If you want to do business using an LLC, you will need to open a business bank account. Having a separate bank account for your LLC is required to protect your personal assets from business liabilities. Savvy entrepreneurs know they should never mix personal funds and accounts with company assets, so it’s important to know how to open a bank account for an LLC.
The process for opening a business bank account can differ depending on which bank you are using and even the branch you go to. Non-US residents will also have to make some additional considerations when opening a bank account for an LLC.
Here we cover how an LLC can open a bank account and what documents may be required.
How To Open a Business Bank Account for an LLC
The process for opening a business bank account for an LLC is not completely standard. Banking laws differ in each state, and separate banks have different policies for opening business accounts. Policies can even differ between separate branches of the same bank. Some branch managers understand LLCs better than others and may require varying amounts of documentation.
Although policies differ between banks, the following steps are generally required to open a business bank account for an LLC:
Step 1.) Form an LLC
Opening a business bank account starts with forming a business entity, like an LLC. Many business owners prefer LLCs because they are easy to both setup and manage.
Forming an LLC requires filing a formation document with the Secretary of State’s office. This document has different names in different states. Delaware, one of the most popular states for forming LLCs, calls the formation document a “Certificate of Formation”. Other states call the LLC formation document the “Articles of Organization”.
A Delaware Certification of Formation requires the name of the company as well as the name and address of the company’s registered agent.
Step 2.) Obtain an EIN Number
An LLC needs to obtain an EIN number from the IRS in order to open a business bank account. LLC Members must provide the bank with a copy of either the EIN Confirmation Letter (575 CP) or an EIN Verification Letter (147C) from the IRS in order to open the account. Federal law now requires even single member LLCs to obtain an EIN number.
An EIN, or “Employer Identification Number”, is the type of federal tax identification number assigned by the IRS to businesses, estates or trusts. An EIN number works like a social security number for a business entity and allows LLCs to pay federal taxes, do payroll and open bank accounts.
LLC owners can obtain an EIN number by submitting the Form SS-4 to the IRS either online, through the mail, or via fax. You do not have to submit the Form SS-4 on your own. Service providers, like IncNow, can submit the SS-4 application to the IRS and obtain an EIN for your LLC. Note that you should not obtain an EIN for an LLC until after the LLC is formed.
Step 3.) Provide Necessary Documents
A bank will require some supporting documentation in order to open an account for an LLC. Banks require proof that:
A.) The LLC legally exists; and,
B.) The individuals trying to open the account are authorized to act on the LLC’s behalf.
Banks typically require the following documents to open a business account for an LLC:
- The LLC Operating Agreement
Most banks will want to see a signed copy of the LLC Operating Agreement in order to open a business account. The LLC Operating Agreement lists the owners and managers of the LLC.
- Certificate of Good Standing
A Certificate of Good Standing is an official document that an LLC can obtain from the Secretary of State in its state of formation. Some states also call this document a “Certificate of Existence”. The Certificate provides proof that;
A.) The LLC legally exists; and,
B.) The LLC has paid its franchise tax balance and is compliant within its state of formation.
If you have a Delaware LLC, you can obtain a Certificate of Good Standing through a registered agent, such as IncNow.
- Statement of Organizer
In some instances, a bank may require additional documentation showing that the people listed in the Operating Agreement are actually connected to the LLC. One option is to provide a Statement of Organizer.
A Statement of Organizer is a corporate document stating that an Authorized Person requested the LLC to be formed while acting as a representative for the company’s initial Members. A Statement of Organizer can help certify who the initial Members of an LLC are intended to be at the time the company is formed.
- Other Public Filings
Some banks outside the United States may find that internal company documents are not enough to prove ownership in an LLC. In this case, a bank may request a copy of an official public filing stating the names of the LLC’s owners.
Some LLCs can simply provide the bank with a copy of the company’s formation document filed with the Secretary of State. Many states require LLCs to include the names of the company’s Members and Managers in the public formation document.
