How/when to start an LLC and business checking account/business credit card.

[Zach Fulton]

Hey yall, beginner investor here with 2 properties rented out and producing income. I am planning on buying something bigger this year... or maybe a couple of different properties. Im thinking I should really open an LLC at this point.

1. How/where do you go to open an LLC? How much does it cost and can I do it online safely?

2. I'm guessing it would be smart to split my personal finances and my real estate finances at this point. Is there any advice yall have to open a business checking account?

3. Do you guys get separate credit cards for your business? What card would you recommend? 

I just want to make sure I'm not overthinking something and/or missing something, thank you everybody! 

[Mike S.]

There have been plenty of similar discussions on this forum and you should spend some time reading most of them.

You will find two camps:
1/ LLCs are not needed, you just need liability insurance
2/ LLCs are a must as insurance does not cover you for everything and all your assets are at risk

1/ and 2/ are valid answers depending on your specific situation. No one can tell you what you need, it should be based on your own specifics and your risk taking tolerance.

For me, I strongly support 2/. However, setting up LLC is not as straightforward as going online and creating one. There are a lot of things you need to learn first. I would strongly suggest you spend the time watching the many videos on Clint Coons Youtube Channel that is a treasure trove of information.

You will learn there what kind of LLC you may use in your situation (single member/multi member; member managed/manager managed). You will also have to decide on its taxation status (C or S corp, Partnership or disregarded). And most important you will need a strong operating agreement for your needs (don't use the free template available online or provided by LLC mills). You will also learn in which state or states you need to create your LLC. The most common setup today is to have a WY LLC as holding (either as disregarded or partnership with a C-Corp as manager), and multiple single member disregarded LLC in each state where your properties reside. But there are some variations with specific states where other tools need to be used in the mix like Wyoming Statutory Trusts and land trusts.

After you educate yourself on the structure, you will have to learn how to use it and properly set up its books and bank accounts. Again depending on the structure you chose, it may be different.

If you want to grow your portfolio, don't set up a structure for what you have today, but design it for where you want to be in ten years. If your setup was created properly initially, it will be easy to expand. On the other hand, limiting your views now will become a costly adventure to expand it properly in the future.