Recs for business checking accounts and credit cards - can you have too many?

Question

What do most do in terms of keeping rental business out of personal finances? My eventual plan is to scale - do most have a single financial LLC with its own checking account and each rental LLC finances go through that one? Or do most larger investors keep a separate credit card and checking account for each LLC rental? Or do you have a checking account for each rental LLC, and a single business credit card? Each of the scenarios, I anticipate can be a headache for bookkeeping and have pros and cons.

Max Emory · Answer

Hey @Michael Ghim, as far as financial account structure goes, think about what will work best for you in your day-to-day operations. Yes, having a bank account and credit card per property works great for bookkeeping as long as the accounts are used they way they are supposed to be used (no commingling).

But, is this practical for you and your team if you have 50 properties? Probably not. That's a very large book of physical cards to carry around.

Whatever you go with, ensure it works for you and your team. It needs to be as simple and efficient as possible.

Some of our Clients get caught up in having these super complicated (fancy) entity structures for maximum protection. But, they don't abide by the structure in their day-to-day operations because it takes too much mental capacity to keep up with. This defeats the purpose of the liability protection they were going for in the first place.

So, again, think about your operations and envision what will work best for you.

Happy to discuss further.

Bruce Woodruff · Answer

Max is correct, do what works for you, people have different mindsets and ways of looking at their properties. But yes, if you only have 1-5 properties and wnat to do your own books, you will be fine (I would still have a Book-keeper come by 1x month and get everything squared away)

Of course when you have a lot of properties, this will just be a confusing nightmare. At that point you should have the money to hire a bi-weekly or weekly person to come by and do everythng for you - write checks and everything. I used to have a CPA who had book-keepers working with his company, that way at the end of the year they would just transfer all of the data to him....easy peasy....

Pat L. · Answer

The wife maintains separate bank accounts for each rental & escrow accounts for each of the properties we seller financed. (Now down to 42 accounts).

It was a life saver during our first extensive IRS Audit, as they checked detailed ledger entries etc etc on all properties going back 7 years. Our most recent Audit ran from Mar-May this year & required weekly 2-3hr phone calls. The Auditor required the same detailed accounting by property, going back from 2019 to 2012. These detailed records, (many copies of which had to be scanned & emailed to them), saved us from any 'taxable consequences'.

Rene Hosman · Answer

There are so many ways you can do this, in my personal opinion, many ways work, it's all about what works for you. Do you have a bookkeeper or someone helping you prepare taxes or are you managing the finances all on your own?

Todd Lennig · Answer

Relay Bank has worked well with my bookkeeping clients.  I use it and like it a lot.  Very profit first friendly, if you are doing that.  Happy to answer questions if you have any.

Basit Siddiqi · Answer

Get a business account where you have your personal accounts.It is much easier to have one login for both business / personal accounts. It makes transfers(if required) much easier.

Bonnie Low · Answer

Your LLCs are mostly for asset protection. You typically want at least one in every state you're doing business. Some people use a rule of thumb of not having more than $250k in equity in your properties that are inside the LLC to make it less likely you are sued. Tom Wheelwright has some good books on this and how to structure it for liability protection and tax purposes. I've personally set up my LLCs following the per state and $250k equity rule and I do have a separate bank account for each LLC and sub accounts for each property. I use Baselane as my banking and bookkeeping platform, which makes this very easy to do. Everything is tied to the master account, which is my holding company, then broken down into sub accounts per LLC and per property. I also have virtual credit cards assigned to the various properties. It's layered, which in many ways isn't simple, but it does make it much easier to do my taxes at the end of the year because of this layering. Everything is dropped into the right categories and assigned to the right properties because I have it set up this way. You either spend the time categorizing your revenue and expenditures as you go (easier) or at the end of the year (harder IMO). And you are totally right, bookkeeping is a headache no matter what unless you're just really good at it, but necessary for your business.

Bruce Woodruff · Answer

To follow up, I would have a checking account for each property, plus a savings acct where you put your CapEx. Plus a debit card. You don't need credit cards for each account, that could just get you in trouble.

Regardless of what the finacial pros say, I'd still go this route.

They will also tell you to get an LLC. Search these very forums for info on this, but you will find that LLCs and Corporations are not what they're hyped up to be. Most of the 'experts' (Lawyers and CPAs) do not own investment properties anyway, just ask them. They are going by-the-book.

The Tax savings and Asset protection are not actually there when you get right down to it. At least as someone who had a few LLCs and S-Corps, I found the LLCs are easy to pierce.... S-Corps not so much, but still you should question whether the cost is worth it. In a state like California, there is a set-up charge of a couple thousand and a yearly fee ( to the state) of $800. Each.

Bruce Woodruff · Answer

I personally like to have a seperate account for each property. But that's just me...a good bookkeeper of CPA will just laugh and tell you to let them take charge and throw everythng into one master account. I prefer to have control and be able to look at everything myself if needed.

Checking accounts are generally free, so why not?

Rene Hosman · Answer

I second @Bonnie Low with the rec for Baseline, if you have 1-2 properties it's easy enough to keep your books and accounts straight but any more than that gets tricky and time consuming!

Recs for business checking accounts and credit cards - can you have too many?

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