Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
6y
@Jonathan B. every attorney and CPA I have spoken to has always told me that I should have separate bank accounts for each LLC. I am pretty sure that if you commingle funds in one account then you may be making the whole structure sort of pointless as an attorney in a law suit could claim that you aren't really running separate businesses.
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
6y
@Jonathan B. every attorney and CPA I have spoken to has always told me that I should have separate bank accounts for each LLC. I am pretty sure that if you commingle funds in one account then you may be making the whole structure sort of pointless as an attorney in a law suit could claim that you aren't really running separate businesses.
@Jonathan B. every attorney and CPA I have spoken to has always told me that I should have separate bank accounts for each LLC. I am pretty sure that if you commingle funds in one account then you may be making the whole structure sort of pointless as an attorney in a law suit could claim that you aren't really running separate businesses.
I understand the logic behind, however... what if someone has 20 rentals and 20 accounts seems excessive
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
6y
@Jonathan B. I get it, but we are investors. You need to make sure you are getting good legal counsel and also good accounting advise from a CPA. The problem with setting up LLC's is that you are supposed to be operating a business. Too many investors create intricate structures for asset protection, and then they make mistakes like this to save money/time. That isn't how it works if you get into trouble.
Personally, I kept a residential property in my personal name for that very reason. It really isn't worth that much money and the time/hassle to create all this structure is not commensurate with the returns or the potential liability. Now if you have a 10 million dollar apartment complex then a complex legal structure starts to make sense.
they are spread out into various LLCs, having couple of properties in each LLC.
these LLCs are all owned by and a subsidiary of a 1 holding LLC.
Rent is currently flowing into 1 bank account, all expenses and income are being segregated and and accounted for with QB and works well.
Ive been reading that each LLC should have its own Bank account.. i feel this would be a pain to do..
What do you suggest doing?
how are you structuring your holding?
appreciate your insight.
stay safe.
This is what we have:
Holding company LLC (partnership) owns 4 single member LLCs. 3 of those own the real estate, the other operates as a property manager. All rents and expenses are handled by the managing LLC.
We have 3 business bank accounts. Checking account for the holding company, checking account for the managing LLC, and savings account for the security deposits.
All records are kept in QuickBooks. Each house is a class, under the LLC that owns it. Income, expenses, assets, and liabilities can easily be sorted by class and grouped with others owned by the same LLC.
Both my lawyer and cpa approve of this arrangement.
they are spread out into various LLCs, having couple of properties in each LLC.
these LLCs are all owned by and a subsidiary of a 1 holding LLC.
Rent is currently flowing into 1 bank account, all expenses and income are being segregated and and accounted for with QB and works well.
Ive been reading that each LLC should have its own Bank account.. i feel this would be a pain to do..
What do you suggest doing?
how are you structuring your holding?
appreciate your insight.
stay safe.
This is what we have:
Holding company LLC (partnership) owns 4 single member LLCs. 3 of those own the real estate, the other operates as a property manager. All rents and expenses are handled by the managing LLC.
We have 3 business bank accounts. Checking account for the holding company, checking account for the managing LLC, and savings account for the security deposits.
All records are kept in QuickBooks. Each house is a class, under the LLC that owns it. Income, expenses, assets, and liabilities can easily be sorted by class and grouped with others owned by the same LLC.
Both my lawyer and cpa approve of this arrangement.
they are spread out into various LLCs, having couple of properties in each LLC.
these LLCs are all owned by and a subsidiary of a 1 holding LLC.
Rent is currently flowing into 1 bank account, all expenses and income are being segregated and and accounted for with QB and works well.
Ive been reading that each LLC should have its own Bank account.. i feel this would be a pain to do..
What do you suggest doing?
how are you structuring your holding?
appreciate your insight.
stay safe.
This is what we have:
Holding company LLC (partnership) owns 4 single member LLCs. 3 of those own the real estate, the other operates as a property manager. All rents and expenses are handled by the managing LLC.
We have 3 business bank accounts. Checking account for the holding company, checking account for the managing LLC, and savings account for the security deposits.
All records are kept in QuickBooks. Each house is a class, under the LLC that owns it. Income, expenses, assets, and liabilities can easily be sorted by class and grouped with others owned by the same LLC.
Both my lawyer and cpa approve of this arrangement.
Thanks Sylvia,
if i get what your saying right - you have 3 separate bank accounts (separate logins), or you have 1 bank account with 3 different checking accounts in it?
Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
6y
The accounts are separate because they have different account numbers and different owners. However, from one login I have access to any account that my signature is on. Currently that is 7 different accounts. Your bank may require separate logins for each account, mine does not.
The accounts are separate because they have different account numbers and different owners. However, from one login I have access to any account that my signature is on. Currently that is 7 different accounts. Your bank may require separate logins for each account, mine does not.
Great info Sylvia. We have just setup a very similar situation with a holding corp that has three LLC's (two properties and a property manager). One of our properties is a short term vacation rental so no security deposit. I get how you setup the accounts but wondered how you handle the transactions:
Scenario: Renter for Property A pays rent to management company which deducts expenses (HOA, Maintenance, Taxes, etc.) and then pays you the balance as cash flow.
Questions:
1. Does your management company charge a management fee?
If so, flat fee or %?
Do you pay the fee or does the property LLC?
2. I don't see any scenarios to move money to holding company. What do you use that bank account for?
3. Also don't see scenario for the vacation property bank account as no security deposits. Property manager LLC handles the reservation, pays vendors, taxes, gets direct deposit from AirBnB and then pays me directly.
So end of day, we know the corp and LLCs have to have a business purpose which implies bank account and operations. Just wondering how you handle it. Thank you!
What you are saying doesn’t make much sense to me:
1). Why charge yourself a fee? You are just adding friction to your money...
