Using One quickbooks file for both management and holding LLC's

[Steve Welsh]

Hey guys, Quick question. Currently I own two properties (my personal property has a secondary unit that we rent) and I bought a SFH a few months back that we are renovating now and have a holding LLC set up to own that property in. I also set up a property management LLC that I plan to handle the tenants, maintenance, rehab and so forth out of. Managing properties for other people is a possibility in the future, but not currently in the near term plans, keep that in mind. Also keep in mind that we plan to pick up additional properties and start grouping a few properties under different LLC's as we grow for asset protection.

Now my question is can I run both sides of this and represent each LLC in one single quickbooks file? I know I can technically do it using sub accounts and such. For example my chart of accounts will have a tab for bank accounts, with a sub account for each "owner" under that, and sub accounts for checking and security deposit escrows under that. So I'd have separate bank accounts for each owner/entity. I'd do the same for equity accounts. Then my customer list and class's would list each owner/entity, with each property as a sub account and sub class, and then each unit as sub accounts and classes from there. Then using class tracking and making sure I assign all income and expenses to the proper property account, which is then in turn listed under the owners, I can track the income and expenses separately for each owner/entity from there for both my own properties and possibly other people properties in the future. From a tax standpoint I know I can make this work, but I'm concerned about the liability side of it. Would this open up the possibility of piercing the LLC protections even though accounts and money are still tracked separately?

The other option which I'm hoping to avoid would be separate quickbook files for every entity I own. So then if my management company lets say hires a plumber to fix a sink in my property owned by LLC1, I'd have to generate a bill from the plumber in my management file then generate a payment from LLC1's checking account to pay that bill. Then I'd have to open LLC1's quickbooks file and generate a bill from the plumber or management company for the sink, and generate a payment to pay for that repair, effectively doubling the amount of paperwork/book keeping I have to do, but would be completely separating the entities from each other.

How do you guys that have properties owned in multiple LLC's and have a separate LLC for management of the properties handle it and would any lawyers/accountants care to weigh in? I've run a landscaping company with quickbooks for years so I'm hoping to continue using quickbooks, and am confident I could set it up in a way the my accountant could properly and easily file my taxes, but I just don't want to weaken or ruin the LLC asset protections to make my paperwork a little cleaner.