LLC restriction from employer, does this solution work

[Matthew Hicks]

Hello,

I have a single LLC that I've used to flip a few houses in, but I've also started to rent out some properties (I currently have 1 SFH, and will soon have another and a duplex). They are all in the same LLC.

I'm aware that there are a number of reasons to start using separate LLCs, and at the very least I want a separate LLC for flipping homes and the one that I use to house my rentals.

Here's the problem. Every time "invest" in an outside company I have to register that investment with the compliance group at my company (I work for a large international bank so the regulation requirements are quite large). The process takes time and requires multiple levels of mgmt sign off.

So what I'm thinking is that I create a new LLC and then open up wholly owned LLCs for investment in that LLC. This will allow me to avoiding getting approval for each individual LLC.

With that said, I have a few questions:

1. Are there any issues I should be aware of that come about from creating this intermediate layer between my investments and myself?

2. Is there any way to manage all of these small businesses using a single bank account or do I need to open up seperate accounts for each LLC? Even if I can manage from one account, does this potentially damage the liability protection provided by individual LLCs?

3. Are there any issues with having a SMLLC own multiple other LLCs, one of which chooses to elect as an S-corp (my flipping entity)?

As always, thanks in advance for any feedback

[Bill Gulley]

The reason the bank requires approval is for issues of conflicts of interest that may arise from a bank officer or employee and they may also look to the time involved in other activities, are you really doing your job at the bank or are you thinking of outside responsibilities?
From either point, forming subsidiary companys under an approved company is still forming another entity under your control and does not circumvent the obligation or agreement or intent of the bank's operating standards. In essence, trying to out smart your employor can get you fired!

Will they find it? Don't know. I do know that it is an area that is included in a bank examination and failing to report interests can be a violation of regulations. You need to report all business interests, that includes any company, parent or subsidiary.

And, there is no reason you can't sell or flip properties out of a company you have already formed for rentals unless you omitted such activities in your operating agreement, in which case, you can modify that agreement. IMO, having seperate LLCs for each property is a scam introduced by gurus and attorneys doing LLCs. Get insurance! If you have a problem and the corporate veil is pierced in one company and become personally liable, that means all your assets can be at risk and the ownership interests in all of your entities are your asset, now they are all fair game, so the whole idea is hype, IMO. You could look into a Series LLC if your state has them and discuss the advanages with your attorney. :)