Business Plans And Questions?
I have a few questions or some ideas to throw around.
I am about to buy my first rental property, or move into the new house and rent my current.
I have began to build my team, I have a finanical planner and good real estate agent, a attorney that I'm going to meet with next week and a accountant. However, my reason for this topic is simple.
When should I consider my rental a business.. I mean I know I have to few it like a business from the beginning. But when do I go to my accountant and go, hey I want to make my rental a business.. 100% alway in a different account... I want to pay myself a paycheck from the business and I want to state getting check made with my trademark etc.
Is there a point when I should change gears in my mind. Or just keep track of my bills etc.
How do my taxs and expenses work?
Any expenses record and when I do taxes in the beginning of the year tell them?
How do I tell my income from the rental units... the profit or the rental payments that come in every month? Then is the expense the mortage payment?
I guess I am asking, I want to start right and do everything I can to get on track. So what are the steps I need to take.
Thanks for all the replies.
Justin
When do you want to start keeping separate records & accounts? DAY 1! As I've said in previous posts, do you really want to dig through a year's worth of statements & receipts at tax time? I try to keep it simple and have just a separate checking account and credit card (one that gives me a year-end summary). As far as paying yourself, it's a moot point for tax purposes since you're taxed on the entire net income of the rental. What makes up net income? Your accountant can answer that or a good place to start is IRS publication 527.
I'm on Conti and Finkel's email list; they say every time you close on a property and/or have a tax-impacting event, you should send the info to your accountant. 'Course, they can afford to do that...I don't have a bus plan (and won't; I'm too much of an anarchist), but I have separate envelopes for the pertinent transactions for each property I've bought so far. I opened a business account the other day, but it's actually a "free checking" personal account with a company name slipped in below my name.
My point is, you can obsess about details of the business, or you can stay a little relaxed about it and at least keep the records where you know where they are. Then next year (after one income tax cycle; I've not had one yet myself), I suppose a more organzied system will be in order. I'm looking forward to kicking myself about not doing it sooner, because that means I'm doing something right. Makes sense to me, anyway...Good luck!
So i need to get a checking account for the buiness... but how do I put a name on it... Doesn't it have to be my name on that account? How do I get a business account setup?
Go to your local bank that you deal with. Explain your intentions to them. They will guide you.
There is a difference in the fees and bank charges between a business checking account and a personal checking account.
There is no limit to the number of personal checking accounts you may have -- even at the same bank. At my bank, I have three checking accounts.
There is no prohibition against reserving a "personal" checking account for your rental property activities. Call this a personal account which serves a "business" need.
I run all the checking account activity for all my rental properties through one account. I have the checks in my property management account labelled as follows:
My name on the first line
Property Management Account on the second line
Street address on the third line
City, State, Zip on the fourth line.