This can be problematic for Delaware LLCs however. Delaware does not require the names of LLC Members to appear on the company’s Certificate of Formation. Most Delaware LLC owners take advantage of this and protect their privacy by not including their names on the formation document.
Delaware LLC Members can file an amendment to the LLC’s Certificate of Formation with the Delaware Secretary of State to include an article providing the names of the company’s owners. Amending the Certificate of Formation creates an official public record of an LLC’s Membership that should satisfy almost any bank.
What is an LLC Bank Account?
An LLC bank account is a business bank account opened specifically for a Limited Liability Company (LLC). Opening a separate bank account is an important part of setting up a business as an LLC.
Business bank accounts provide many benefits for LLCs and its Members. The primary benefit of an LLC bank account is the liability protection it offers. LLC Members need to make sure that they are not mixing personal and business finances in order to maintain their limited liability shield in the company. Opening a separate bank account for an LLC can make it easier to avoid commingling funds between a business and owners.
Opening an LLC bank account can also assist with accounting. Having a separate business account can make it easier to track any expenses, deposits and transfers related to a business. This clarity will help during tax time, and is crucial if the company needs to complete a financial audit.
LLC bank accounts may come with certain features that personal accounts don’t. These may include higher transaction limits, merchant services, business credit cards and more. These benefits can help give your company’s finances a boost depending on what kind of business you are in.
Do I Need to Open a Business Bank Account for My LLC?
Yes, you should always open a separate business bank account for your LLC. An LLC does not need its own bank account to conduct business. However, keeping business finances separate from your personal bank accounts is an important part of operating an LLC the right way.
The point of forming an LLC is to legally separate yourself from your business to protect you from being personally responsible for any debts or obligations incurred by the company. These legal protections are called “limited liability protection”.
You can lose your limited liability protection if you start mixing business income and expenses into your personal finances. The best way to legally protect yourself and your business is to open separate business bank accounts for your LLC.
What Should I Use My LLC Bank Account For?
It is important to remember that an LLC bank account should only be used for depositing business income and paying business expenses. Your personal finances should be completely separated from any bank accounts associated with your LLC.
Mixing personal finances with business bank accounts is called “commingling”. If LLC owners or Managers are found to be commingling business assets or funds with personal bank accounts, the whole company could lose its legal protections. This puts the LLC Members at risk of being held personally responsible for the company’s legal liabilities and financial obligations.
Where Can I Find My EIN Number?
The first place to look for your company’s EIN number is the original EIN Confirmation Letter. You can also find your EIN number recorded on numerous company documents and records. These include:
- Old federal tax returns,
- Business bank account statements,
- Official IRS tax notices,
- Business license, permits, or other applications.
If you cannot find your EIN number on any relevant documents, you can call the IRS and request an EIN Verification Letter.
Keep in mind that you will need access to a fax machine in order to receive an EIN Verification Letter. The IRS can provide you with the Verification Letter right away, however, they can only send it through fax.
Do I Need a DBA to Open an LLC Bank Account?
An LLC does not need a DBA to open a business bank account. Bank representatives who are unfamiliar with LLCs may think that the company needs a DBA to open an account. This is not the case.
A DBA stands for “Doing Business As”. A DBA is an alternative name that an LLC can use for business purposes other than its official corporate name. DBAs are also referred to as “fictitious names” or “trade names”. For example, Agents and Corporations, Inc. trades under the name “IncNow”. An LLC can acquire a DBA by filing a document at the county level in its state of formation.
Can A Non-US Resident Open an LLC Bank Account?
Individuals from almost any country in the world (except restricted countries and individuals on prohibited lists) can form an LLC in the United States. Non-US residents who form LLCs likely need to visit the US in order to open a business bank account. Non-US individuals often decide to open a business bank account in the state where the LLC is formed.
Regardless of where you do business, you will find having a bank account for your LLC to be essential. Once your company is formed, you can obtain documents later that your bank requests if you do not have them at the time of formation.
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