Preventing Commingling Funds

[John Lewis]

Hello BP,

Question about entity structuring and commingling funds. 

Do you recommend that every investment property that I have be in a separate entity, also what would be the benefits of having a property in my personal name. I ask because I see a lot of people hold property in their personal name but also here how it's smart to put them into an entity for asset protection.

Cash Flow Question: 

I often here people say that they've invested enough to live off of the cash flow from their property. Isn't that using the business income for personal expenses, would that be considered commingling the funds which could lead to the corporate veil being pierced if they came upon legal trouble?

Entity: 

When I create my LLC to transfer my property into which is free and clear, will I need an EIN or can I just keep using my social?

Sometimes when I present these questions to industry professionals they say that you're not big enough to worry about this yet. Would you start you business by keeping good books and making sure that you have proper industry structuring underway or wait until you have a nice sized portfolio.

Thank You.

[Account Closed]

Keeping each property in its separate entity can be a organizational/bookkeeping hassle but may protect you more based on if someone sued one of the LLCs. 

There are a few different ways to take cash from your entity. You can structure it as a payroll expense (however watch out for self employment tax), you can pay out a "management fee" to yourself, or if you are a partner you can take a distribution which will be drawn from the net income/retained earnings. I am sure there are other ways as well, but these are a few popular ways to ensure separation of the business and yourself. 

Also you will need the EIN number if you want the property in the LLC name.