LLC And Rents Collected?
If we form a LLC and put our rental properties into it, do the tenants still pay us personally for the rent, or is the check made out to the LLC? If it is paid to the LLC, should we have a separate bank account in the LLC name? Thanks.
If you want the liability protection intended by the formation of a separate entity and the transfer of your property to that entity, you need to treat the entity like it exists separate and apart from you personally. Here is a common sense test: if you sold your property to a real person or business you did not own, would they still want the rent checks to be payable to you? Obviously not. They would insist that the tenants pay them all rents coming due after they acquired the property. Therefore, you should make sure your tenants are notified that they must pay rent to the LLC which owns the properties. Collected rents should go into a a separate LLC bank account. Expenses related to the LLC property should also be paid out of that LLC account. By the way, always remember that the first line of defense against liability is not the LLC--it is your insurance policy. Make sure your insurance agent knows of the transfer to your LLC, and make sure the coverage limits are sufficient to protect your equity.
all payments need to be made to the LLC. the LLC should have a bank account and a separate security deposit account for all your transactions. you are risking your corporate veil to do it any other way.
ACTUALLY...and someone can correct me if i am wrong...the validity of your corporation can be called into question if you do not have a bank account set up for it anyway.