How To Open A Business Bank Account For LLC? Free Guide 2023
Did you know how to open a business bank account for LLC? A business bank account is a financial account specifically for business transactions. It provides a separate and organized way to manage business finances, track income and expenses, and build a clear financial record. A separate business bank account should be used to pay vendors, federal and state taxes, payroll, credit card purchases, and other business needs.
All types of businesses, from sole proprietors to LLCs to corporations, can benefit from having a dedicated LLC business bank account. Most banks, including online banks, require LLC bank account opening prior to the opening of the business to show the personal finance and business finances separate and do not commingle. Many of these accounts have a minimum balance requirement for small business owners, and some may require linked savings accounts or a separate merchant account for business expenses.
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What Documents Do You Need Before Starting?
When opening a LLC bank account, you typically need the following documents: a valid ID for the account signer, business formation documents (such as articles of organization or incorporation), employer identification number (EIN), license, and any relevant partnership or operating agreements. Additional documents may be required based on the bank’s policies. You must keep personal finances separate, and may be required to deposit cash before being granted a business credit card, business debit card, or larger credit card account. An LLC protects your personal assets in cases of bankruptcy or other legal issues.
How to Open a Business Bank Account For LLC?
A business bank account is not the same as credit card accounts. They are available to multiple LLC owners or to single member LLC. To open an LLC bank account, the business owner must choose a bank, gather required documents including the business tax ID, driver’s license, and maintain clear separation between business and personal accounts. The business account should not be connected to any personal savings, checking, money market, or other types of bank accounts, and you should decide if a business checking or business savings account is needed. Some creditors and vendors will require as part of the approval to accept credit card payments.
Start a New LLC
To start a new limited liability company, choose a business name, file articles of organization with the state, obtain necessary licenses and permits, and create an LLC operating agreement for the company.
Obtain an EIN
To get an Employer Identification Number (EIN), visit the IRS website, complete the online application, and provide the necessary information about your business. You’ll receive an EIN verification letter when approved for an account for an LLC.
Choose a Bank
When choosing a bank for your business, consider factors such as monthly fees, business vs. personal account features, minimum business funds needed, online banking options, customer service, branch locations, reputation, and compatibility with your business’s financial needs and goals. Research and compare different banks to make an informed decision. Many will require a positive credit history and the ability to maintain a certain minimum balance before you can open a bank account. Make the first cash deposits.
Provide Required Documents
Typically, you will need the following documents to open an LLC bank account: identification for authorized signers, articles of organization or incorporation, Employer Identification Number (EIN), and business license or permits. Additional documents may be required based on the bank’s requirements.
Complete Account Application
To complete a bank account application, gather the required documents, such as identification, business formation documents, and tax identification numbers. Fill out the application form accurately and provide any additional requested information.
Transfer Funds to the New account
The amount of funds required to open a personal account can vary depending on the bank and the type of business or personal account you choose. Some banks may have a minimum deposit requirement, which can range from a nominal amount to a few hundred dollars or more. It is best to check with the specific bank you intend to open an account with to determine their specific requirements. It is generally advisable to have enough funds to cover at least three months of operational expenses, including salaries, rent, utilities, inventory, and other essential costs. However, the actual amount can vary significantly based on your specific circumstances and business plan. Conducting a thorough financial analysis and budgeting process can help determine an appropriate amount for your LLC’s initial funding.
How to Apply for a EIN Number?
To apply for an Employer Identification Number (EIN), visit the IRS website and complete the online application. Provide the necessary information about your business, such as its legal structure, purpose, and ownership details. The process is typically free and can be done online. When applying for an Employer Identification Number (EIN) with the IRS, you will need the following information:
- Legal Name and Address: Provide the legal name and physical address of the business entity applying for the EIN.
- Responsible Party Information: Identify the person or entity responsible for the business and provide their name, social security number (SSN), and contact information.
- Business Structure Details: Specify the type of entity (e.g., sole proprietorship, partnership, corporation) and provide details about the business structure.
- Reason for Applying: Explain why you are applying for an EIN, such as starting a new business, hiring employees, opening a bank account, or establishing a pension plan.
- Social Security Numbers: For entities with multiple owners or members, provide the SSN of each individual.
- Previous EIN: If you are applying for a new EIN due to a change in business structure or ownership, provide the previous EIN.
Tips for Opening a Business Bank Account for an LLC
Here are three tips of opening an LLC bank account:
- Choose the Right Bank: Research different banks and compare their offerings for business accounts. Consider factors such as monthly fee, account features, online banking capabilities, and customer service.
- Gather Required Documents: Collect all the necessary documents for opening a business bank account or LLC bank account, such as articles of organization, EIN, business license, and identification for authorized signers.
