Hello all, I saw that Seth sets up one LLC with two different arms: A buying, and a selling arm. My question is, if you set this business account up at a bank, wouldn’t they be suspicious with the 2 DBAs under the LLC? Seeing that there will be a DBA with a different name?
I was thinking of using two LLCs, one for acquistion and one for selling. Any thoughts would be appreciated. How are others setting up there entities?Thank you.
I’ve set it up this way at a few different banks over the years and none of them have ever questioned it.
You could set up two LLCs if you want, but that would definitely complicate things. You would need two separate bank accounts, with two separate tax returns (or Schedule Cs) each year for each one, not to mention separate accounting files for each. You’d also need to establish a clear separation of roles between each entity and you’d have to be even more careful not to co-mingle funds between the two, among other things.
Sounds like an accounting nightmare to me… but if you decide to go down that road, keep me posted on how it goes.
Thanks for the feedback, Seth. That was just a thought from my inexperienced self. I think I’m going to set this up the way you described.
I’ve heard an attorney recommend having a separate LLC for providing financing to buyers. This is to intentionally keep the liability and accounting separate from the operations of the buying/selling LLC. Any thoughts?
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Interesting. Maybe?
Would the title need to be transferred to the new entity before selling it that way?
If not, would the second LLC loan the buyer money to purchase it from the first LLC?
I’m honestly not sure how that work. Maybe there’s some logic to that… but as you can tell from my questions, it would add some complexity.
Perhaps it would only be worth this extra effort for deals above a certain value threshold.
Good point…I was thinking about what to do if I borrow some funds, say 10K from a family member. Can that be written off as a one time gift, then send it to my personal account? Then, I would transfer the funds to my business account.??
That seems to be getting into CPAish territory. In other words, I don’t know or am not confident enough to give you a good answer.
Perhaps @North knows more about it?
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Well, you have many years of experience having your entity set up in the way you described. I plan to duplicate this. One LLC, and one DBA. I think when you describe the business model, it can come across as “shady” to an accountant. My CPA had a hard time grasping the concept initially.