Please help with Funds co-mingling

9 Replies

Hi guys,

I have a question for all of you... I am trying to avoid funds co-mingling. So what is the best way to do it?

I have a house in an LLC, also I have a property management company.

Ideally would be great not to open a separate bank account for each future property...But its is probably unavoidable....

Anyway:

1) HAndyman does the work on a property but there is not enough of money in the LLC's bank account. Can I add my personal money into an LLC account? Or, can I write a personal check to the contractor even though the property is in an LLC? Or is it funds comingling?

2) If I want to buy another property, can I write an earnest money check from my property management company? Or it is funds co-mingling?

3) How to withdraw money so it would not be comingling? Can I just go to the bank and get cash out what is left in the LLC for the house account?

4) Can my property management company pay mortgage for all rentals that are in different LLC's? So I would not have to order checks for each house in each LLC? Its should not be comingling of funds, right?

Thank you so much in advance!

I'm not sure what the annual fees are on an LLC in AZ but in CA they are too high to make a single LLC for each property viable, if the funds aren't in the LLC you have a problem, you need to make sure any money you put in is counted as a capital contribution. It seems like you may have over-complicated things and made them harder than they needed to be with the LLCs

@Mary Jay

What is your path of money? Rent goes into Management LLC and then Management LLC keeps a portion and sends the rest to Asset LLC and then you want to pull money from asset LLC?

1) You can get a business credit card to pay when you are short on funds. You can add money to the LLC, I'm assuming it is a single member LLC.

2) It depends on how you are buying the property, if it is in your name I believe the check needs to come from you and not another entity. 

3) You can just pull money out of any account that you own.  Not sure what you mean by co mingling here.

4)We have 1 management LLC and all of our mortgages are paid out of there. None of our assets are in Managment LLC, the banks don't care where the check comes from as long as it comes.

Originally posted by @Aaron K. :

I'm not sure what the annual fees are on an LLC in AZ but in CA they are too high to make a single LLC for each property viable, if the funds aren't in the LLC you have a problem, you need to make sure any money you put in is counted as a capital contribution. It seems like you may have over-complicated things and made them harder than they needed to be with the LLCs

 What is the easier pathway?

Still if LLC bank account has no money in it, can I add from my personal funds?

Originally posted by @Stone Jin :

@Mary Jay

What is your path of money? Rent goes into Management LLC and then Management LLC keeps a portion and sends the rest to Asset LLC and then you want to pull money from asset LLC?

1) You can get a business credit card to pay when you are short on funds. You can add money to the LLC, I'm assuming it is a single member LLC.

2) It depends on how you are buying the property, if it is in your name I believe the check needs to come from you and not another entity. 

3) You can just pull money out of any account that you own.  Not sure what you mean by co mingling here.

4)We have 1 management LLC and all of our mortgages are paid out of there. None of our assets are in Managment LLC, the banks don't care where the check comes from as long as it comes.

Lets say you need repairs done and management LLC nor the LLC for your property does not have enough of funds.'

How do you transfer money from your personal account to the management LLC bank account?

@Mary Jay

When a business starts it needs capital (cash) to start.  Typically this is an owner contribution.  No problem.  You can call it a loan from the owner.  Just keep track.  

I have a separate check book for each property it is a pain, but it keeps me from co-mingling. Set up a management account is where I am heading. All funds are deposited there and are transferred to the individual checking accounts for properties to pay bills. The managenent account is its own LLC. It's only purpose is to hold an receive money. We just don't want to pay for personal items from our investment accounts where the corporate veil is pierced and the LLC asset protection is lost.

Originally posted by @Mary Jay :

Hi guys,

I have a question for all of you... I am trying to avoid funds co-mingling. So what is the best way to do it?

I have a house in an LLC, also I have a property management company.

Ideally would be great not to open a separate bank account for each future property...But its is probably unavoidable....

Anyway:

1) HAndyman does the work on a property but there is not enough of money in the LLC's bank account. Can I add my personal money into an LLC account? Or, can I write a personal check to the contractor even though the property is in an LLC? Or is it funds comingling?

2) If I want to buy another property, can I write an earnest money check from my property management company? Or it is funds co-mingling?

3) How to withdraw money so it would not be comingling? Can I just go to the bank and get cash out what is left in the LLC for the house account?

4) Can my property management company pay mortgage for all rentals that are in different LLC's? So I would not have to order checks for each house in each LLC? Its should not be comingling of funds, right?

Thank you so much in advance!

Dump the LLC idea until you've got more than 10 properties. In the interim, buy an umbrella liability policy to protect yourself. You'll get easier bookkeeping that will create less management woes and significantly cheaper financing with a similar amount of protection.

Originally posted by @Aaron K. :

@Mary Jay do not add from personal funds or you will pierce the corporate veil. The only "good" way to add personal funds is through a capital contribution to the LLC.

 Thank u all of u guys!

Aaron, how do u do capital contribution to the llc ?