Bank Account For LLC: Everything You Need to Know
Opening a bank account for your LLC allows you to keep your personal and business finances separate. Additionally, holding a business account for your company can lend to the overall credibility of your company. 3 min read
Opening a bank account for your LLC allows you to keep your personal and business finances separate. Additionally, holding a business account for your company can lend to the overall credibility of your company. Here are the things all business owners should know.
Open an LLC Bank Account
One reason many business owners choose to structure their company as an LLC is due to the level of financial protection they offer to their members. Owners and business members of an LLC are not considered to be personally responsible for any debt the company may accrue. This protection only goes so far in a legal situation, however, if members are unable to prove adequate separation between business and personal finances.
One of the best ways to establish this separation is to establish a bank account for your LLC, keeping the company's finances separate from yours and any other LLC members. In fact, this should be one of the first things you do once you have formed your company and registered your LLC with local authorities.
Failure to create a separate business account for your company is known as "co-mingling" your financial assets. In these cases, a judge can easily find you to be personally responsible for any business debts or obligations your company may have accrued. Pursuing a business owner personally in court is known as "piercing the corporate veil."
While financial and legal protection is a primary reason for establishing a separate bank account for your company, there are other benefits. These can include:
- Accurate financial record-keeping
- Tracking taxes owed
- Preventing possible audits
- Tracking business expenses
- Improving the company's credibility
In addition to maintaining a separate business account to protect your personal liability, consider avoiding paying for personal expenses with your business account or vice versa.
Why Can't You Use Your Personal Bank Account?
Setting your company up as a Limited Liability Company establishes it as a separate entity from you, thereby providing you with limited liability protection. Because of this separation, you are also required to keep your finances separate. It can be tempting to co-mingle your personal and business finances, but doing so can put you at risk of losing your limited liability protection.
There are other reasons, besides legal requirements, for you to consider keeping your finances separate. Keeping your personal and business finances separate can make calculating your taxes much simpler. If you employ an accountant, you can potentially save money on their accounting fees by making it easier for them to sort through your personal and business finances.
Credibility is very important, especially for new companies seeking clients. Maintaining a separate business account can greatly increase your credibility. You and your business will appear far more professional and respectable when doing business with vendors if you pay out of an account with your company's name on it.
After opening your business account, with responsible maintenance, you will eventually build a positive relationship with the bank. This can be important for securing business loans, should you need them in the future.
How to Open an LLC Bank Account
Not all business accounts are the same. There are a lot of options to choose from. It is important to take your time and research the accounts that will best fit your needs. Be sure to select an account with fee structures and services that match what you're looking for. It's a good idea to visit the website for each bank you are considering to see what they offer in terms of business accounts. Specifically, look into their terms regarding items such as:
- Overdraft protection
- Check-writing terms
- Minimum balance requirements
- Debit cards associated with the account
- Potential card-holders on the account
- Anything else specifically important to you and your company
- Debit cards associated with the account
Once you've decided on a bank and account type, contact the bank and determine what documentation they will need to open a business account for your LLC. Most banks are likely to require some or all of the following:
- A copy of your Articles of Incorporation
- A Certificate of Formation
- Your company's federal tax ID number
- Your Operating Agreement
If you need help with opening a bank account for your LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.