All Forum Posts by: Dave M.

Oh, to further muddy the waters... When I created LLC #2, I listed LLC #1 as the authorized representative to form the new LLC, and it was signed by me as a member of LLC #1.

I guess it all comes down to how we document who the members are of each LLC.  The bank is asking about an EIN because they want to know who/where to send the 1099 interest statement at the end of each year. They need an EIN or SSN. 

Hi All: I'm not sure which category this belongs in, but here goes... We are into short-term/vacation rentals (cabins) in Ohio. We have a 2-member LLC (#1) established last year that currently owns 2 cabins and provides all the management services. We are in the process of building two more cabins on a single parcel of land and I created a new 2-member LLC (#2) to hold that property. We got a commercial loan made to LLC #2 for land & construction , of course with a personal guarantee from us.

Question is... Can LLC #1 handle all the management of the properties for LLC #2 and run all the income & expenses through the bank account & merchant account of LLC #1. I didn't even establish an EIN# or bank account for LLC #2, but now the lender is asking me for one after we already closed on the loan.   

Also, can LLC #1 contribute funds to LLC #2, or does that require LLC #1 being a member of LLC #2? My fear is I already screwed up because we made a contribution of personal funds to LLC #1 (deposited personal check to LLC #1 bank account), then we pulled a bank check from there to provide our down-payment on the loan made to LLC #2 for the new cabins.

How bad did I screw up?  :(

The new LLC will manage the two new cabins (which are in the LLC), and it will manage the 3rd cabin that is personally owned. This raises another interesting issue, in that the LLC has a merchant account which will be used to receive payments from guests. So, rents for the personally owned cabin would have to be paid out of the LLC back to us personally. Very similar to what the current property manager does now.

I'm wondering how folks handle this situation who might have multiple short-term/vacation type rentals, each in their own LLC. I'm sure there is not a merchant account for every LLC. :)

Hi All! I've been mostly a lurker here, but have posted a question or two in the past. I have what feels like a weird situation and I'm trying to figure out how to deal with it.  Here's the setup....

We have a rental cabin (short term/vacation) that was built 3 years ago and has been managed for us by a property manager. I never created an LLC for it, so it's in our personal names and we have good business insurance (hotel type policy). So, I have a personal bank account we use to pay the bills (mortgage, utilities, etc), and our property manager sends us a monthly check for the rents minus his fee.

Now... We're in the process of buldiing two new cabins under a newly formed LLC. I put both in the same LLC because they are on the same parcel of land and we got one big loan for all of it. We have a business checking, credit card, etc, for the LLC.

Once these new cabins are up and running, we will be taking over management of the other cabin as well so we don't have to pay the property manager anymore. 

I'd like to use the new LLC basically as the "property management" company for the 3rd cabin. But I've been confused over whether to move all the (personal) funds for that cabin over into the LLC account and just merge them all together. Or... Would it be best to maintain the personal account for that other cabin and continue paying bills as we have, and then just have the LLC take a property management fee each month?

I plan to create a new LLC for that other cabin sometime this year and have an attorney help us structure it correctly. At that point, I would assume I'd still need a separate bank account in the new LLC to continue paying expenses, etc.

Not sure why this is confusing me... But I'm trying to keep things as simple as possible, but no matter how I look at it, it's confusing. :) 

Thanks in advance! 

Thank you @David Dachtera your response was very helpful, especially the comment about mindset.

I spoke to a couple other people in a similar situation as mine, and it seems they typically create a S-Corp as a holding / property management company, and then hold each individual rental property in a separate LLC (one LLC for each property). I'm not sure I want to go to all that trouble. :) I think I'd rather just have one LLC for the three properties we will have.

Would you mind commenting on the last paragraph of my original post (pasted below)? Specifically, the last couple sentences.  Thank you!

Not sure if this is the right category to post in, but I have a general question about managing multiple LLC's for rental properties. If you hold rental properties in individual/separate LLC's for privacy & protection purposes, what's the best way to handle income & expenses for each? Is it recommended to have a separate bank account in the name of each LLC? Or could you setup another LLC as a management company and run everything through that?

Also I'm a bit unsure how to handle the initial investment in the case of an LLC being formed to purchase property and then subsequently build a new property that will be used as short term/vacation rental. Obviously, the LLC owns nothing at first, so money has to come from somewhere. We are paying cash to purchase property initially, getting a loan to build, and then spending funds to furnish the new properties. This money has to come from somewhere. Do we just record it in the operating agreement as the initial capital contribution from each member?

Thanks Clint - great advice! Does the same hold true given that our cabin will be a short-term/vacation type rental with pretty much constant tenant turnover?

Establishing an LLC in Ohio seems pretty straightforward (fill out a form and send it in with $125), but creating a Land Trust is a different story. Doesn't sound like something I'd want to tackle on my own.

Good point John, hadn't thought of that. But I can't imagine ever taking the property out of the LLC unless we were selling it. I'm sure the ramifications of having all our personal assets attacked in a lawsuit would be far higher. :)

Fortunately, in Ohio there is no annual renewal for an LLC that I'm aware of.

Thanks Scott! I've already read a bunch of stuff about land trusts, and feel that is definitely another tool to be considered. However, from what I understand, a land trust in and of itself offers no legal protection/insulation of our other personal assets. The protection comes when you name an LLC or other legal entity as beneficiary of the trust instead of individuals such as yourself and/or wife, kids, etc.

A big benefit of a land trust is that it allows you to transfer ownership of your property into the trust without triggering the dreaded "due on sale clause" that most lenders have. I guess this is due to U.S. Code Title 12, Chapter 13, Section 1701j-3 which limits a lender from accelerating a note when there is a transfer to an "inter vivos trust" in which the borrower is and remains a beneficiary.

Maybe I could just proceed as we are with everything in our name for now, and then setup a land trust & LLC later once things get rolling. That gives us 2-3 months for more research and to consult a good attorney and CPA.

Dave

Thanks Joe. I'm not sure what you consider significant, but our personal net worth is pretty high (IMHO). Not a million yet, but getting close. :)

If we form the LLC, we would not be mixing funds. We'd establish a business checking account in the name of the LLC and run all income & expenses through that.

I'm just concerned about having so many renters in and out of the cabin all the time, and what happens if someone gets injured and decides to go after us personally. Unfortunately, we live in a sue-happy society where people take no personal responsibility for their actions.