Key Takeaways

  • An LLC account is essential for maintaining limited liability protection and business credibility.
  • Keeping personal and business finances separate helps simplify taxes and bookkeeping.
  • Opening an LLC account requires specific documents such as the EIN, LLC operating agreement, and formation documents.
  • Choosing the right type of account and banking partner can support your LLC’s long-term growth.
  • Online and traditional banks have different offerings—compare fees, features, and accessibility before deciding.

What is a LLC account? An LLC account is a business bank account that is strictly for your Limited Liability Company (LLC) and should be kept separate from your personal bank account.

The LLC was intentionally conceived as a business structure to safeguard personal property and assets from liquidation and used as compensation in lawsuits, to pay fewer taxes, and yield other advantages. If you have a company that functions as an LLC, opening a separate bank account in your company's name is an excellent way to keep your personal banking transactions separate from your business transactions. An individual business account also makes business and personal bookkeeping less complicated.

Why You Shouldn't Use Your Personal Bank Account as Your Business Bank Account

When establishing an LLC, you created an independent business entity that will afford you with limited liability protection. Since your LLC is an independent entity from your personal situation, it's required of you to keep the finances of your LLC separate from your own finances. Even though it's enticing to merge your company funds with your personal funds, it isn't a good idea because it puts the limited liability protection at risk.

Notwithstanding the legal stipulation to retain a detached bank account for your LLC, there are also sensible purposes for obtaining a business bank account. The business bank account will assist you in keeping your personal finances unconnected from your business finances, making it simpler to figure out the taxes you owe, both personally and for your LLC. Having a separate business bank account contributes to your credibility with suppliers and vendors as a reputable business owner because you'll show more professionalism if you pay with checks that have your LLC's name on them instead of paying with personal checks.

After you have established your business bank account for your LLC, you'll be able to start a business relationship with that bank because you will be demonstrating that you are a responsible business owner and would be a good candidate for a business loan and further credit needs from your bank in the future. Having an individual business bank account is a necessity for your LLC and will assist you with several sensible prospects of operating your LLC, like bookkeeping for business expenses, paying the bills for your business, and depositing payments from clients.

Even though it's not legally imperative, an individual bank account established for your LLC is a vital part of maintaining the liability protection afforded you by your LLC. When a business has a separate business bank account, it is not difficult to substantiate that you are sustaining an individual legal entity.

A downside of not creating a separate business bank account for your LLC would cause you to combine your personal funds with your business funds, and not establishing your business as a separate legal entity and putting your personal assets into the mix. A court of law could find you personally liable for your LLC's legal obligations and debts and your personal assets would be liquidated and used to pay your debts and legal obligations. Not establishing a separate bank account would nullify one of the reasons the LLC business structure was formed in the first place.

Benefits of an LLC Account Beyond Compliance

An LLC account not only preserves your liability protection but also adds value to your business operations. Here’s how:

  • Improved financial organization: Keeps income, expenses, and records separate for smoother operations and clearer reporting.
  • Enhanced credibility: Vendors and clients often view payments from a business account as more professional and trustworthy.
  • Tax readiness: Easier to track deductions and prepare for quarterly or annual tax filings.
  • Streamlined employee payments: If you plan to hire, payroll is easier to manage from a dedicated account.
  • Eligibility for business credit: A separate account helps establish your LLC’s financial footprint, improving your chances of qualifying for credit lines and loans.

Using an LLC account strategically can support growth while maintaining clear legal and financial boundaries.

How to Choose the Right LLC Account

When selecting a bank for your LLC account, consider the following features to ensure they align with your business’s needs:

  • Monthly fees: Some accounts waive fees if you meet minimum balance requirements.
  • Transaction limits: Review how many transactions are allowed per month before incurring extra fees.
  • Online banking and integrations: Look for platforms that connect with accounting software.
  • Customer service and accessibility: Choose between online-only banks, which may offer lower fees, and traditional banks, which provide in-person support.
  • Lending options: Building a relationship with a bank that offers small business loans can be beneficial as your business grows.

Different banks offer specialized small business accounts, so compare terms to find the most cost-effective and functional option for your LLC.

What You Need to Open an LLC Account

To open an LLC account, you’ll need to provide documentation that verifies your business’s legal status and ownership. Requirements may vary slightly by bank, but most will ask for:

  • Employer Identification Number (EIN): Issued by the IRS, this is required for tax and identity purposes.
  • Articles of Organization: This document shows that your LLC is legally formed with the state.
  • LLC Operating Agreement: Even if not required by your state, banks often request it to confirm business structure and roles.
  • Business License: Required if your business activities are regulated at the local or state level.
  • Ownership Documents: Some banks may ask for a resolution of authority if someone other than the LLC owner will open the account.

Having these materials prepared can streamline the application process whether you apply online or in person.

Why You Should Have an LLC Bank Account

There are many excellent reasons why you should establish a separate LLC business bank account from your personal bank account which include:

  • Uncomplicated financial bookkeeping because personal finances are kept separate from business finances
  • Simplifies the calculation of personal and business taxes and keeps them independent of each other
  • Prevents audits
  • Easier to keep track of business expenses and deductions
  • It shows a level of professionalism and business credibility when you use business checks to pay business expenses instead of personal checks

Frequently Asked Questions

1. What is an LLC account? An LLC account is a dedicated business bank account used solely for your Limited Liability Company’s financial transactions, separate from your personal funds.

2. Is it legally required to have a separate LLC account? While not federally mandated, maintaining a separate account is essential for preserving your LLC’s liability protection and meeting financial best practices.

3. What do I need to open an LLC bank account? You typically need your EIN, Articles of Organization, Operating Agreement, and possibly a business license or ownership authorization documents.

4. Can I open an LLC account online? Yes, many banks—including online-only institutions—offer digital account opening for LLCs, though requirements and timelines vary.

5. How do I choose the right LLC bank account? Compare banks based on fees, transaction limits, customer support, digital tools, and lending options to find the best fit for your business needs.

If you have any further questions about what an LLC account is, if you should have an LLC business bank account, and what will be the consequences if you don't have one, feel free to contact UpCounsel.com. Post your legal need on UpCounsel's marketplace, and there will be a lawyer to assist you in your situation. UpCounsel has the most knowledgeable and experienced lawyers on their staff that are ready to assist you with your legal needs. UpCounsel accepts only the top five percent of lawyers, coming from law schools such as Harvard Law and Yale Law, having an average of 14 years of legal experience which includes working with or on behalf of companies like Menlo Ventures, Airbnb, and Google.