LLC structure advice...

[Jonathan Ruths]

My wife and I bought our first investment earlier this year - an STR. We have a money partner who helped finance some rehab costs for that property in return for some equity. We created an LLC, set up the bank accounts, and are now looking for our next property. After the original LLC was created (simply titled after the street address), we starting using the branding "Family First Hideaways" when talking about the web of properties we would like to acquire across the country. I'm just looking at our current expenses - some are specific to the first property (street address LLC) like cleaners and handymen charges, but a few - mostly managing and analysis software - are going to carry over and used for other properties... Since our plan is to bring in partners for future purchases, should we set up a separate LLC for "Family First Hideaways" that can act like a holding/managing company to become the partner in those future STR acquisitions... or am I just getting ahead of myself.

Thanks for your input!

[Sarah Downey]

Hi Jonathan,

If it were me, I would set up a Master LLC- Family First Hideways LLC to cover to overall business activities and then continue to create individual LLCs for each property. That way, you have it separated out from the projects you are running with different partners and are not blurring the lines together.

It would require more paperwork for each entity but I have used websites like Legal Nature to create operating agreements/corporate resolutions. It is super easy and I know there are others out there like it.  

You could create Family First Hideways LLC (100% owned by you and your wife) and then have the others branch off it.

Ex: Property 1- (title owner) 123 Main Street LLC- owned 80% by Family First Hideways and 20% Partner 1

Property 2- (title owner) 456 Cherry Lane LLC- owned 80% by Family First Hideways and 20% Partner 2

You will still have to work through whether you want to set up individual bank accounts for each property/how you want to manage your accounting for each. 

I have seen a lot of investors doing this, and I think if you are bringing on partners, this is a great way to go about it.  

Best of luck with your expansion!