Suppose you've decided to open a limited liability company (LLC) to separate your assets from the businesses.
In that case, one of the critical steps you'll need to take is setting up a business bank account. A separate business bank account is necessary for depositing customer checks, paying business expenses, and projecting professionalism.
A bank account in the name of your LLC also makes it easier to calculate taxes and project credibility when paying vendors and suppliers with a check in your company's name.
In this article, I'll share with you what you need to consider when opening an LLC bank account.
Opening A Bank Account For An LLC
Here are the main steps to take when opening an LLC bank account.
The first step is researching which type of bank you'd like to use for your LLC account.
Generally speaking, there are two types of banking institutions: brick-and-mortar banks and online banks. Brick-and-mortar banks have physical locations where customers can deposit checks, communicate with customer service representatives, or access their accounts via ATMs.
Online banks don't have any physical locations but offer great incentives, such as higher interest rates on specific accounts or no fees on certain transactions. You'll have to decide which type of institution best suits your needs and research the costs associated with each option before making a decision.
When establishing an LLC, you must provide documents proving your business entity's legitimacy. The records required will vary by state but generally include Articles of Organization, Operating Agreement, EIN (Employer Identification Number), and Certificate of Good Standing (or similar document).
Ensure you have all the necessary documents before visiting a brick-and-mortar location or submitting an application online.
Having these documents will help speed up the process significantly. Also, keep a copy of these documents if you need them again.
Open Account & Manage Funds
Once approved, manage funds responsibly by keeping personal funds separate from the company's; this is essential for maintaining limited liability protection. Additionally, be aware that if your LLC has multiple members (owners), each member will need to open an individual bank account in the name of their LLC.
Owners do this to ensure that all income and expenses associated with their share are tracked accurately. Finally, reconcile accounts so that one can identify any discrepancies quickly and easily regularly.
How To Choose The Right Bank
Researching different banks and comparing their features is crucial when opening up an LLC bank account.
Types Of Accounts
Look at what types of accounts they offer and what services are available to them. Ensure you read through the fine print regarding any fees or annual charges associated with the account.When choosing a bank, it's essential to inquire about minimum balance requirements. Certain banks require a certain sum of funds be maintained in the account each month so as to dodge monthly maintenance fees.
Another thing to consider is whether or not the bank offers online banking services. Many banks now offer online banking, making it easy to check your balance, transfer funds between accounts, pay bills online, and more—all from the comfort of your home or office. If you often travel for business purposes, look for a bank that has locations near where you travel so that you can make deposits and withdraw cash without having to drive too far out of your way.
Every bank will charge fees related to their services – make sure you read through each fee structure to compare and contrast each bank's offering accurately. Additionally, some banks may offer discounts for more extensive deposits or businesses that always keep the minimum balance in their account.
When it comes to your business finances, security should be a top priority. Make sure that the bank you choose has state-of-the-art security measures to protect your funds and that they provide fraud protection services.
A business account should offer more than just basic checking and savings accounts; it should also provide products like business loans, investments, and other services tailored toward small businesses. Ensure that the bank offers support for special needs such as payroll and employee benefits administration, credit card processing services, merchant services, and more.
Having excellent customer service is essential in banking—after all, having someone there who can answer all your questions is critical. The staff at your local branch (if going with an offline option) should also know about the bank's various products to help educate you on which ones might suit your needs.
Location And Hours
When selecting a bank for an LLC, consider how convenient it will be to access your money when needed. Most banks offer online banking, but some prefer visiting a physical branch location.
Also, look into what hours the branch locations are open so that you don't miss out on any transactions or deposits due to timing issues.
What Document Should I Take With Me To Open A Bank Account?
Banks require certain documents before opening an account, so you must be prepared when you go to the bank. The most important document you will need is your LLC's articles of organization, certificate of formation, or equivalent document. This document serves as proof that your company is registered and approved by the state.
The bank will also need your LLC's federal taxpayer identification number (EIN). This number can be obtained from the IRS website and should be kept on file at all times.
Another vital document to bring with you is the operating agreement or some other document authorizing signature on behalf of the LLC. This document shows that you have the authority to make financial decisions on behalf of the company and serves as proof that you are authorized to open a bank account in the name of the LLC.
It is also essential to call ahead and speak with someone at the bank beforehand. They may have additional requirements not listed here, such as copies of personal identification cards or proof of address. It's better to be safe than sorry, so make sure you call before opening an account.
