LLC Start-Up Cash and Funding

[Michael S.]

Hello! I'm a new investor with a shiny new LLC. We're getting ready to close on a 4-plex, and I'm curious about a couple of things.

When forming the LLC, we decided (with our attorney) to capitalize the business with $1000. Once we get our business bank accounts set up, we'll just write a personal check over to the business and our business account will have a balance of $1000.

Question 1: When closing on this property, the deed will be in the name of the LLC, but the loan will be guaranteed by us personally. Should we put the full amount of closing costs into the LLC account and pay from there? Or does that matter? I already paid for the inspection out-of-pocket from my personal account because the LLC was not quite finalized yet...

Question 2: The property we're buying is a good deal, but we may need to put a new roof on it before we've saved enough in Cap Ex from rental income. Can we just "invest" more of our personal money into the LLC account to cover it?

Thanks!

[Josh C.]

I'm not a CPA, but have real estate owned by LLCs. My accountant has strongly suggested what you are saying and that is what we do. Try not to co-mingle funds.

Don't pay for anything out of your personal pocket. Have the LLC pay for it. If there isn't enough money in there then you invest more money in there. If you guys know you have a lot of rehab expenses coming up there you need to put a lot in there. One nice thing is if you buy right the bank account becomes self sufficient after a while and you stop putting money into it while it covers everything and you can take quarterly draws. I haven't put money in my LLC for years while we consisting keep buying.

Good luck and find an accountant.