Is it necessary to set up separate bank accounts?

[Jimmy Wen]

Hi all,

After a year of studying and hesitation (I will admit that), I finally pulled the trigger and got a duplex under contract! This will be my very first investment property!

Here is a quick question: do you create separate banking accounts for all transactions on your rental properties? From the Rental Property Investing book by Brandon Turner, he clearly stated: "don't use your personal checking account to run your rental business!"

I am not quite sure where the author is coming from. Why is it so bad to mix personal and rental property transactions in the same bank account? Is it to make tax reporting simpler? Or are there any legal considerations?

Best,

Jimmy Wen

[Syed H.]

Originally posted by @Anthony Wick:

For those of you saying you cannot co-mingle LLC and personal bank accounts, I ask; why not? Not saying it's a good idea, but as far as I know it is not a tax or law violation. At tax time, your LLC will prepare a K-1, which then goes on your personal taxes anyway. At no point has my CPA asked or required me to have a separate bank account for my LLC (which I do, but I haven't heard it is "required").

It's no illegal to do so, but the point of an LLC is to shield some liability. If you co-mingle funds, it can be argued that the LLC and you personally are the same, thus piercing the corporate veil.