Hi, I was told by my real estate lawyer that I can no longer accept cash rental payments from my tenants now that he created a series llc for me. Is this true? I just find it odd since I've seen other "llc" companies accept cash and give out reciepts.
I have never heard that but i am also not a Lawyer. It does sound odd. We do not accept cash for rents just because there is no reason to, it makes you a target carrying large amount of cash and it is harder to track vs a money order or check.
Cash is legal tender and has to be accepted by pretty much everyone. Not sure how having an LLC overrides federal law. With that said, like @Jeremy Gunn I am not a lawyer.
Cash is ok to accept just be good about receipts. Have them signed, get copies, track them, etc. Last thing you want is lack of a paper trail.
Did you ask your lawyer why you can no longer accept cash payments? It'd be good to understand the reasoning behind it. No one here can say whether he's right or wrong because we don't know your specific circumstances. Just keep in mind that in some states, a landlord cannot refuse a cash payment. From my quick research, I found this out about your state: "A landlord must accept rental payments in the form of cash, unless the written lease provides otherwise." (Source: State Bar of Texas: Tenants' Rights Handbook). I'd talk to your lawyer again and ask him to help you understand why he said that. After all, that's what you pay him for.
I am not a lawyer but I see no reason why you would not accept cash as payment. You could go straight to the bank and deposit it.
But if you cannot take cash, you can ask your tenant to bring the cash to your bank and deposit it on your account. You can also get a payment service and get your tenants to pay with cash or any other method on their friendly 7-11 and get the money transferred to your account (minus a minimum fee).
Please ask your RE Lawyer and keep us posted.
I personally wouldn't want to accept cash because I would like an electronic paper trail of sorts.
Cash is king. Landlords don't like to talk about accepting cash payments but there is always that one tenant that pays you cash and it goes into your pocket and the IRS never knows about it. There is no law that says you can't accept cash. You have the right to require your tenants to pay with a check or money order but it's not a matter of law, it's a matter of preference. It's likely your attorney was suggesting you not accept cash as to make sure you have a paper trail and what not. I accept cash all the time. It's money. I will take cash today over a check that must clear tomorrow and possibly bounce any day.
Thanks everyone for your input. I do believe that he meant it because of the records but I wasn't sure. In case I ever get sued, there would be a paper trail. I guess I really wanted to know if its possible to accept cash and still keep good records. I currently give my tenants reciepts for their payments and keep a carbon copy. I dont want to contact my lawyer again because honestly, he always seems rushed and it just makes my conversations with him awkward.
Lawyers are people who got an advanced degree and took a bar exam that did not include your landlord-tenant laws. They learn how to look up laws and interpret them, but just because they are a lawyer, doesn't mean they actually looked up all the laws.
He sounds like a jerk, actually. His "I'm rushed and busy" method may be to avoid people pinning him down on the fact that he didn't do his job by looking things up, or doesn't know what he's talking about.
I could tell you stories about lazy lawyers.
An LLC is just a way to protect your personal assets, in my understanding. Your bookkeeping methods, or methods of how you accept payment, shouldn't have to change, other than just simply keeping good records. A cashed check is really just a receipt anyway.
You need a new lawyer because he should be able to clarify what he meant. If he can't do that for you or you don't feel like you can't go to him with questions, you need a new lawyer. You should feel comfortable and confident in him to help. And I agree it's probably just a paper trail that needs to happen.
Agreed, get another lawyer if he doesn't have time for you.
Yes, it's a paper trail and co-mingling of funds issue.
I printed off my receipts so that I had two originals. I'd have to accept different amounts sometimes from my college kids as they shared a unit, one might write a check, the other had cash, a PITA! If one wrote a check and took the cash, the check might bounce, so I just accepted what I could get. I would not accept cash by mail!!!!! They would have to come to my office to get the receipt before credit would be given, goes for dropped payments in my night deposit drop too.
The receipt would have their name, address, date received, amount, purpose (for rents due) they would sign as the remittance paid and I signed as receiving payment.
Original signed documents will pass the sniff test, deposit that cash immediately in the LLC account, the deposit slip can be annotated on the back as to what rents were paid.
Being consistent in your record keeping is critical, might be that attorney simply thought the administration would be too much for you and advised you not to accept cash making your life easier, but s/he still needs to explain.
Get with your accountant too! :)
Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com
Thanks everyone! This information really helps. I will have the tenants sign the receipts as well.
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