Real Estate Investor · Amherst, NH · Member since 2015 · 59 posts · 14 votes
I recently converted to Quickbooks Online for 2 main reasons: 1) peace of mind in case my computer decides to crash 2) may eventually hire a virtual bookkeeper so thought online would be easier.
I thought I could just track each LLC in a separate class but accountants keep telling me I need a separate QBO company for each LLC which requires another paid subscriptions. Bottom line: doesn't make financial sense to me.
No one however has been able to explain to me in a way that makes sense (at least to me) why I can't use classes for each LLC? I think I heard it has something to do with the balance sheet but it appears to me that QBO has Balance Sheets by Class so I don't see the issue?
While technically it's most correct to keep each legal entity in a separate QBO file, you can certainly either use Classes or even Customers to track each property separately. If you use Customers, I would then set each Lease up as a sub customer and each Tenant up as a subcustomer of that.
A good QB ProAdvisor will understand how to set this up and how to run reports by class or customer. You should have a separate bank account for each LLC though and it is important not to commingle funds. Any transfers that you do between properties will need to be considered Intercompany (or "Due To/From") transactions. It can become a bit tricky, but it can be done.
I would actually suggest that you consider another software to handle this though. We use Buildium to manage our clients' accounting, and they use it for the Property Management aspect. You can also use AppFolio or others. We like Buildium though. If you choose to track it in QBO, I would suggest using the "Customer/Subcustomer" route rather than classes.
While technically it's most correct to keep each legal entity in a separate QBO file, you can certainly either use Classes or even Customers to track each property separately. If you use Customers, I would then set each Lease up as a sub customer and each Tenant up as a subcustomer of that.
A good QB ProAdvisor will understand how to set this up and how to run reports by class or customer. You should have a separate bank account for each LLC though and it is important not to commingle funds. Any transfers that you do between properties will need to be considered Intercompany (or "Due To/From") transactions. It can become a bit tricky, but it can be done.
I would actually suggest that you consider another software to handle this though. We use Buildium to manage our clients' accounting, and they use it for the Property Management aspect. You can also use AppFolio or others. We like Buildium though. If you choose to track it in QBO, I would suggest using the "Customer/Subcustomer" route rather than classes.
Thanks Michele! Curious why you recommend Customer/SubCustomer over classes for tracking different LLCs?
Also, do you know if you would need separate Buildium subscriptions for each LLC? Or does their accounting functionality include Balance Sheet reporting by LLC all under one subscription?
Monica, the preference for using customers versus class is more of a personal preference. I'd prefer to use classes for departments within your operation. The term Customers in QuickBooks is generally synonymous with "Project" or "Job," and that's how I view the properties.
Buildium would be one subscription for all properties. They have a sliding fee based on the number of units and is a more comprehensive subscription. You can have the tenants pay you electronically, you can pay vendors electronically, store leases, post notices, accept task requests, screen tenants, and more. It has bank feeds like QBO does, so reconciliation is pretty simple (depends on the bank).
We used to handle accounting for multiple properties in separate files (like the other accountants were suggesting to you), and in 2014/2015, we migrated to using Buildium and haven't looked back. We still support some clients in other industries using QBO, but when we see a real estate owner/investor, we suggest Buildium.
I use summit hosting which uses QuickBooks but they allow you to have multiple companies while paying one monthly fee. I think $68/month. I’m not sure why QBs doesn’t do the same thing.
Rental Property Investor · Member since 2019 · 19 posts · 10 votes
7y
Hi Monica We actually own 20 properties a few that are complexes that have buildings and we use QB online. We have LLC's and use Classes. Not sure if you have the QB with the Tenant function. But it is helpful. We use the Class that is the property and the bank account is the LLC. You can create reports that will help differentiate each LLC. It works fine. As long as you set it up to work for you it really doesn't matter. But QB does work for that.
You don't need a separate QBO for each LLC. Classes for LLCs and subclasses for properties is one solution, but not the only one.
QBO has a Location feature which can be used for different LLCs. Each report can then be filtered by a location, effectively showing each LLCs separately.
All of the solutions above work. I would actually advise against having a separate QB file for each Property/LLC because it's too darn cumbersome and you have to be methodical about making sure your setups are identical if you want to compare. It also won't allow you to easily look at your whole portfolio. You will, however, need to be able to print/export your financials by property (Customer/Class/Location -- whichever you choose) and be disciplined about entering that information into every transaction. Also, Location is a relatively newish feature in QBO, and I'm not sure about the flexibility in reporting on it (we don't use it often). Hope this all helps.
I still vote for a proper property management system over QB.
Rental Property Investor · Stamford, CT · Member since 2017 · 153 posts · 75 votes
7y
One note about QBO for whomever may be reading this later...On initial setup you can reach out to Intuit (that makes QBs) and talk to them about a multi-company discount. Full fee on the 1st company file and $5 for each additional company file that has common ownership. You cannot do this retroactively.
Having said all that, I’m a Quickbooks ProAdvisor and although separate files is ideal, it’s not, as others have said, very practical. If they’re all disregarded LLCs with the same ownership, Classes will work just fine.
Accountant · Richboro - Philadelphia, PA · Member since 2008 · 901 posts · 246 votes
7y
According to me, there are TWO things to keep in mind:
- all property management software is not accounting software
- but you can use QuickBooks as a property management software and financial management software
As to QuickBooks:
- It is not about LLC's. It is about EIN. Each EIN should have its own file.
- You can have unlimited files in Desktop and pay for discounted for multiple QBO files
Bank Accounts:
- Separate bank and credit cards account for each EIN
- Do not go crazy and create one for each property.
Reports in QuickBooks
- Always use Class for each property for easy reporting
- You can find line items not specified or unclassified with few clicks when using Class but not for Jobs.
Accurate reports:
- You will not get an accurate Balance Sheet by Property in QuickBooks Online
- You will get very close to accurate Balance Sheet by Property in QuickBooks Desktop
- When you view Balance Sheet by Class or Job report QuickBooks will give you a warning message that it will not be accurate. Please KEEP AN EYE FOR IT.