Buying under a LLC ???

Question

I know this is a rookie question but it completely slipped my mind, how does one buy under an LLC ? Do I need a separate banking account with funds? do I need to establish credit with the LLC ? And how do I do that ??

Carl C. · Answer

We have purchased two properties under our LLC in the last year. Let's start at the beginning though. In order to set up an LLC you need a business bank account. In New York, we couldn't form the LLC without it. We funded that account with our personal money that was intended for purchasing our next property. Now the business has money with which to start operating (buying properties).

Our first was a cash deal so there was nothing to it with regards to needing credit. The second we needed a mortgage. The bank wanted to see our history of profit/loss, tax returns, and pro forma financials for the property we wanted to buy. Our LLC was less than a year old at the time and we had not completed our taxes. They were willing to accept our personal tax returns as well as profit/loss statements for each of the properties we owned to date.

The bank was happy with the history we were able to show them and provided the loan. Our LLC is now building credit history for future deals. Keep in mind that you will likely have to personally guarantee the loan to your LLC so whatever bank you work with will likely be more focused on you and your financial history when you start, rather than your LLC.

Dan V. · Answer

Before you buy under an LLC you have to make sure that you will be able to fund the purchase under the LLC. Banks do not usually lend to new entities so initially, you either have to put in your own money to the LLC or borrow from hard money or private lenders. And if you are going to use an LLC, everything should be under the LLC name, and transactions are processed thru the LLC accounts, no commingling.

And yes, as Carl mentioned, the lender may require you to personally guarantee the loan until you have enough history to get you off the hook.

Billy Daniel · Answer

We didn't need to establish credit with our LLC.  The bank just checked our personal credit.  Maybe after the LLC has done some business they can use it's credit, but I dont really know.  Your accountant would be happier if you got a separate bank account for the LLC.  You want to keep a clear line between personal and business expenses.  As for buying under the LLC, all that takes is putting the LLC name on the contract instead of yours.  Good luck and have fun!

Buying under a LLC ???

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