Quick Books

[TMCG]

wow.  

okay so i've spent about $950 so far (start up):
LLC forming - 500
Stationary -   250
Quick Books- 200

Do I open up business banking - then just deduct money to pay myself back personally, then claim expenses this way at the end of the year/quarter....

I mean I'm going to ask my CPA anyway, but I figured I'd post for sh*ts and giggles...  

[TMCG]

oh yeah....umm HELP!!!

QuickBooks is scary!

 :

[JeffInCT]

Quicken for 59 bucks is more than sufficient for tracking properties.
Can you return quickbooks?  It's overkill.

What are you doing?  Do you have money coming in?  If ther is no income initially, I would avoid he cost of business banking.

You can track your expenses on a separate personal credit card or bank account.  Then, when you have some income, you present a statement to the llc for payment.

Or, you could loan the llc some money and work off that through the business account.  You would create a quickbooks liability account called owner loan to track the money you put in or the money the company paid you back.

 
SO....
What is with the LLC anyway?  If a newbie has no significant assets and their first properties are fully mortgaged, do they really need an llc?

State farm sells an insurance  policy that incudes plenty of personal liability insurance.

Do people just like the idea of owning a company?  Because I just like owning property.

[mcwagner]

I commend you for doing it right from the start.

Owning property in your own name is like painting a target on your forehead.  Think your liability insurance is enough?  Wait till little Suzie slips and falls on that loose board and breaks her neck.  Your million dollar umbrella isn't going to touch the judgement Mama's going to get on you and everything you own is at risk.  But I digress.

1.  Fund your LLC.  Make a $100 capital contribution.  Then loan the LLC operating funds.  Execute a promissory note, make payments, interest, the whole deal.  Keep everything arms length.

2.  Fill out an expense report and have the LLC reimburse you for the expenses you have incurred.

3.  If the LLC needs money, loan it money.  Don't pay LLC expenses personally.  If you do, then submit an expense report and have the LLC reimburse you.

4.  If you need money, take a distribution.  Don't pay personal expenses from the LLC.  Write yourself a distribution check, deposit it in your personal account and pay your bills from there.

5.  When you buy a property, buy it in the LLC.  Lenders WILL do this; though some may require a personal guarantee.  The point is that the LLC owns the property, not you.

All this is to avoid "comingling".  Treat it as a business, not your personal play fund.

You can look to other posts for more info on why asset protection is vital and why the LLC is a good route to achieve it.

[propertymanager]

TMCG,

Very good start!!!  If you've decided to run a successful REI business, then I think that you're on the right track.  Next, I would recommend getting some education on LLCs and accounting.  This doesn't have to be a big production, but you can read some books to get an idea how things should be done.  Accounting for Dummies and Quickbooks for Dummies are both good (and inexpensive) books about Quickbooks.  Setting your accounting up correctly from the start will position you well for the future.  

LLCs are not just for asset protection.  LLCs can own things and give you big tax advantages.  Typical people with a job receive a paycheck from which taxes have already been deducted.  People pay taxes on gross income.  They then spend the remaining after tax dollars on whatever they like.  Companies can buy things with pre-tax dollars.   Companies recieve income, buy things with pre-tax dollars, and then are taxed on what is left.  BIG DIFFERENCE!!!

For example, let's say that you need a new car.  You can spend your own money on the car -  OR  -  your LLC can buy the car.  If you buy the car, you are spending after tax dollars.  If your LLC buys the car, your LLC gets to depreciate the car and the interest is deductable.  In addition, if your LLC buys the car, the LLC will get to deduct the gas, insurance, and maintenance as expenses.  WOW!

So, you could operate as a individual and throw away your money in excess taxes or you can have entities and  keep a lot more of your money!

Also, I agree with everything that MCWagner said.

Mike

   

[marcus335]

Wamu has free business checking, no minimum balance.  You just have to pay for the actual checks but they are cheap.  I'm not sure if you're in a state that has them or not.  I'm sure there are others though.

[Bluemoon06]

Wamu has free business checking

I open a separate Washington Mutual account for each of my houses.  I have each of these accounts color coded (the color of the basic safety paper checks that go with that account) I deposit the rent payment from each house into its individual free checking account.  After the check clears, I transfer the fund via computer into my master business account (my yellow account) and pay the mortgages and expenses out of it.  That way I don’t bounce checks from my account if the tenant pays with a rubber check.  The yellow account allows me to clear each individual account into a place that I can see where the money is.  Wamu also has a great website that allows you to track the payments and when they clear.

[TMCG]

WOW.

Where do I begin.  Okay, I'm telling myself - keep it short and simple.

First, I want to say that I am continually amazed at the generous offerings of information that are exchanged on this site.  The exchange of knowledge is incredible.

Second, here's the plan:

I am going to open up my biz account by making an initial contribution as the 1st (and only) partner of the LLC.  

I will then lend the LLC money minus the expenses I have incurred already ($950 start up funds) So If I lend the LLC $5000, I will actually be placing $4050 in the account - the note will indicate the expenses already incurred...

  Question:  A promissary note - since I am essentially both entities, the lender and the borrower - how is the promissary note initiated.  I have a general copy of a prom note that I can fill in...do I register this note anywhere...officially?

That's for starters...

Now, as I take on a partner or two...I will then

As the lender - discount the loan back to the LLC as a portion of my capital investment - giving me equity financing as opposed to debt financing.

