that it is a separate company, not simply an alter ego to be disregarded.
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
7y
In the case of a Traditional LLC, you would need individual bank accounts for each LLC as each Traditional LLC is required to be filed and reviewed by the state and receives a separate EIN. In the case of the Series LLC you only need a single bank account because the Series LLC is established under a single EIN, but I only recommend this in the case of those who can follow the proper bookkeeping procedures. If you do not manage the Series LLC correctly, you can risk the whole structure, negating all the effort of separating the liability through financial commingling. The benefit is that you don't have multiple bank accounts which reduces the redundancies, but requires good fund allocation and earmarking.
With that being stated, I would still use a separate Traditional LLC as the operating company. The end of this article explains the function and operations of the operating company. There is more that goes into the formation because it needs to meet different needs for different investors, but establishing it under an Agent Trust can allow for anonymity on public filing when done correctly.
It's important to get advice specific to your portfolio from an experience attorney and CPA. This isn't legal advice, just some info you would benefit to look into - hopefully clarify some questions.