The process of how to open a business bank account for an LLC involves forming a limited liability company (LLC) through your state’s secretary of state, getting an employer identification number (EIN), choosing a bank, then preparing your application documents. Following these steps helps you separate personal and business finances, which enables the limited liability protection that your business structure provides.
If your business is already organized as an LLC, skip to Step 2. If you need to form an LLC first, begin with Step 1.
Step 1: Form an LLC
The first step in how to open a bank account for an LLC is forming your LLC. To do this, you can check your state website, which will typically provide a step-by-step outline of the process.
Most states will require an operating agreement, which contains all details relevant to how your LLC is operated. This includes information about profit distribution, capital contributions, and the legal, financial, and management rights of LLC members.
You will also need to file LLC formation documents. Depending on which state you operate, this could be your articles of organization, articles of incorporation, certificate of organization, or certificate of formation.
Additionally, you need to ensure that the name for your LLC has not been taken by another organization within the state you’re registering in.
Step 2: Get an EIN
If your business is organized as an LLC, you are required to get an EIN to open a business bank account—and you can apply for an EIN online or submit physical applications via mail or fax. Your EIN is a unique number the IRS uses to identify your business whenever you file taxes, open business bank accounts, apply for loans, and do other business activities.
Step 3: Gather Relevant Documents
Before you select a bank, prepare your application by gathering all relevant business documents. Business banking applications typically require the following:
One of the biggest reasons that companies have their bank account application denied is due to missing or incomplete documentation.
Step 4: Choose a Bank and Account Type
Now that you have your documents ready, you can apply for a business bank account. Identify your organization’s unique needs and determine what services you need from your bank and checking account.
Here are a few factors to consider when opening a business bank account:
- Monthly fees and minimum balance requirements: Banks charge monthly fees for account maintenance. You can typically waive these fees by meeting certain balance or activity requirements.
- Transaction limits: Most checking accounts come with a certain number of fee-free transactions and cash deposits per month. Accounts with lower allowances typically charge lower monthly fees, so determining the number of transactions you make per month can help you save.
- Service fees: Determine which services your business needs most and choose a bank that charges lower fees. Possible fees include fees for excess transactions, cash deposits, ATM transactions, wire transfers, automated clearing house (ACH), and overdraft fees.
- Products and services: Typically, traditional banks can offer wider banking product selections, which include not just checking accounts but also savings accounts, lending products, and insurance. Meanwhile, online-only banks usually only offer checking accounts but provide useful unique features, such as competitive interest, tax preparation assistance, bookkeeping tools, invoicing, and more.
- Network size and availability: If your small business operates in one state, it might be best to choose a regional bank with representatives who understand local market conditions better. However, if you plan on expanding, a bigger bank with wider geographic availability might suit you better. Meanwhile, businesses with low cash needs can likely survive with online-only banks.
Step 5: Open Your New Account
Visit your chosen provider to open an account with them. Many of today’s providers let you open your account online. However, some traditional banks still require applicants to visit physical branches.
Your bank may ask additional signers to visit during the application process. Typically, business partners and any employees you want to hand signing powers to will be required to visit the branch with you.
Step 6: Deposit Your Funds
Once you open your account, you need to deposit money. Some accounts will have minimum opening deposit or balance requirements. Your options for depositing funds include check deposits, cash deposits, or electronic transfers via wire transfer or ACH.
If your provider has a mobile app, you can fund your account through mobile deposit. You can also invest in a physical check scanner to deposit checks remotely.
Frequently Asked Questions (FAQs)
Forming an LLC gives you liability protection, which means that no entity can hold you as an individual personally responsible for debts or other liabilities your business incurs. To keep these protections, you need to separate your personal and business assets.
Additionally, having an LLC bank account shows your clients that the business you run is legitimate. It also keeps you from having to sort through personal and business transactions when doing your business bookkeeping. Lastly, an LLC bank account lets you build credit as a business entity, which can give you access to better business loans in the future.
We recommend getting a business checking account for your LLC. Checking accounts have higher transaction allowances than savings accounts, which lets you move money in and out at an affordable cost.
As long as your business is structured as an LLC, you are required to have an EIN to open a bank account.
While an EIN is mandatory for opening a business bank account as an LLC, banks will typically ask you to provide additional documentation relevant to your business, such as your business license, LLC formation documents, and your DBA certificate (if applicable).
Bottom Line
Following the steps on how to open a business bank account for an LLC is a matter of ensuring that you have all relevant documentation on hand. This includes your formation documents, operating agreement, EIN, and relevant pieces of personal and business information.
