Business basics: How to open an LLC bank account

One of the most important moves after you've formed a limited liability company (LLC) is to open a separate bank account for your LLC.

Having a separate bank account is required by law because a limited liability company is a separate entity from you as an individual. You have provided yourself with liability protection by creating an LLC, and in order to enjoy the limited liability protection, you must keep your personal accounts completely separate from your business banking by opening a new account for an LLC. If you mix your personal and business finances in your personal bank account, you are in danger of losing those limited liability protections and could be liable for your business' financial obligations.

Why a business account protects you

When you open a bank account for an LLC, not only are you following the law for limited liability companies, but you are also protecting your personal funds while making it easier to run your business.

Having a separate bank account for your business funds means:

• You will signal to clients that your business is legitimate and that you have taken the time to set up a separate entity. Your business is not merely a hobby, and you want your customers to know that you are running a business you plan on operating for the long haul rather than while you're in between other pursuits.
• Either you or your accountant won't waste billable hours sifting through all of your expenditures to separate business expenses and personal finances when it is time to file taxes.
• Should a time come when you would like to utilize credit with your bank for your business, you have an established account with a positive history, making you an ideal borrower for your bank.

How to open a business account for your LLC

Opening a business account is a necessary step for most LLC businesses, but it is a fairly simple process. Small business banking services like Novo allow you to apply in minutes for a free checking account. Regardless of which institution you choose, ensure a smooth application process by checking their documentation requirements prior to applying.

Gather the necessary paperwork and information

The first step in opening an LLC bank account is gathering all necessary documentation and information needed by the bank. While there may be some variation by bank, generally speaking, you will need the following documents in order to open your account:

• Personal identification and information: When opening a bank account for your LLC, you will also need to provide personal identification and details such as your driver's license or passport, your home mailing address, date of birth, personal phone number, your email address, and also your Social Security number. If you are a non-US resident, you can provide your individual taxpayer identification number (ITIN), which is a tax processing number available to certain non-US residents.
• Employer identification number (EIN): While sole proprietorship LLCs may use the owner's Social Security number (SSN), any company with employees will need to have an EIN. If you are the only employee of the company and are operating it as a single-member LLC, you may still obtain an EIN in order to protect your identity. You may need an EIN verification letter to provide to your bank.
• Business details: The bank will need your company name, the address of your registered agent, phone number, the date your business was formed, and also what type of business and industry it is.
• Business license: You will need to provide proof that you are licensed to conduct business if your industry requires it.
• Business formation documents: For an LLC, this may include your business name reservation form, articles of organization, and any other documents related to your business' formation. Make sure to check with your institution in order to provide the proper documentation.
• LLC operating agreement: If you are not operating as a sole proprietorship, you will need to provide documentation that you are authorized to open an LLC bank account on your business' behalf by sharing your operating agreement. Additionally, if there are other LLC owners of the business, they may be required to apply for the account with you.

Research your options for opening an LLC bank account

Your business has wants and needs unique to you, and your choice in banking should reflect the current state of your business as well as your plan for growth. As you begin your search for the right bank, here are some banking features for all LLC members to consider:

• Service fees: When choosing which bank best fits your LLC, consider any service fees associated with doing business, such as payment receipts, ATM fees, and wire transfer fees. Depending on the types of transactions your business will be making, these fees can add up and become a burdensome expense for your business.
• Monthly transaction limits: Depending on your monthly transaction volume, these limits may end up costing you additional monthly fees.
• Interest rates: Many business checking accounts do offer interest, but these rates can vary greatly. Interest rates should be a factor in which bank you choose. Some interest rates may be dependent on the type of business account as well as the minimum balance, so be sure to read all of the qualifications for the best interest rate possible.
• Banking services: Research other offerings for your business, including lines of credit, small business loans, and any additional business services provided alongside a business bank account.
• Technological integration: You'll have preferences as to which technology you utilize for your business, whether that be Quickbooks, Venmo, PayPal, Zelle, or any other payment services and accounting software. Make sure you choose a bank that will allow you to continue using these tools.
• Digital features: Many business account features should be able to be accessed online through a banking website or app.
• ATM and local branch access: Depending on your specific business, you may have in-person needs such as frequent cash deposits or the ability to withdraw funds that require a traditional bank with physical branches. In that case, a brick-and-mortar option will be a priority for your banking needs.
• Minimum balance requirements: Most business accounts do not have hefty opening balance requirements, but you should always know if there is a minimum balance required to maintain your business account. On average, minimum business account balances range from $5 to $1,000.

Details you need to apply online to open an LLC business bank account

There are many online banks available for businesses, and you can open an LLC business bank account without leaving your house. There are some limitations to opening an online-only bank account for your business, such as having a multimember LLC, but each bank's website will make these requirements clear as you explore the possibility of an online account.

In order to open an LLC business account online, you will need the same information needed to open a business bank account in person. You will be asked to upload these documents through the bank's secure server. Finally, you will need the funds to deposit the minimum balance required for opening your LLC business bank account.

What business owners should know about opening an LLC bank account

When opening your LLC bank account, whether in person or online, you will want to make sure that all of your business' needs are addressed. Most banks use enticing perks in their advertising, but the fine print may not hold up to your scrutiny. For example, perhaps you've discovered an online banking institution with an incredible annual percentage yield (APY), but the minimum balance is $100,000 in order to receive that APY.

Many banks also offer 1% cash back for each business debit card purchase, although some banks may restrict this benefit to a limited number of merchants. If you don't frequent those businesses for your company or even plan on using a debit card frequently, this is not a benefit that should influence your choice of bank.

When choosing a banking institution for your LLC, you should also explore options for both checking and savings bank accounts. Make sure you familiarize yourself with your options in banking and choose the institution that best serves your business. Remember, however, that if you are ultimately dissatisfied with the bank you choose and it is no longer a good fit for your business, you can always revisit your decision and move your banking elsewhere.

Sharing and selling personal information

When you open a business bank account, you provide the bank with a lot of personal information. What you may not realize is that some of that information may be shared with third parties. While a bank may not share private information such as your Social Security number or your income, other information can be shared for marketing purposes.

Banks collect your personal information in order to determine your eligibility for their services, but they also use this information in other ways. And while there are some exceptions and opt-out possibilities, there are no blanket opt-out options for individuals and businesses. Additionally, any time you access your banking website or app, your bank can gather information about your web browsing history, your social media, and even the type of device you are using and where you are using it. This information is meant to help the bank prevent fraud, provide better service, and also to adjust its advertising.

How LegalZoom can help

Once you have chosen a bank for your business, you will need a service to manage all of your accounting needs. LegalZoom offers LZ Books—accounting software to manage your small business finances through tracking your income and business expenses, invoices, and payments, all in one centralized location. LZ Books securely connects with your business bank accounts and also creates invoices, and sorts your finances into tax categories, making tax season much simpler. If you are also an LZ Tax customer, LZ Books shares your financial information seamlessly across these services. Affordable subscription plans for personalized services are a part of LegalZoom's small business solutions.

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