Questions about the business model and activation of our LLC

[Hussein Myr]

As a newcomer in the home renovation industry, I highly need expert advice. I own an inactive LLC with my friend, and we intend to activate it so that the company can be eligible to utilize mortgage and construction loans in the future. In the first step, my friend is going to renovate his primary residence in a contract with our LLC. This contract makes a profit and lets the LLC negotiate with lenders to borrow mortgage and construction loans. If it goes well, the home title can be transferred to an LLC, and we can sell the property or rent it. My questions are:

• 1- How do you evaluate the whole idea? Does it generally make sense?
• 2- I understand that we should file a tax return when the company is activated. How can we formulate our business to pay the minimum tax and be profitable enough to talk with lenders?
• 3- To record incomes and expenses correctly for tax issues, do we need to make an official contract for the renovation (between the LLC and one of the owners), or is simply issuing invoices and receiving payments in the LLC's bank account enough?

[Jake Baker]

@Hussein Myr

At the bare minimum, you should do the following to make your bookkeeping easier:
1. Dedicate one checking account and credit card exclusively to real estate. Keep personal and business finances separate.
2. File all receipts in a dedicated Google Drive folder. Digitize physical receipts for easy storage.

Additionally, you can track income and expenses consistently, using software or spreadsheets.

I use QuickBooks Online for most of my clients. For most real estate investors, a Plus subscription is needed. It is the most popular software in the industry and all CPAs know how to navigate it which is nice.