Do yo need separate bank accounts per property LLC?

Question

A business partner and I plan to own multiple multi-family properties. We will start with one in 2019 and, hopefully, add 1 property each year for the foreseeable future. Each property will be owned by separate independent LLC's. These LLC's will make annual distributions to each member on an annual basis and will pay individual taxes, as well.

With this in mind, do we need to create separate bank accounts/checks/cards for each property?

Outside of the individual property LLC's is a separate LLC that will serve as our "brand" LLC and one that will make "pursuit expenses" like pre-operating legal expenses, web hosting, email, and travel expenses etc. that are not related to an individual property. This bank account already exists and is active.

So, do we need to create separate bank accounts/checks/cards for each property?

Greg Dickerson · Answer

@Harry Williams yes you will want to set up separate accounts for each entity including the operating company. You will receive rents and pay expenses from each LLC account and then distribute profits to members. The operating company will fund all upfront and due diligence costs and get reimbursed from the property level account.

Chris Levarek · Answer

@Harry Williams There are methods to having a CPA or bookkeeper to separate out transactions from the same account through Quickbooks for multiple properties however, this will be additional setup and bookkeeping costs. Additionally, if you want to have a cheerful cpa, its suggested to simply separate the properties by bank account.

Yes a little extra work initially but from then on , you simply pull the bank statement to see how the property is doing and your cpa will be alot more friendly. You will have a clear idea, without asset management software, how the property is doing and can adjust your property repair, vacancy and capex percentages quite easily if they are too low or too high.

If you do set up multiple bank accounts, I would highly advise that you work with an attorney on the LLC that will hold the property to have either 1 manager only, or if you do 2 managers, ensure there is a stipulation with the ability to sign without the other.

Banks, at least national banks, require both managers to be present, unless the above is done, to open the account or any business line of credit. This gets pretty tedious to have to bring both managers in for one-two hours for each account opening after the 5th bank account or so. Not to mention, if your LLC partner is in another state.

They will also close the account in certain cases if you try to change this after the fact., such as changing the ownership percentages, adding managers, etc. Again my experience, so can't say this is typical for all banks but just some advice.

Hope that helps!

Jerome K. · Answer

Just curious, why have each property owned by a separate llc?  Are you planning on having different ownership mixes between you and your partner for each property (50/50, 60/40, etc)?

Kent Ritter · Answer

@Harry Williams yes keep it all separate it will make your life easier.

David Smith · Answer

Does not matter if you think the LLC will not run into problems or disputes.

In real life , LLC is more for ownership.  Unless someone needs to sue LLC For liability and you donot enough insurance. Then you will be personally liable.  Even then , it is still not the end of world.

Bjorn Ahlblad · Answer

@Harry Williams I have separate bank accounts and credit cards that way much of your accounting is done for you with year end statements etc. The biggest caution is don't allow any personal funds, purchases etc to get mixed in with LLC funds (commingling). Talk to your CPA and if you don't have one it is time to get one. All the best!

Harry Williams · Answer

This is exactly what I was implying. Sorry for not being more clear.

Originally posted by @Jaysen Medhurst:

separate bank accounts are a best practice.

Thanks.

Basit Siddiqi · Answer

@Harry WilliamsYou should have a sit down with an attorney and CPA to discuss the mechanics behind an LLC.LLC's in itself are pass-through vehicles and do not pay a tax.In regards to your question, each LLC should maintain its own bank account. This will allow it to keep its own books clean and to also keep its legal protection.

Jaysen Medhurst · Answer

@Harry Williams, you really need to have this discussion with your CPA (I'm not one), as there are a number of things at play and your post reveals at least one issue that you're confused about. "These LLCs...will pay individual taxes, as well." No, they won't. LLCs are pass-through entities. Any profits or losses flow to the owner(s), who then pays the taxes. Each LLC does file separately, though, which is why, at least from an accounting standpoint, separate bank accounts are a best practice.

Do yo need separate bank accounts per property LLC?

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