Yes, the LLC owns rental properties. All rents come in and all mortgages are paid out from the LLC’s checking account. There are a few side expenses here and there (directly to the business) and those are also paid with the LLC’s credit card and paid out from the LLC’s checking account.
No, it doesn’t charge me a management fee for the properties, although I suppose it easily could. The reason being, and this is the real problem overall, it doesn’t make enough money to barely break even. I know, I know, negative cash flow and all that. I’m working on it, but that’s not the point of this thread. Whatever the reasons, the end result is that the LLC needs some cash influx from somewhere. Initially, from a direct loan or capital or donation or being paid for something or whatever. With that money, more advertising leading to more property acquisition, more rental income, most likely selling of the negative cash flow property, finally positive cash flow. I’m trying to figure out how to get this done in the most simple, yet official way.
My thought process on “paying” the entity is that it handles all the administrative (paper)work of the rentals. Thus, since it functions technically as a property management company, I would interact with it in that manner. I thought that might be the easiest way to put money into the business.
you need to quit viewing the entity as "yours" and start running it like a business.
Ok, I'm trying to grasp this concept. With the LLC, I am the General Mananger and my wife is the Treasurer. So, how am I to distinguish the differences between me and "it", since I am the General Manager, President, CEO, CIO, CFO, employee, boss, secretary, cook, chef, busboy, bellboy, batboy, waterboy, etc. etc. etc. As far as I understand I am the business, i.e., it is mine.
Now, don’t go on and tell me that I’m a dumbass and don’t know what the crap I’m doing and quit trying to run a business when you can’t… ARGH! No one seems to hesitate in repeatedly alluding to that. I get it! That, however, does not help me achieve the goal of a proper business structure. The whole point of this thread and question is to get one step closer to that. At this point in time, when things aren’t that critical, I have the liberty of stumbling around to get all my ducks in a row. Therefore, when I do come to the point of necessitating a proper business structure, I’ve already gotten everything taken care of and I can smoothly move forward as opposed to running around like a chicken with my head cut off trying to last second everything and miss out on future opportunities.
Now, onto the S-corp. It didn’t make any money because it barely started in the last half of last year and I’m working on aquiring properties for it. Its long term goal is to have enough properties that real-estate is inventory as opposed to capital gains. Also, plans for it are to pay my wife’s salary (and eventually mine), HSA, kids 401’s (they will be employees), future employees’ salaries as growth occurs, obviously tax deductions, and anything else that comes along. Remember, I prefer to be ready to go ahead of time as opposed to last second’ing everything. Honestly, handling the necessities of a low activity S-corp don’t bother me really that much. I believe the reason why the S-corp isn’t more up and going is simply because it doesn’t have the advertising power. Thus, I wanted to put in a thousand or two and hit advertising with that. If, in the end of this year, things aren’t going that well, I’ll probably discontinue the S-corp next year and just stick with the LLC.
So, in summary, I need to put money into the LLC and S-corp. I want to do it as simple as possible. I want to do it as officially as possible. The LLC and S-corp are distinct in that they have specifics spelled out in their Operating Agreements/Articles of Incorportation (I hope no one asks me to cut and paste the entire things here for review; they’re both quite large :shocked ). Overall, the activites relate to real-estate, thus I figure money for advertising is a legitimate and simple first step to get experience for bigger steps later on. While they’re both less than 1 year old, I think it may be too late for startup capital since I filed the first tax return already and the IRS approved it and sent me check for the refund. That’s why I haven’t considered that possibility.
Now we keep going back and forth, back and forth in this thread. Is it truly such a :banghead thing to give my business $1000?? All I want to do is get $1000 from my wallet to my business’s checking account without having the IRS or Chamber of Commerce getting pissy at me. Isn’t there some form: fill it out, cut the check, file the form? Its not like I’m trying to smuggle cocaine in from Columbia! :anon From the way this thread is turning out, I could have an easier time buying marijuana downtown and be worried less about those legal ramifications. Haha!
Dean
P.S. Yes, I will re-read over the Operating Agreements/Articles of Incorporation and look for funding “instructions”. I keep forgetting each night as I get busy looking for real-estate deals. In any case, I’m still looking for people’s input, because if someone has a good idea, and its not already in my documents, I’d like to ammend it in.