Again, question - do I have to officially record the promissary note anywhere?  

I want to get these....seemingly...simple pieces of the larger puzzle out of the way.  Guys...and gals, I am retraining my mind to think like an investor/business owner - I appreciate your patience with anything silly I say and I truly appreciate your free, yet PRICELESS assistance.

 

[mcwagner]

the note is between you and the LLC.  you sign as you, and you sign as manager of the LLC.

you would rather be a creditor than have equity.  something bad happens and you can't get equity, but you can pay off liabilities (you).

nowhere to file.  keep it in your records.

[farting_thru_silk]

   I WAS JUST LAYED OFF FROM INTUIT!!!

    With that said you actually need Quickbooks for Profit and loss just Bulk entries for the other program, bottom lines if u will...

and Quicken Rental Property manager for your houses.. its pretty cool it tracks rent payments and expenses quite easily (although you can bend quickbooks into shape++   Its actually pretty cool, which should mean a lot coming from someone recently laid off by Intuit, the company that makes it!!!

http://quicken.intuit.com/commerce/catalog/product.jhtml?lid=left_nav_no_rollover&prodId=prod0000000000008003301



IF u need any other advice on QuickBooks i'm up to my ears in the sh*t!!


Eric   8)


++++  what you do is you set up your properties as jobs, and ur tenants as customers.. therefore you can determine profitibility..
equity would be done seperately in excel and added in portion into an asset account....

[farting_thru_silk]

WOW.


Question:
I will then lend the LLC money minus the expenses I have incurred already
Answer:
I GUESS U R TRYING TO TRACK THIS IN QBOOKS??

There are a few ways to set this up,  the easiest way is to set urself up as a credit card and apply ur apr to the card rate,  this allows it to properly show up as a liability as apposed to asset as u spend the money!

Secondly you could draw from an owners equity account and the do a Jounal entry at the end of each period for the finance charge..

THe first one sounds better to mE!
Question:
 - giving me equity financing as opposed to debt financing.
Answer:

I would say a JOURNAL ENTRY you could charge it on the Credit Card which is YOU  ???  and then debit  owners equity as u pull it out @ a direct loss....
 
Question:
Again, question - do I have to officially record the promissary note anywhere?

Answer:

From a tax standpoint (NOT A CPA)  i Believe that interest you pay yourself would fall on your personal income statement!
   

But you definately WANT TO RECORD and understand the liability of the amount of money you owe yourself in order to, determine profitability and MORE OVER make sure u r getting paid!


Any other ideas??  


 :)

[TMCG]

how do i track member contributions on quick books?

basically i want to set up member accounts.

i got the part about making tenants "customers" and rent money part of accounts receivable, but

i can't seem to figure out how to track each members equity in quick books...i want to be able to track this so i know who gets paid what, based on their contribution amount.

my cpa told me not to worry about all the stuff about loaning money to the company etc. etc.  

i see where you guys are going with the whole liability and asset thing - it is a liability to me, especially since, right now, i'm the only member and i'm not making any money!  

however, given what i wrote above, about member accounts - i would rather the money i put in, be my contribution, as a member - and not a loan.  make sense?    
don't forget, help me with the whole member account issue...

[TMCG]

so, i contacted Quickbooks (free 30 day call center with purchase).  they walked me through setting up member accounts and i see where you were going with the assets liabilities thing.

they had me set up my member contributions in chart of accounts, under Equity type.  You're saying i should have this under liabilities, in order to....?

[mcwagner]

Loan the LLC money rather than make a member contribution.  here's why:

tenant slips and falls, breaks her neck, sues, you lose.  Tenant gets a charging order against LLC income.  Now LLC cannot make a DISTRIBUTION to member; it goes to rubber-neck instead.  However, the LLC is not prohibited from making DEBT PAYMENTS.  This is how you get your cash out of the LLC and frustrate the adversary.  

It's no more work, creates no bookkeeping hassles and means NOTHING unless something bad happens.  All upside, no downside.  Tell your CPA I said he's a quack.  Hell, give him my email address and I'll tell him myself.

Now, how to do it.  

#1 Write a check for $100 to the LLC.  This is the "member contribution" called "funding" the LLC and it's important for legal reasons.  debit cash, credit member's equity. done with that.

#2 Write another check for however much you want to loan the LLC.  execute a promissory note: interest, payment due in five years or whatever (must be a specific date or "date certain"), the whole deal between you and the LLC.  Put it in a file.  debit cash, credit notes payable.  done.

#3 go about your business.

when the LLC makes money and you want some. pay off all or part of the note.  done.

questions?

[TMCG]

why do i get the funny feeling like i'm in a Nextel commercial...  :D

okay now i understand you.  H  O W E V E R...

in quickbooks, i will have to change the type of account to a liability, correct? - accounts payable.

i will make the note payable May 30, 2011.

And when I loan it more money in the coming weeks (the big "loan", I will date the pay off date 5 years from that date.

In quick books, for my records, change the type of account to a fixed liability or long-term liability?

and for my CPA, i will give him a copy of the promissary notes?
or does he not need them?

when you say debit cash...this means?  

and for my contribution, i'll write a check to LLC, and credit this to Equity - member contributions.

My bank statement will be ...i.e. 10,000    but my financials will look like:

Equity                                        Liability
100                                            9900