Which LLC for Bank Accounts - Holding or Operating or Both?

Question

Hi- I am just starting out and plan on using the Profit First banking method. For my first property I will open five bank accounts. Three of these will be for the entire business (when I eventually have more STRs) and two specific to my first property. Does that mean that my holding company will open the three "entire business" accounts? And my operating LLC will have the two specific accounts for my first property?

Nathan Gesner · Answer

If I understand correctly, your business (the holding company) would have five accounts:

• Income: A general purpose account where all business revenue is deposited.
• Profit: The account that holds the predetermined percentage of revenue your business takes off the top as profit.
• Owner’s pay: The account that holds the percentage of income used for founder(s) to pay themselves a salary.
• Tax: The account that holds the portion of business revenue allocated to pay taxes.
• Operational expenses (OpEx): The account that holds remaining business revenue not allocated for profit, owner’s pay, or taxes that’ll go towards covering business expenses.

Your LLC would have an operating account to handle income and expenses. Money your business (holding company) earns would go to the holding company's Income account and then be dealt with as income at that level. If you have ten "businesses" operating under the holding company, each of them would have income/expenses handled at that level and only the income that belongs to the holding company would go to the holding company's income account and then be disbursed throughout the holding company's accounts.