LLC / Business Checking Account on First Property?

Question

I was wondering if it makes sense to open up an LLC after closing on a first property?

Or would it be okay to simply open up a separate checking or business account to keep track of taxes at first.

Do you even need an LLC to open up a business account?

Frank Chin · Answer

For the first several properties, you don't need an LLC. I have a separate checking account for rentals to deposit rent payments, and pay rental expenses. You don't need a business account. If you open one, you'll have to form and provide the name of a business entity ranging from a DBA, LLC, or S Corp, C Corp. all requiring paperwork showing it's formation.

Basit Siddiqi · Answer

@Joshua SunYou normally can't open a business account at a bank without an entity.The thing is with business accounts at banks is that they normally have higher requirements to avoid fees.For example - A personal account may require a $1,000 average monthly balance to avoid fees.A business account may require a $1,500 average monthly balance to avoid fees.One thing I do benefit from by having a business account is that I am normally offered business credit cards that are not tied to my social / DTI ratio.The credit balance is not huge on each business card, they are normally $3,000 to $5,000. However, I am hoping those credit balances increase in the future.Best of luck

Joshua Sun · Answer

@Frank Chin Thanks for the helpful advice. It makes sense.

An LLC and business account might not be good for me. I'd probably need a great real estate CPA at that point.

Some of the CPAs I talked to were very good, and friendly. But their fees alone would take out all my first year's cash flow from my first investment property. I'm not sure if they would give me enough write offs to justify it yet. An LLC and business account, along with working with a great CPA seems like a good idea after several more properties.

If anyone disagrees, and has other view points, I'm all ears!