THE LLC WEB NOBODY CAN EXPLAIN There are good reasons to hold rental properties in multiple LLCs. Separate entities may provide liability protection, segregate investors, satisfy lender requirements, or support an estate plan. Complexity itself is not the problem.
The problem begins when money moves among those entities, and no one can clearly explain why. Here are some examples:
A property LLC pays a management company controlled by the same investor.
One entity lends money to another without a promissory note, repayment schedule, or recorded interest. A related construction company performs renovations for several properties. The owner pays a property expense personally, but the transaction never reaches the property’s accounting records. Each transaction may be entirely legitimate. However, each one should have a clear business purpose, supporting documentation, and consistent treatment in the accounting records of both entities. If one company records an intercompany loan receivable, the other company should show the corresponding payable. If one entity reports management fee income, the other entity should generally record the corresponding expense. Those balances should agree.
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