Do I need a business checking account and business credit card?

3 Replies

Hi BiggerPockets folks,

My wife and I are new investors. We don't have an LLC set up quite yet (and we aren't sure if we're going to need it in the near future). We are closing on our first deal soon. It's going to be a long term hold/rental property and we are trying to figure out how to structure the bank account side of things.

I understand that we'll need a checking account and a credit card that is completely separate from my personal accounts and cards.  Which is all well-and-good, I can definitely get that set up.  However, what I need help to know is:  Does it need to be abusiness checking account?  And does it need to be a business credit card?  I have heard that a personal checking accounts and personal credit cards could work as long as I keep them earmark them separately from my other accounts and I am very careful to always use the new accounts for our business expenses, but I'm not sure if that's true.

Thanks in advance for any advice.

@Christopher Cordero It does not need to be a 'business' account or card. In fact some banks will charge you monthly fees for a 'business' account and some card issuers won't give you points on 'business' card accounts. Dumb-right? 

Keeping things separate makes accounting easy for tax purposes. If you have an LLC you have to keep stuff completely separate or there is no point to having the LLC.

Hi Christopher, it all depends on what your overall plan is. If you are looking at a few buy-n-hold properties then it might not be worth the admin and cost to do this in a business. If you do however put the house in an LLC, then this entity will need its own bank account.

Personally i think you would be better off with just buying the property in your own name/s (which will also make it easier for the refi down the road), and bypass the need for the LLC. I know that people like to say that they have an investment company that owns the properties, which is a great vehicle if you intend to build a portfolio, but there is some additional admin and cost. While it is not impossible to refi a property owned by an LLC, it is considered a commercial loan and handled differently. (on a side note i will put the next house i purchase in my own name specifically for this reason).

One of the main considerations of being a landlord is the liability risk which should be covered with adequate insurance, applicable to owning both directly or in an LLC - please don't neglect this. Also if you are doing this with your partner you should both agree on the approach and ensure that your affairs are in order specifically w.r.t the property ownership.

Otherwise good luck and all the best.