When you have a business entity, especially multiple business entities, banking can become complex. There are many reasons why you might need to move your money, but there are strict regulations, as well as tax implications that will dictate how this should be done.
On this episode of Investing in Real Estate, Natali and I are discussing how to use the money in your LLCs’ bank accounts. We’ll share what we’ve learned, the mistakes we’ve made, and more! Please join us for episode 157!
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We’ve discussed before the importance of owning real estate inside of LLCs, and how we personally structure our banking accounts. Each LLC should be treated as its own bank entity. The LLC has an EIN, which is owned by you, and gets reported on your personal tax return.
But that doesn’t mean the funds inside that LLC banking account are yours for the taking. You can’t write a check from your LLC’s business account to purchase groceries for your family. In fact, that’s known as commingling, which is illegal.
The rent that you receive as income every month should be paid to the order of the LLC. Those funds must be deposited into the LLC account. You should not deposit checks into your personal checking account.
In our business, we have our LLCs under holding companies. This was done at the counsel of our legal team. We’ve been advised that under the circumstances that we need to move money, the LLC should send the funds up the holding account. That account can then disperse the funds accordingly. It’s incredibly important to have some sort of trail of proof any time funds are rearranged.
On today’s show, we’ll discuss more about our personal banking structure, and how we use our different accounts. We’ll talk about the Profit First system, the importance of treating each entity individually, and how umbrella LLCs are taxed. It’s all here on episode 157 of Investing in Real Estate!
If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.
On this episode you’ll learn:
- Can you use funds in one LLC to purchase a property for another LLC?
- Can you be taxed twice on money that you’ve transferred?
- What is a distribution?
- Does your owner pay account need to be owned by the LLC?
- When should you consider setting up a holding company?
- And much more!
EP010: How to Set Up Profit First for Real Estate Investing – Interview with Mike Michalowicz
EP040: How to Implement Profit First for Real Estate Investing
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