Create a Property Management LLC?

Question

I co-own and manage two single family homes in Maine and am buying a multi-unit in 2017 and  more down the line. All are in separate LLCs with different investor equity compositions. Should I start a separate property management LLC that buys everything, pays all expenses, contractors etc. and then bills the LLCs OR should I just keep track of each property's expenses? Pros, cons?

James Triano · Answer

@Dave Holman

I would actually think this would just make things more complex for you to track everything by project and then bill your other LLCs.  There's really no harm in doing so.

The only reason I would suggest doing it is if you were planning on doing Property Management for other customers other than just your own businesses.  If that's the case it would make sense just to separate it all now.  Otherwise, I'd just keep it simple and do everything within the LLC's you already have.

Ryan Murdock · Answer

From an accounting standpoint you are safe just tracking expenses for each. I have a few LLC's that both own and manage property but not a separate LLC for each one. I keep track of everything on Quickbooks and use separate classes and subclasses for the different properties and management entities. My accountant is happy with this. I will note that I have no outside partners in my LLC's. If I did I may want to keep those ones completely separate from the other stuff regardless of how well tracked and "classed" my QB file is.

From a legal standpoint, your attorney may make a case for breaking out each property and function into its own LLC.

Dave Holman · Answer

Thanks Ryan and James, helpful suggestions!