Airbnb and LLC - setting up business bank account

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Airbnb and LLC - setting up business bank account

Stephen Brieloff
Chicago, IL · Member since 2017 · 23 posts · 8 votes

Hello!

I operate an Airbnb listing, renting out the second bedroom of my primary residence (which I own). I recently opened an LLC for my other rental properties. With that, I have also opened up a checking account to pass through all of my rental income and mortgage payments, along with other payments.

Is there any reason why I shouldn't pass my Airbnb income and expenses through the same business bank account, even though the primary residence, of which I'm Airbnb-ing the second bedroom, is not owned by the LLC?

My goal with this is to keep all of my business income/expenses completely separate from my personal income/expenses.

Thanks,

Steve

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Eric P.
New York City, NY · Member since 2016 · 470 posts · 348 votes
7y
Originally posted by @Stephen Brieloff:

Hello!

I operate an Airbnb listing, renting out the second bedroom of my primary residence (which I own). I recently opened an LLC for my other rental properties. With that, I have also opened up a checking account to pass through all of my rental income and mortgage payments, along with other payments.

Is there any reason why I shouldn't pass my Airbnb income and expenses through the same business bank account, even though the primary residence, of which I'm Airbnb-ing the second bedroom, is not owned by the LLC?

My goal with this is to keep all of my business income/expenses completely separate from my personal income/expenses.

Thanks,

Steve

Yes, huge reason not to. Comingling LLC & non-LLC / personal funds is one of the top ways to have a judge disregard / invalidate your LLC in case of a lawsuit (it's called piercing the veil - google it). Not a lawyer, but this is what i've been advised by lawyers who specialize in this. Keep LLC funds strictly separate

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  • Eric P.
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    7y
    Originally posted by @Stephen Brieloff:

    Hello!

    I operate an Airbnb listing, renting out the second bedroom of my primary residence (which I own). I recently opened an LLC for my other rental properties. With that, I have also opened up a checking account to pass through all of my rental income and mortgage payments, along with other payments.

    Is there any reason why I shouldn't pass my Airbnb income and expenses through the same business bank account, even though the primary residence, of which I'm Airbnb-ing the second bedroom, is not owned by the LLC?

    My goal with this is to keep all of my business income/expenses completely separate from my personal income/expenses.

    Thanks,

    Steve

    Yes, huge reason not to. Comingling LLC & non-LLC / personal funds is one of the top ways to have a judge disregard / invalidate your LLC in case of a lawsuit (it's called piercing the veil - google it). Not a lawyer, but this is what i've been advised by lawyers who specialize in this. Keep LLC funds strictly separate

    1Reply
  • Ken Latchers
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    7y

    I own my properties as rental properties, but my LLC manages all the short term rental activity. So I suggest you have the LLC manage the short term rental activity of that spot

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  • Daniel HymanBusiness Member
    CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    You can still keep the your business transactions separate from your personal activity without running the STR activity through the LLC (which is not a good idea for the reason that @Eric P. mentioned).

    You can simply keep two sets of business books. One for the LLC and one one for the STR business.

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  • Stephen Brieloff
    OP
    Chicago, IL · Member since 2017 · 23 posts · 8 votes
    7y

    @Daniel Hyman + @Eric P. thanks for the intel! To make sure I understand the commentary, the recommendation would be as follows for the STR business:

    • Not part of LLC
    • Funds do not go through the LLC's business bank account
    • Separate books, which are classified as personal, are kept to document STR income/expenses

    Would the same recommendation hold true for my other rental properties, in which the title is in my name, not the LLC?

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  • Eric P.
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    7y
    Originally posted by @Stephen Brieloff:

    @Daniel Hyman + @Eric P. thanks for the intel! To make sure I understand the commentary, the recommendation would be as follows for the STR business:

    • Not part of LLC
    • Funds do not go through the LLC's business bank account
    • Separate books, which are classified as personal, are kept to document STR income/expenses

    Would the same recommendation hold true for my other rental properties, in which the title is in my name, not the LLC?

    Sounds like there's 2 pieces here: 1) what should be in an LLC?, 2) how do you do proper bookkeeping for an LLC? I'm not a CPA or lawyer (you should consult them, they can help you a ton!), but here's my understanding:

    1) The LLC isn't to protect your rental property (that's what insurance is for); the LLC is to isolate your property so if you get sued no one can touch your OTHER assets that aren't in the LLC.

    If you have valuable other assets (bank accts, stocks, bonds, brokerage accts, 401k, other houses, etc), then it's worth considering an LLC for the rental property so if something happens & you're sued, the lawsuit is isolated to just the LLC & not your personal assets (if done properly). Also, I'm not a lawyer & there are certainly some nuances beyond this that a good lawyer can tell you - this is just a high-level overview

    2) LLCs are like "protective containers" for assets. You can put many assets in 1 LLC, or you can put each asset in its own LLC. But - bottom line - treat each LLC like its own separate business & don't mix it with any other LLC or your personal funds.

    Hope this helps!

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  • Ken Latchers
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    7y

    An LLC can be disregarded for a variety of reasons (including coming Ling funds) . For example, the LLC needs to have sufficient assets or insurance to pay against potential claims. Not having occasional meetings, etc

    Honestly, you should be involving CPA and lawyer, not relying on advice from a forum. If trying to save money, it is penny rich and dollar poor. 

    0Reply
  • Account Closed
    Investor · United States · Member since 2018 · 565 posts · 356 votes
    7y
    Originally posted by @Stephen Brieloff:

    Hello!

    I operate an Airbnb listing, renting out the second bedroom of my primary residence (which I own). I recently opened an LLC for my other rental properties. With that, I have also opened up a checking account to pass through all of my rental income and mortgage payments, along with other payments.

    Is there any reason why I shouldn't pass my Airbnb income and expenses through the same business bank account, even though the primary residence, of which I'm Airbnb-ing the second bedroom, is not owned by the LLC?

    My goal with this is to keep all of my business income/expenses completely separate from my personal income/expenses.

    Thanks,

    Steve

    I don't think it's necessary to create a legal entity if you're only doing one property. Check this out: https://www.biggerpockets.com/blog/airbnb-arbitrage

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