Keeping Expenses Seperate

[Hunter Heimer]

How do you guys handle your personal expenses and rental expenses? Separate bank accounts or some other form?

[Anna Laud]

Hi Hunter! 

The easiest way to do this would be separate bank accounts, yes. The smartest way to do this would be to set up an LLC and obtain an LLC EIN, allowing your LLC to have it's own bank account.

Keep in mind, you may also benefit from having a business account with your LLC at some banks and with different account products provided.

In doing this, taxes should be more streamlined as well, and you might benefit from having the rental income 'pass through' the LLC as it's designed to do.

Another benefit to having an LLC set up is the corporate veil of protection it offers, limiting personal liability.

LLC's can be so beneficial in fact that some investors have a sperate LLC for each property- this way if a situation goes into lawsuit with one property, the lawsuit is contained to this property (and this LLC) alone, not all of the investment (or personal property!) the investor owns.

(You might be thinking why would someone sue me over an investment property?? Unfortunately, that's actually as close as the wrong lawsuit happy person stepping in a hole on your property and twisting their ankle- but an LLC would offer your personal assets {and other investments} safe)

If it's just yourself taxes are not so complicated with a SMLLC (single member LLC) so that shouldn't be a huge reason not to use one as the protection benefits offset/outweigh the small steps during tax time.

For future note then it's simply a matter of attaching Schedule C form to your Individual Income Tax Return (IRS Form 1040) and showing a total profit or loss as part of your total income that's being reported. 

During the stages of setting up your LLC, you can include provisions in your operating agreement to have it survive beyond your lifespan and seamlessly transfer to another named individual. In other words what you set up now can last beyond a lifetime and keep working for any future heir as well.

Quite a few people that end up setting up an LLC do so in the state of Delaware, for tax breaks and lower fees, as well as a pretty quick turnaround time in organization.

Overall yes, separate bank accounts would be easiest, and setting up one through an LLC (single member/sole proprietorship) would be ideal.

Hope that helps some = )