Cash & LLC

General Real Estate Investing
1

I don’t see much info. concerning Cash & LLC.
Are their rules you should follow concerning the transfer
of cash from a saving acct. over to a new LLC.
Thanks.

2

What I’ve done is fund my LLC with $100 initially. The other money I’ve contributed is on a promissory note so the LLC has to pay me back that money and interest. The most important thing to avoid is comingling of funds. Set up a business checking account in the LLC name. When you have to pay expenses, use that account. If you don’t have enough money in there, transfer the money into the business account (and document it with a note) THEN pay your bill out of the business account. Likewise if you want to take money out of the LLC, write yourself a check to deposit into your personal account. Then you can use the money as you wish. Don’t pay personal bills from the business account and vice versa.

3

I open my business account with 1k to pay some business expenses.
But I have 50k that I would like to protect with my LLC.
What should I do.
Thanks.

4

Justin’s on the right track.

Manny: what do you plan to do with the LLC and $50k?

5

My new LLC will hold 4 R.E. investment properties and a few more down the line.
I don’t want to make it too easy for someone to see what I have. Also how do you shield savings from the public without going too crazy? I am just getting started so I am learning as I go.
Thank you.

6

If you want to protect the cash, then put it into something that has statutory protection, like life insurance or an annuity. Putting it into an LLC won’t do it.

7

So if I flip a property and I cash out $50K where do I hold the cash until my next purchase?
Switzerland? :banghead Eventually it’s going to grow to 1M. :smile (I should be selling life insurance
instead of R.E?):shocked Ok so where is a safe and practical place to hold cash, short term and long term while I am alife.
Thanks.

8

You can’t have it both ways. Either it is available for use in the business or it is protected from creditors.

9

So you are saying that having cash under my LLC is consider business use? And is not protected so keep only what I need at the time. Bummer. And how do you protect it (not) from creditor but (mischief lawsuits).
Thanks.

10

An LLC is an entity for conducting business and can only hold business assets. If it holds personal assets, then it will be ignored. The same rules apply to partnerships (limited and general) and corporations. The entity must conduct business and have a business purpose. Trusts are an entity that can hold personal assets.

Mischief lawsuits become creditor claims if the plaintiff wins. That’s when you need protection provided by entities. Up until that point, good business practices, strong ethics, and sufficient insurance provide protection. LLCs, etc. do not scare plaintiff’s attorneys nor do they prevent a lawsuit.

11

Ok, Thanks. I got it now.
Thank you.

12

HI, thanks for posting the question. I didn’t quite get it yet.

I am in the process of forming my LLC but would love to get accounting done right from the beginning…so I am absolutely not sure how to do the accounting (considering not to co-mingle funds)
-I will transfer a property into my LLC
-I have the loan in MY name not in the LLC’s name
-when I receive the rent checks I would deposit it into my LLC’s bank account and from there pay the loan? That is not considered co mingling?

  • Someone said on the boards when you have LLC expenses, have the LLC get a loan from myself personally and or lease the the rooms you are using for business from myself to the LLC. I am confused because the LLC has not income except for the rent check coming in and that is 0/0…

I am hoping that when I have come to grip with an overall concept I’ll be off to a better start.
If you know of a good website or book explaining this I would love to hear about it.

Thanks for your help .
Susanna

13

Susanna

Unless you have significant wealth outside of real estate, you don’t need an LLC or any type of planning other than a revocable trust and will. Grow your business and worry about an LLC when you actually have something that will justify the cost of real planning.

14

but to answer your questions:

That is not considered co mingling?

No, the LLC owns the property (and assumed the related debt); it owns the rent checks. the LLC owned rent checks are being deposited into the LLC’s checking account and used to pay the LLC’s mortgage on the LLC’s property. No comingling here.

Now, if the LLC begins writing checks to pay your personal car payment…

have the LLC get a loan from myself personally

loans to the LLC, as opposed to capital contributions, may provide some benefits (interest income, for example).

lease the the rooms you are using for business from myself to the LLC

this doesn’t work. while you can rent out rooms in your residence, this counts as rent income on your personal return, which negates all the benefits. mucho hassle with no benefit.

because the LLC has not income except for the rent check coming in and that is 0/

you’re confusing income with cash flow. they are not the same.