Bank account and Federal Tax ID #

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Bank account and Federal Tax ID #

Kevin Driggers
Robinson, KS · Member since 2017 · 2 posts · 0 votes

I am new to Real Estate and want to do this as a business, my question is do I need to get a business account at my bank? Do I need a Federal Tax ID # fron the Government? 

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  • Jenelle H.
    TX · Member since 2017 · 70 posts · 38 votes
    9y

    I am new to real estate as well, and not a CPA, but if you plan to run a business, yes, it is wise to get a business bank account that is separate from your personal bank account.  The reason for this is to keep your business activities separate from your personal activities for accounting purposes.  I'm not sure if you need a Federal Tax ID# from the government.  Maybe someone else can answer that.  I think that may be necessary if you have employees(???)  I'm not sure.

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  • Mike McCarthy
    Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    The federal (and likely state) government wants a cut of your profits, regardless whether you treat your rentals as a business or as personal revenue.

    If you're planning on making this a business (which if you're here... you probably are), you should set up some type of business entity and a corresponding EIN.  This will allow you to set up a business bank account and possibly business credit.

    The business entity could be a DBA or LLC, depending on what makes most sense for you. While you could use your SSN instead of an EIN, as long as you're making this a business, might as well get started on the right foot. AFAIK, it won't make any difference financially or tax-wise.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    9y

    Hi @Kevin Driggers
    1) regardless if you hold the real estate in your personal name or in the name of a business. you should have a separate bank account for personal use and a bank account for each rental property.
    This makes recordkeeping much easier and support to the IRS in the case you get audited. 

    2) If you decide to create an entity - you may or may not be required to obtain an EIN. 
    If you create a single member LLC with your only intent is to hold real estate and no plans of having employees, 401K among other things; you may not need an EIN.

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