2). You need to move the money to the holding company. LLC and partnerships don't pay owners a salary. Single member LLC take an owners draw and partnerships give out distributions. The mgt LLC passes the funds to the holding Corp which distributes the funds accordingly — if this truly a Corporation then you have more options in how to get the money out.
3). Need to check with accountant here. The two property LLC don't necessarily need bank accounts in so much as they won't be holding any cash. The mgt LLC is doing the property mgt so the internal contract agreement could have that LLC hold everything — not sure if you need a brokers license.
Investor · Charlotte, NC · Member since 2015 · 6 posts · 1 vote
6y
@David M.
Great stuff David. Thank you!
We just started the holding company. The management LLC (now under the holding company) does Property Management and Office Management and has other customers. My wife draws a salary for this work from this third party income (not our own).
It makes sense we should not charge ourselves for our own property LLCs and that this should all pass to the holding company.
The accounts are separate because they have different account numbers and different owners. However, from one login I have access to any account that my signature is on. Currently that is 7 different accounts. Your bank may require separate logins for each account, mine does not.
Great info Sylvia. We have just setup a very similar situation with a holding corp that has three LLC's (two properties and a property manager). One of our properties is a short term vacation rental so no security deposit. I get how you setup the accounts but wondered how you handle the transactions:
Scenario: Renter for Property A pays rent to management company which deducts expenses (HOA, Maintenance, Taxes, etc.) and then pays you the balance as cash flow.
Questions:
1. Does your management company charge a management fee?
If so, flat fee or %?
Do you pay the fee or does the property LLC?
2. I don't see any scenarios to move money to holding company. What do you use that bank account for?
3. Also don't see scenario for the vacation property bank account as no security deposits. Property manager LLC handles the reservation, pays vendors, taxes, gets direct deposit from AirBnB and then pays me directly.
So end of day, we know the corp and LLCs have to have a business purpose which implies bank account and operations. Just wondering how you handle it. Thank you!
1. No fee
2. Any money not spent on expenses or held in reserve for yearly expenses is transferred to the holding company, because it is the owner. As partners in the holding company, Hubby & I take money from it. Money never flows directly from the management company to us personally.
3. My 3 LLCs that own real estate do not have bank accounts because they have no money.
When forming the management llc, is the holding llc it member and owner?
How are the other LLCs with the properties related to the management llc?
If one has only a holding llc and 1 property llc, can the property llc collect rent, pay bill then sends the rest of cash to holding llc?? Is the management llc really needed?
I get the idea, just trying to incorporate it into my setup, which is 1 holding llc, 1 property llc which house 2 properties.
Both holding and property llc have a separate bank account. I don’t collect security deposit.
When forming the management llc, is the holding llc it member and owner?
How are the other LLCs with the properties related to the management llc?
If one has only a holding llc and 1 property llc, can the property llc collect rent, pay bill then sends the rest of cash to holding llc?? Is the management llc really needed?
I get the idea, just trying to incorporate it into my setup, which is 1 holding llc, 1 property llc which house 2 properties.
Both holding and property llc have a separate bank account. I don’t collect security deposit.
We started out with one LLC that did everything. After a few years we had grown to the point where we were no longer comfortable holding all our real estate in one LLC, so we reorganized to the structure we have now. Keep it simple as long as you can. When it's time for complications, don't do anything without advice from a lawyer and CPA.
Thanks, Sylvia. I only have 2 properties but with equity of about $350k that I will be taking out, hence the reason to want to structure with a holding llc so the cash can sit there until a make another move.
Kansas City · Member since 2019 · 162 posts · 54 votes
6y
How do y'all approach financing? Do you have lenders willing to lend directly to an LLC with no financial history? Or are you cross collateralizing based on other assets in the hold co?
Rental Property Investor · Gulfport, MS · Member since 2018 · 113 posts · 133 votes
6y
@Jonathan Bren hold mine in my name with a separate bank account for all rental income and expenses. QBO to manage book keeping for CPA. Have a couple million Umbrella policy for liability. Pretty simple.
Rental Property Investor · Gulfport, MS · Member since 2018 · 113 posts · 133 votes
6y
@Mike Jones meh. If someone wants the name of a LLC owner it's pretty easy to find. I find LLC owners and their contact info with a few clicks all the time.
Of course all is possible. It all comes down to how much one is willing to risk and how anonymous they want to be, how much info they want to share with the public and how easily It can be accessed.
@Mike Jones meh. If someone wants the name of a LLC owner it's pretty easy to find. I find LLC owners and their contact info with a few clicks all the time.
Not in every state. For instance WY and NM are anonymous.
If you have an LLC in another state, you can have it owned by a holding LLC in WY and the only thing you will get is the address of the WY LLC, not the owner.
You can also use land trust or personal property trust to also mask the ownership. These won't add any liability protection, but it will stop the basic ambulance chaser law office looking for contingency big pocket settlement.
Rental Property Investor · Gulfport, MS · Member since 2018 · 113 posts · 133 votes
6y
@Mike S. Agree with you that there are ways to structure it to prevent basic exposure of ownership. What most folks on here say is they have a basic LLC for holding a property or two and they think they are fully protected and anonymous and that isn't the case.
@Mike S. Agree with you that there are ways to structure it to prevent basic exposure of ownership. What most folks on here say is they have a basic LLC for holding a property or two and they think they are fully protected and anonymous and that isn't the case.
@Cole Raiford
I would say that most people who want to form a holding llc are aware of where to form the entity in order to be anonymous.
The accounts are separate because they have different account numbers and different owners. However, from one login I have access to any account that my signature is on. Currently that is 7 different accounts. Your bank may require separate logins for each account, mine does not.
What bank are you using? I'm looking to have the same setup...
I don't know if this feature of multiple accounts/one login has a name.