Different Bank Account & LLC for Every Property?

Question

Hey Everyone,

Do you have a different bank account for every property, or do you have one account that holds all of your funds? I’m assuming if you just have one account that you would need to have a well documented system that tells you how much of your funds are designated for repairs & such on each property?

Also, do you have a separate LLC for each property?

Frank Chin · Answer

They're not suing the parent company. They are suing the owners of the entity. Usually if it's only one or at most two owners, they can prove that it is you who was the negligent one. My employees told me during depositions was asked what the owner did all day, what did he do to ensure safe operations. What prior experience did he have. The answer was none. Unfortunately, he had no prior experience in that business, sat around all day, and on nice days, take long walks.

Usually in discussion about LLC''s, they stressed the needs not to comingle funds. Based on what attorneys tell me, that's not what they go after.

If you are a one man company, have personal ownership of other entities, they can go after the equity of the other entities to satisfy the judgment. That's why having so many entities has no safety effect for you, especially if the other side has a multi million dollar judgments against you.

Frank Chin · Answer

@Steven Cobb

Setting up all these LLC's won't do you any good.

I had S Corp's, LLC and C Corp set up for various businesses with the thought of having corporate shield against litigation. I learned in the final analysis, it's a total mirage.

Bought a business in an LLC from someone in an S Corp. Learned later the S Corp and the S Corp owner was sued for $3 millions dollars. He only had $1 million liability coverage for the S Corp. S Corp owner thought, no problem, I have the corporate shield, had his lawyer file motion to have suit against him dismissed because after all, they should be only suing the S Corp. Wrong!! The court refused to dismissed the suit against him personally as litigants has the grounds to go after him.

I'm a little concerned, check with my attorney and my insurance agent who had me buy liability insurance for myself besides the LLC. Checked with my attorney and he advises people suing small businesses usually sue the owner personally for gross negligence anyway. In that case, if they win the lawsuit, they have claims against his ownership in any LLC you have, whether you have 1 LLC or 100 of them.

I was aware of the progress of the lawsuit as my employees were called down to give depositions about their former owner, who was sued for gross negligence. The plaintiff attorneys was not aware the S Corp owner sold the business, moved from NY to Florida, bought his home with the proceeds and sheltered by the state's homestead laws. In the final analysis, it's not the corporate shield that saved him, but the state's homestead laws.

The lawsuit was finally settled for $1 million. Had he stayed behind in NY, the lawsuit would have been for $3 million, and had he lost, would be personally out $2 million. He complained to me he was told the insurance company's lawyers only represent the insurance company and he was told he better get lawyers to represent himself personally.

I decided to used my money I saved from not setting up all those LLC's, and instead spend it on buying several million in umbrella liability insurance instead. It's my way of sleeping better.

Cody Hunter · Answer

Aw! Yeah that makes total sense. They are not suing the company rather the individual who owns the companies! Thus all the assets. Thanks for sharing.

Cody Hunter · Answer

Interesting story. It's very important that the entities be set up properly. Also, suing a parent company is deferent then suing a child company.

Cody Hunter · Answer

Hi Steven,

Absolutely it is recommend that you have a separate LLC and bank account for each property. The short reason being if a suit is brought against you, there is separation and limitation on what can be "attacked".

Kamil Baldyga · Answer

Hey Steven, so I have one bank account and once LLC for all of my properties. As far as funds for repairs/emergencies, I take a safety in numbers approach to it. I have an emergency fund set aside in the business but it can be used by any of the properties. When any repairs or work are done, I take the invoice and classify it in my book keeping software Quick Books, so I can get an idea how much is being spent on each property and the overall performance of each property. If you do a separate account and/or LLC for each property it is going to get excessive very quickly and it is going to be very difficult to keep track of everything. Hope this helps, let me know if you have any questions!

Different Bank Account & LLC for Every Property?

Most Popular Reply