When setting up your LLC for your rental properties, it’s very important to keep your financial “stuff” separate from your personal accounts.
And fortunately it’s pretty easy!
Last week, we talked about why it’s important to keep your rental properties in an LLC. It keeps them separate from your personal accounts so in the case of lawsuits, it will keep your personal assets safe.
2 big reasons to keep everything separate:
1. Your rentals are separate from your personal assets, so your finances should be separate too. You’re already keeping your properties out of your own name, so keep your business’s finances separate too. If you don’t and a lawsuit comes, how can you prove which finances are yours vs. the LLC’s? When they are separate, it’s very easy to show the difference.
2. To show the IRS that your business really is separate from your personal finances. The IRS too is very interested in making sure you keep track of your finances correctly, and this also makes it very clear to them in the case of an audit or other issue.
I could go on, but hopefully this one is pretty obvious!
And fortunately it’s very easy to do! All you have to do is go to your local bank with your business license in hand, and ask the bank to set up an account in your business’s name with your name on it as well. They’re more than likely very used to doing this, so it shouldn’t be hard at all.
Most banks will have a debit card that comes with your account, and be sure to use this for any purchases rather than using any personal cards you may have.
While you’re at the bank, also open a savings account in the business’s name as well. We’ll be using this later, so go ahead an open one now. This will be key to not getting blindsided with yearly expenses such as insurance and property taxes.
If you have your HELOC and any future mortgages set up with the same bank, they can usually auto-draft any mortgage and HELOC payments directly from your checking account. Guaranteed way to not miss any payments!
1. With your business license in hand, go to your bank and open a checking and a savings account. Make sure it has both your business name and your personal name on it.
2. If necessary, ask for a debit card for the checking account.
3. Remember, keep your business finances separate from your personal ones! All expenses and any income should only be in your business account.