Question:  You have formed most, if not all, of my LLCs over the years and I am grateful for the efficiency, cost and professionalism.  I do have two quick questions.

  • Is it best to have rentals each in their own LLC or is okay to have them all under one?
  • What is best practice for banking? Is it best to have a separate account for each for the sake of liability?

Answer:  The reason you want multiple LLCs to operate multiple businesses or own multiple real estate properties is because you don’t want all of your eggs in one basket.  You know what happens if you drop the basket.  You get the same result if one business or property causes a lawsuit against the LLC and there is a big judgment that exceeds the insurance – you lose all your eggs, aka businesses or properties.

A fundamental rule of LLC asset protection is that each LLC must have its own bank account into which its income is deposited and from which its expenses are paid.  Each LLC also needs its own books.  If you break this fundamental rule and a lawsuit is filed, a court is going to rule that because you are treating the LLCs as if there is only one LLC the court will do the same and allow all of the assets of the LLCs to be reached by a creditor of one of the LLCs.