First, let's look at what an LLC bank account is and why you probably should open one.
If you have a business structured as a limited liability company, or LLC, even if you're the only member, it's still a smart idea to keep your personal and business finances separate.
It can be much easier to keep track of business tax deductions and file your business tax returns, stick to a business budget, keep track of your business's balance sheet, produce expense reports, and more by keeping business finances in a separate bank account.
Plus, being able to write a check with your company's name on it just looks more professional. And by paying yourself from your LLC, it makes it clear that you're truly keeping your business and personal finances separate, which can be important from a legal standpoint.
One minor housekeeping note before we get started. When we refer to an "LLC bank account," it's safe to assume that we're referring to a business checking account unless otherwise noted. Most people who need a business bank account need it for the purpose of paying vendors and accepting payments, not for saving money for a rainy day.
LLC bank account requirements and eligibility
First, it's a smart idea to get your ducks in a row before you sit down to apply. So, here's what you'll need before you set up an LLC bank account.
1. Establish an LLC if you haven't done so already
This is the most obvious requirement, but it's worth pointing out that you'll need to establish an LLC before you can open a bank account for it. The process of forming an LLC varies from state-to-state, but your state's Secretary of State is a good place to start. You'll need to file articles of organization (sometimes called a certificate of organization or formation) and probably pay some sort of registration fee.
You'll also need to apply for an Employer Identification Number with the IRS and gather some other LLC documents to legally establish your business.
2. Have your articles of organization handy
If you've already formed your LLC, you'll already have articles of organization. This document contains information such as your business name, business purpose, address, ownership structure, and more. You'll need this document before opening an LLC bank account, and it must be a copy that is stamped or filed with the state to show the bank that your LLC is currently active.
3. Gather the required information
In addition to your formation paperwork, there are some other documents that you should gather before applying to open an LLC bank account.
You'll need your business tax ID (EIN), your LLC operating agreement that shows who is authorized to sign checks and other documents on behalf of the LLC, information such as Social Security Numbers and addresses for any owner in the business who will be listed on the application (typically this is anyone who owns 25% or more of the LLC), and a fictitious name or DBA certificate if applicable.
This isn't an exhaustive list, and your bank may ask for additional documentation, but gathering these things ahead of time will undoubtedly make the process go smoother.
How to open an LLC bank account
Now that you've formed an LLC and gathered the necessary documentation and other information you're likely to need, it's time to open a bank account for your LLC. Here's what you'll need to do.
1. Decide on a bank
Most banks offer business accounts, so you'll need to decide which is the best place to open your LLC account. Your current bank is certainly a good place to start, as there's value in keeping everything in one place.
As a personal example, I have both personal and business bank accounts with Bank of America. Not only can I visit the same branch to conduct both personal and business transactions, but I can also see some of my business account details (like business credit card balances) through the same online portal as my personal accounts.
In many cases, your current bank could be the best choice. But this isn't always the case. A few other things to consider:
- If you need to physically go to the bank often, which is quite common in certain businesses that collect significant amounts of cash, you'll want to make sure that there are branches conveniently located close to where you are.
- Shop around for fees. Many business bank accounts have different fee structures from personal accounts, especially when it comes to avoiding fees. For example, I can avoid the monthly fee in my personal account based on a certain amount of direct deposits, but my business account only waives its fee if I maintain a certain minimum balance.
- Look at the details of a few accounts. Some banks offer lucrative rewards programs for business customers, especially those who maintain relatively high balances. Others offer relationship discounts on loans for business bank account customers. The takeaway is that there's no perfect business bank for everyone, so you need to figure out which one best meets your needs.
2. Fill out the application
If you gathered all of the documentation and information discussed in the previous section, this step should be rather painless. However, it's worth mentioning that many banks don't allow business accounts to be opened entirely online — you may need to visit a branch or speak to a banker over the phone to complete the process.
3. Fund the account
Once your account has been opened, the final step is to fund the account. You can deposit cash or a check, send a wire transfer, or use another deposit method supported by your bank.
3 tips when setting up an LLC bank account
In addition to the suggestions we've discussed so far, here are a few final tips to help you know what to expect when opening an LLC bank account that can help the process go smoothly.
1. Decide who is going to apply
While the bank will likely need information from all owners of the LLC (at least those who own 25% or more), only one person needs to apply. In most cases, the applicant needs to be either a 25% owner or an authorized officer, such as the CFO of the business.
2. The bank may check your credit
When you apply for an LLC bank account, you typically have to agree to allow the bank to obtain a credit report, at least for the person applying. This is mostly done for identification purposes, but it's possible for adverse information to create a problem.
3. Decide who is authorized to sign before you apply
Who will be allowed to write checks on the LLC's bank account? Obviously, if you are a single-member LLC, this isn't an issue, but it's important to discuss this and make a decision if there is more than one owner.
Do you want every owner to have the ability to write checks, or will one person be responsible for the business' finances and budget? An authorized signer doesn't need to own a large percentage of the LLC, but they generally must be specified in the LLC's operating agreement as able to sign financial and legal documents.
The bottom line on opening an LLC bank account
Opening an LLC bank account can be rather different from opening a personal account, but as long as you know what to expect, it's generally a straightforward process. By gathering the appropriate documents and information ahead of time and choosing a bank that meets the needs of your business, you can open an LLC bank account quickly and painlessly.