I’m looking for advice on how to do this properly. 

Be wary of TX property tax as it is very expensive and can impact cash flow if not factored properly.

You can't just always convert an old garage....for example the existing slab must have the proper PSI, vapor barrier, and steel.

Of course, there are a lot of things to look out for...setting up an appropriate contingency reserve for unexpecteds, getting an accurate scope of work, properly knowing what your time-value-of-money costs are going to be, making sure you're contractor is not pulling crews for other customers, knowing codes and getting your permitting right, and the list goes on.

Avoid properties on main streets (traffic noise, avoid homes near freeways (smog/traffic noise), avoid homes without garages if most other homes have garages, avoid being in airport flight paths, avoid over building or over rehabbing for the area comps, know how to properly and accurately estimate ARv and rehab costs, and have money lined up in advance.

Might be you're not set up properly to obtain a separate account. 

@Ryan Tongue have heard of termites in Michgan before, but have never SEEN termites in Michigan.Winter usually kills them.The biggest challenge with this issue is doing it properly. 

Corporate Veil: Courts tend to respect the corporate veil (the legal distinction between the LLC and its owners) more when the LLC is properly formed and operated in the state where the property is located, reducing the risk of personal liability.4.

Or what is the proper way to deal with it?

Take ownership of your mistake and learn to do the proper due diligence recommended above😊