What do you do to protect the legal integrity of your LLC?

Question

I have created a LLC for holding a piece of rental real estate in Florida. I want to make sure I take the proper steps to keep my LLC as a separate entity then myself, what should I do other then the steps I have listed below?

Also- I purchased the property in the name of my LLC, but used my personal bank account to physically wire money to the title company. Is this ok? How should I record this transaction?

Things I think I should do:

1) Conduct regular meetings and record minutes 
2) Use a Florida registered agent 
3) Keep a separate bank account for the LLC and only use it for business expenses 
4) Hold a operating agreement 
5) Do I need to use "Quickbooks" or other professional accounting software to record expenses/revenues?

Account Closed · Answer

Actually the reality is that you used personal funds for the benefit of the LLC.  This can be a personal loan or an investment into the LLC.  Sounds to me like it was an investment in this situation.

I understand that you made the payment directly from your personal account.  The key point here is that it was for the benefit of the LLC and was titled in the name of the LLC.

You have 2 separate transactions to record.

1)  The transaction between you and the LLC.
2)  The transaction by the LLC to purchase the property.

It would have been better if you had made a check out to the LLC initially and had the LLC make the payment.  Since that is not what happened you have to look at what the intent was.  Clearly your intention was to invest personal funds into the LLC so that it could purchase this property, so that is the way I would record the transaction.

Account Closed · Answer

I agree Bill Gulley a personal guarantee in no way co-mingles funds.  It is just that a personal guarantee is used to get around the limited liability.

A newly formed business or new investor is not likely to avoid a personal guarantee especially on big ticket items.  In time though it may be possible to avoid a personal guarantee and it makes it harder to pierce the LLC and attach your personal assets.

Terence Stacey · Answer

I think the structure would be better if you have the LLC be the beneficiary of a Trust that owns the property, this protects identities and at the same time asset protection. And definitely separate business from personal.

Dennis Tierney · Answer

Joe AWhere was the LLC created - NY or Florida? If NY you'll need your lawyer to get it registered to do business in Florida. Then you'll have to pay fees to Florida to keep the LLC active in that state. I have LLC's in my home state and have property in another state and that is what I have been advised to do by my legal counsel.

Bill Gulley · Answer

I agree with Charkes, but a personal guarantee on your loan is not co-mingleimh funds and will probably be necessary, That in its self will not disqualify your position, IMO, It;s best nit to, but it will proabaly ve necessary for small investors.

Account Closed · Answer

The main thing you want to do is keep your personal assets separate from your business assets.  Do not sign any personal guarantees if at all possible.

You do not need to use QuickBooks, but you will need to maintain adequate books and records.  An accounting program like QuickBooks can make this job easier.

The best way to treat this is as two separate transactions.  
1)  A personal investment into your LLC
2)  The purchase by the LLC of the real estate.

Bill Gulley · Answer

Do not write company checks to anyone where you have a personal interest with that entity. Don't write a check Wal-Mart with shaving cream and deordant in the basket. Write a check to yourself with the notation as "Drawing Account". All other expenses must have a business purpose not personal. That includes credit card charges used that are in your name, write the draw check and make your payments. On the books you can annotate expenses reimbursed to you and declare such for taxes. It's all about keeping funds seperate from you and your company, known as co-mingeling accounts or money.

Another accounting feature is having a cut-off amount that does not need board approval for disbursements. Say anyting below a hundred dollars to one payee. Anything over that requires board/member approval and enter the approval in the minutes. This helps to show a financial responsibility to the company.

I'm sure there are books on the topic......somewhere.....good luck.

What do you do to protect the legal integrity of your LLC?

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