Who Should Apply For An LLC Bank Account?
The first step when opening a bank account for your LLC is deciding who will apply.
The applicant should either be an owner of at least 25% or more of the company or an authorized officer such as the CFO. In some cases, you may also be able to use an agent who will act on behalf of the LLC — but make sure they have full authority and legal rights.
When applying for a bank account for your LLC, remember that many banks will run a credit check on all applicants — including authorized signers. This is done to protect both parties from any potential risks associated with fraudulent activities or mismanagement of funds. So make sure everyone listed on the application has their personal credit information available.
Once you've decided who will apply and what documents are needed, it's time to determine which authorized signers should be allowed access to the bank account. Authorized signers are allowed to sign checks and other financial documents on behalf of the business. Make sure everyone listed as an authorized signer knows their responsibilities.
In addition, establish what they can sign for financial records to avoid any issues later.
How To Open A Bank Account With An LLC If You're Not In The Us
If you visit the US, you can open an LLC bank account at a bank's physical branch in the state where your LLC is registered. If your LLC were recorded in New York, you must travel to New York and open an account at a local bank. It's important to note that some banks may require additional documents like ID proof and other records related to your business.
If traveling isn't an option, then using an online bank will do the trick. This option offers many advantages over traditional banks as it doesn't require a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) and does not need a US address.
The Benefits Of Getting A Business Debit Card For Your LLC
Business debit cards provide more control over finances than personal accounts do. This is because the account holder must approve each purchase before it goes through, which helps prevent unnecessary spending and provides accountability for how money is used. Additionally, funds can be transferred from the account to other accounts quickly and easily, which makes it much easier to manage cash flow.
Business debit cards have enhanced security features such as two-factor authentication or chip-and-pin technology to help protect against fraud and unauthorized transactions. This added layer of protection can give owners and employees peace of mind knowing that their finances are safe from potential scams or cyberattacks.
Another great benefit of having a business debit card is access to rewards programs. Many banks offer cash-back rewards on purchases or travel rewards points.
With these types of rewards available, businesses can get the most out of their spending while still controlling costs and staying secure online.
Using Regular-Sized Checks Are Best For Your Business
You'll need to purchase checks when opening up an LLC bank account. I suggest not starting with check #001 - this could give your business an amateur feel. Also, most banks will try to sell you 'special' checks that are bigger and come in a bulky binder—but unless you need to run them through a printer, regular-size checks are acceptable.
Regular-sized checks offer several benefits for businesses. First and foremost, they're more affordable than bigger ones—which can save your company some money in the long run. Additionally, they take up less space in the checkbook or binder, making them easier to store and transport. If necessary, you can always print out more extensive checks.
Another benefit is that these standard-sized checks often have simpler designs than the enormous variety. This may make them appear more professional when paying vendors or other businesses. It also makes it easier for people on both sides of the transaction to read the critical information, such as payment amount, date, payee name, etc.
Finally, since these types of checks tend to be smaller than the fancy ones sold by banks, they fit better into envelopes, so they can be sent via mail if necessary.
Opening A Business Bank Account For LLC: Should You Use SSN Or EIN?
If you choose to use your SSN for your LLC's bank account, be aware that this could open you up to potential liabilities. This means that if one took any legal action against the company, creditors or other parties could access your personal information from the bank.
Additionally, when filing taxes, it can be more challenging to differentiate between personal and business income and expenses since they flow through the same account. Banks may require additional documentation, such as tax returns or financial statements, before allowing you to open a business account using your SSN.
An EIN is essentially a tax ID number assigned by the IRS for businesses that file taxes or hire employees. It is highly recommended that you use this number when opening a business bank account so that any transactions running through the report can be tracked more quickly and not confused with your finances. Furthermore, having an EIN protects your privacy since it prevents third parties from accessing information about your identity or credit score.
If your LLC was formed by following all of the necessary filing instructions, it should have received an EIN from the IRS. If not, you can apply for one online through their website; however, it may take up to 6 weeks before you receive confirmation from them.
Opening a bank account for your LLC is essential in getting started on this exciting venture.
With some research and careful consideration, you'll be able to find the perfect banking solution for your business needs.
Armed with this information, you'll be able to confidently open a new LLC bank account without any stress or worry.
Further reading on MikeVestil.com: Want to start an LLC in a specific state?
Here's information on three distinct states:
Furthermore, here's information about the finances involved in various states: