Interest-bearing security deposits

[J Adams]

I have looked into the subject of interest-bearing security deposits and I have a few questions about the setup. So in California there is no law that requires this. I am asking because I view it as a benefit to the tenant and therefore a way to attract high-quality tenants. 

The chief among them is the definition of "separate". Yes, I do understand that you want to separate business checking from personal checking. This is the whole reason for limited liability. However, when talking about these security deposits does separate mean each unit, each door, has it's own account or does separate mean an account that only security deposits dump into and paid out from? Depending on this answer raises the complexity. If the former and you are an apartment complex owner you could be looking at managing hundreds of accounts. If the latter how do you keep track of the interest? Continuing on, how are these accounts held? Be that a separate individual escrow account in their name, in the company's name under a For Benefit Of (FBO), or a bank account "in trust" of the tenant. These affect the taxation of the account as well I believe. Take for example the company holds the money and is issued a 1099-INT for the interest. Does the company pay the tax or can that be passed through to the tenant. 

I do understand that YMMV, that only a lawyer can answer these, but this could also be a jumping off point for anybody else interested in this topic as the rest of the Internet is pretty lacking. Thank you!