How are you structuring your bank accounts?

[Matthew Chalfant]

I hear almost nothing about this in the forum or on podcasts. How do you all set up your banking systems? Do you have banks you like to work with? Do business accounts make sense? Why or why not? Do some of you get credit cards in the name of your LLC's? Do you all like big names or local banks? Are there any neat discounts you get by having large sums of money at these banks? I feel like banking is such a foundational thing and it is not discussed.

[Michael Temple]

I set up LLCs to hold my rentals and then I set up a holding company to own the various LLCs. The LLCs that own property can hold one or more properties depending on your risk profile and are set up in the same state the property is help in. The holding company owns each of those LLCs.

Each LLC should have its own bank account. Each LLC will pay its expenses out of that bank account, i.e. mortgage payments, insurance, repairs, etc. The cash flow is paid as a member distribution to your holding company and is put in that checking account and then pulled out of there for your personal use. Each of my LLCs also has their own credit card, typically with a 3-5K limit, enough to take care of basic expenses that might exceed the cash balance I have available right at the moment.

You can also set up lines of credit with your bank to push cash down to each of these entities if you want to buy property, do repairs, etc.

Now, admittedly this is a complex structure and requires maintenance to keep all the parts in force. Some people won't want to do all of that. I didn't invent this, I learned it from Anderson Business Advisors who has presented at BP events in the past. Check out their YouTube channel for the 2 senior partners Toby Mathis and Clint Coons, plus a 3rd channel for the firm itself. I have learned a ton just by watching their free content.