LLC Separate Bank Account: Everything You Need to Know
An LLC separate bank account helps create a separate business identity, which is important for maintaining your limited liability protection.3 min read
2. Opening Your LLC Bank Account
An LLC separate bank account helps create a separate business identity, which is important for maintaining your limited liability protection.
Why You Need an LLC Bank Account
Many new LLC owners are busy filling orders, buying supplies, and paying bills. Although you're busy, you need to open a bank account just for your LLC. You'll need it for various activities, including paying business expenses or depositing customers' checks.
You might wonder why you can't use your personal bank account. After all, you have so much to do, and your days are hectic. Can't you just use your personal account for now?
When you create an LLC, you establish a separate business entity that gives you limited liability protection. The business is separate from you, just as another individual is separate. Therefore, you must separate your personal finances from your business finances.
It can be tempting to skip the step of opening a separate bank account early on, but failing to do so runs the risk of jeopardizing your limited liability protection. There are often legal requirements for having a separate business bank account, but there are practical reasons as well, which include the following:
- It's easier to calculate your business taxes when you keep your finances separate.
- You won't have to pay an accountant extra to sort your personal expenses from your business expenses.
- You'll have more credibility with suppliers and customers, which is important for new businesses.
- You'll project a more professional image, which can lead to increased respect and trust from suppliers and vendors, especially when you pay with a business check vs a personal one.
After you open a business bank account, as long as you maintain it responsibly, you'll develop a good relationship with your bank. This will be useful if you need to apply for a business loan down the line.
Opening Your LLC Bank Account
While it may not be as easy to open an LLC bank account as it is a personal account, it's still not an especially time-consuming process. You can speed things up by doing research first and bringing all the necessary documents to the bank.
First is research. Not all business bank accounts are the same. Look into various options to choose which type is best for your business. Consider the various service options and fee structures. Other important considerations include the following:
- What type of overdraft protection will you have?
- Will you have a debit card?
- How many checks can you write before being charged a fee?
- Do you only need one account?
- Does a minimum-balance requirement suit you?
- Will the bank charge you anything just for having an account?
When you decide on a bank account type, ask the bank for the documentation you'll need to bring in to open an LLC account. Most banks require the following:
- A copy of your certificate of formation or equivalent document
- Your LLC's EIN, or Employer Identification Number
- Your operating agreement or other document showing who's authorized to sign for your LLC
The bank may have additional requirements, which is why you should call before going in. You want to have everything the first time to avoid wasted trips. After you've gathered all the appropriate paperwork, you're ready to meet with a banker. Having everything organized can make the process of opening a business bank account run smoothly.
Because many jurisdictions require LLCs to have separate business bank accounts, you'll have one task out of the way when you take care of this early on. A separate account helps you with some practical aspects of running a business as well, including accounting for expenses.
There are many steps you have to take when you want to run your own business. Opening a bank account just for your company is one of them. Although it may seem like a hassle, it's a necessary part of operating your own company.
Sometimes, courts may take away some of your liability protection if you've neglected keeping your business finances separate from your personal ones. Separate accounts help you legally, and they also add a level of professionalism to your company. This can help you grow and expand, something many business owners want to do.
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