You paid one rental LLC's bill from another LLC's account: how to fix it
Do not leave it as it is, and do not quietly edit the books. Record what happened: the LLC whose account paid the bill lent money to the LLC that owed it, so book a due-from entry on the paying side and a due-to entry on the owing side, then settle it with a transfer back, or document it as a capital contribution if that was the intent. The goal is that each LLC's books show its own expenses and its own cash, with the cross-payment visible instead of hidden.
Why it matters when one LLC pays for another
If two buildings are in two LLCs, each LLC is supposed to be its own business with its own money. A plumber who fixed a leak in Oak Court and was paid from the Elm Street account leaves two sets of books wrong: Elm Street shows an expense it never had, and Oak Court is missing one.
There is a legal side too. Courts looking at whether to hold an owner personally responsible for an LLC's debts can look at whether the owner kept the entity's money separate. The Legal Information Institute explains the idea under piercing the corporate veil. One slip, fixed and documented, is very different from a habit of mixing funds. Ask a local attorney about your state's standard.
Three ways to treat the payment
| Treatment | Elm Street (paid) | Oak Court (owed) | When to use it |
|---|---|---|---|
| Loan between LLCs | Due from Oak Court (asset) | Due to Elm Street (liability), and the expense | A one-off mistake you will pay back soon |
| Contribution and distribution | Distribution to the owner | Contribution from the owner, and the expense | The owner meant to put in money |
| Reverse and repay | Receives the money back | Pays the vendor from its own account | The cleanest, if the vendor will cooperate or the money can simply move back |
For a small amount you will repay within days, a documented loan is the usual fix. For anything larger or lasting, talk to your tax preparer and attorney, because a loan between LLCs should have a written note and sensible terms.
Steps to fix it
- Find the transaction in the paying LLC's bank feed and note the date, amount, vendor and the property the work was for.
- Code the expense to the LLC that owes it, not the one that paid. Attach the invoice.
- In the paying LLC, record a receivable (due from the other LLC) instead of an expense.
- In the owing LLC, record the expense and a payable (due to the other LLC).
- Move the money back by a bank transfer, with a memo naming the invoice, and record it in both books. The receivable and payable then go to zero.
- Write a short note in the books about what happened and why. If it is a loan that lasts, sign a simple promissory note.
Example a made-up repair for Oak Court costs $850, and it was paid from the Elm Street account. Elm Street records a $850 receivable from Oak Court, and no expense. Oak Court records $850 of repairs and an $850 payable to Elm Street. When Oak Court repays $850, Elm Street's receivable goes to $0 and Oak Court's payable goes to $0. Each LLC's repairs line is now right, and the cash is back where it belongs.
How to stop it happening again
- Pay vendors only from the account of the property the bill is for. Put the property name on every invoice.
- Do not use one debit card for several LLCs. Give each LLC its own card.
- Reconcile each bank account monthly. A cross-payment shows up as an expense you cannot match to a property.
- If you must move money between LLCs, do it on purpose: a logged contribution, distribution or loan, with a memo.
- Review the "due to" and "due from" balances at each month end. They should be zero or explained.
How DoorKeeping handles it
Each property in DoorKeeping has its own ledger and its own bank account. If a bank line from one LLC's account is coded to another LLC's property, DoorKeeping flags it and proposes the due-to and due-from entries for you to approve in one tap, instead of posting it silently. Money never moves between two LLCs' books without an explicit, logged contribution, distribution or loan.
At month end, the close checklist lists any open balances between LLCs. You can ask Claude or ChatGPT "do any of my LLCs owe each other money" and get the list. Rent and payments stay in your own bank accounts. DoorKeeping never holds your money and sends a payment only when you approve it. The price is $2 per unit a month with every feature included. DoorKeeping gives no legal or tax advice; ask your attorney and tax preparer how to document an inter-company loan.
Sources
- Legal Information Institute, Piercing the corporate veil, read Oct 30, 2026
Questions
- Is it illegal to pay one LLC's bill from another LLC's account?
- It is not a crime, but it blurs the separation that an LLC depends on. Record it properly as a loan or contribution and avoid making it a habit. Ask a local attorney about your state.
- Can I just move the money back?
- Yes, and for small amounts that is often the cleanest fix. Record the repayment in both sets of books so the receivable and payable cancel out.
- Should the expense be on the LLC that paid or the LLC that owed?
- On the LLC that owed it, because it is that property's cost. The paying LLC records a receivable from the other.
- Does this change my tax return?
- If each LLC is a single-member LLC reported on your Schedule E, the expense should appear under the correct property. Your tax preparer can confirm.