- Separate Personal and Business Accounts: Clearly separate business and personal finances to maintain accurate records. Use the business bank account exclusively for business transactions and avoid commingling business and personal funds to protect personal liability and simplify accounting processes.
What Should You Consider Before Opening a Business Bank Account for LLC?
Aware of Account Fees
Account monthly fee can vary depending on the bank and the type of account you choose. Common fees associated with an LLC bank account or most business bank accounts may include monthly maintenance fees, transaction fees, wire transfer fees, overdraft fees, ATM fees, and fees for additional services like cashier’s checks or stop payments. It’s important to carefully review the fee schedule provided by the bank before you open an LLC bank account to understand the specific fees and charges that may apply.
Aware of Promotions
Banks may offer various promotions to help defray account costs. These promotions can include fee waivers for a certain period, cash bonuses for opening an LLC bank account, free transactions or ATM fee reimbursements, discounted or no-fee services, or special introductory rates. It’s recommended to research different banks and their current promotions to find offers that align with your business needs and can help reduce account fees.
Use EIN for Account Opening
Have your EIN on hand. The EIN serves as a unique identifier for your business entity and is commonly used for various purposes, including banking and tax-related matters. Banks typically require the EIN to open an LLC bank account to verify the legitimacy and legal status of your business.
Check Starting Number
If allowed, have your starting check number begin at 1000. A good starting number for checks is typically the next sequential number from your previous checkbook. This ensures that the check numbers are in a logical and organized sequence. It’s recommended to start with a number higher than your previous check number to avoid any confusion or duplication.
Decide Who Can Sign for the LLC
The authority to sign on behalf of an LLC is typically determined by the single member LLCs agreement. The LLC’s operating agreement outlines the roles and responsibilities of the members and managers and may specify who has the authority to sign legal documents and conduct transactions on behalf of the LLC. It is important to consult the operating agreement and follow the designated procedures to ensure proper authorization for signing on behalf of the LLC. If there is no operating agreement, state laws may dictate who has signing authority for the LLC.
Consider Debit & Credit Card Use
Establish a clear credit policy, define credit limits based on the business’s financial capacity, monitor credit utilization regularly, make timely payments, and maintain a favorable credit-to-debt ratio to demonstrate responsible credit management.
The Top 2 Business Bank Accounts
| NOVO | CIT Bank | |
| Award | Best Overall | Most Versatile |
| Price | Free account No minimum deposit No monthly fees | A large variety of account options Low monthly fees Minimum deposit required |
| Rating | 4.8 | 4.5 |
| Detail | Read Review | Read Review |
| Link |
NOVO
Novo is a modern digital banking platform designed specifically for small businesses and freelancers. The Novo LLC bank account offers a streamlined and user-friendly experience with no monthly fees, no minimum balance requirements, and no transaction fees. With Novo, you can easily manage your finances through a mobile app, access features like mobile check deposits, cash deposits, send and receive electronic payments, integrate with popular accounting software, and receive real-time transaction alerts. Novo also provides business tools and resources, such as expense categorization and financial insights, to help you better track and manage your finances.
CIT Bank
CIT offers a comprehensive business banking solution designed to meet the needs of small and medium-sized businesses. The CIT LLC bank account provides a range of features and benefits, including competitive interest rates, online and mobile banking capabilities, and a suite of cash management tools. With CIT, you can easily manage your business account, make electronic payments, access detailed account information, and streamline your cash flow. They offer personalized customer service and tailored banking solutions to help businesses achieve their financial goals. CIT also provides additional services such as merchant services, business loans, and treasury management solutions to support the growth and success of your business.
Final Thoughts
Establishing a business bank account is a crucial step for any LLC or small business. It provides numerous benefits, including separating your personal bank account from the company, simplifying accounting and tax filing, and building a strong financial foundation. By choosing the right bank, gathering the required documents, and maintaining clear separation between business and personal finances, you can ensure smooth operations and better financial management. Remember to research various banks, compare their offerings, and consider factors such as fees, account features, and customer service. Opening a business bank account is an essential step towards the success and growth of your LLC.
Opening business bank accounts helps separate personal and business finances, simplifies accounting, and provides a professional image.
Required documents for a business checking account may include identification for authorized signers, articles of organization, EIN, and license or permits.
By keeping business transactions from your personal and business checking account separate, business bank accounts simplifies tax filing and provides clear records for deductions and reporting.
Consider factors like business checking fees, business checking account features, online banking capabilities, customer service, and compatibility with business needs.
It protects personal liability, simplifies accounting, and helps maintain accurate financial records for the LLC.
It is not recommended. A separate bank account can help maintain legal protection, ease financial management, and prevent confusion during tax filing.
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