Why do I use separate bank accounts for the LLCs I manage? It’s simple: I want to know that one property isn’t using another property’s money.
In my opinion, different owners and different LLCs should have separate bank accounts. I reconcile the accounts every month, but I still don’t want Jim’s property funding Sally’s property—or the other way around.
Here’s why that matters. Suppose Sally’s LLC is short $1,000, one of its units is vacant, and the owner gives me 30 days’ notice to end management. If there’s no rent coming in and no separate account showing where the money went, Sally’s unpaid expenses could leave Jim’s property covering the shortfall. Jim may never get that money back.
Separate accounts make each property’s available funds easier to see. If Sally’s account has only $200 and the property needs a new water heater, I can tell her the account is short and request the needed funds before moving forward. I don’t have to take money from another owner’s account to cover the cost.
I currently maintain around 39 separate bank accounts through Enterprise Bank & Trust,(the best bank for management companies haves down) and I would gladly open 100 if that’s what it takes to keep the accounting clear. Owners can also request a copy of their bank statement. It’s their money, held and used for their property’s benefit. Shouldn’t they be able to see every transaction, down to the penny, if they ask?
Separate accounts, monthly reconciliations, and clear reporting help protect each owner’s funds and make it easier to answer a basic question: What money belongs to this property, and where did it go?