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Opening a business bank account is one of the most important steps in starting your new venture, second only to filing formation documents for your LLC.  

Choosing a Bank

While there are countless banking options (including online banks), you should take care to select a bank with great customer service and pricing options above all else.  Typically both of these qualities are more easily found at local banks.  In addition to convenience, local banks may also be more flexible and willing to work with you regarding minimum account requirements, business loans, and investments.  Prior to choosing a bank, you should be sure to compare the monthly fees and minimum required balance to determine the best fit for your business.  

Monthly Fees

Most banks charge monthly fees for personal checking accounts, but the monthly fees for business accounts can be markedly more expensive and can take the unaware business owner by surprise.  

Monthly service fees occur each month and are applied against a business account for each month it remains open.  Some banks will waive this fee or offer account options that do not include a monthly fee.  

Some banks also apply fees for excess transactions and cash handling.  Be sure to inquire about these fees and alternative accounts before starting the process of opening your account.  

Minimum Balance

Banks typically require that your business checking account maintain a minimum amount in order to remain active.  This is also true for most personal checking accounts, although the minimum required for a business account is usually much higher.  The minimum required balance should be a big factor in your decision in banking institutions.  

Why You Shouldn’t Use a Personal Bank Account

Having a separate commercial bank account designated for your business is not only convenient, but also necessary to maintain the liability protection afforded by the Limited Liability Company structure.  Using your personal bank account will likely be considered “commingling” of your funds with those of the business and a court could potentially find you individually liable for judgments against the LLC.  

A separate account for your LLC also makes it easier to track business expenses.

What is Needed to Open an Account

Each financial institution has different requirements, so it is important to contact your chosen bank prior to going in person to set up the account.  Although the specifics may vary, a bank will often require personal identification of those on the account, EIN, formation documents (Articles of Organization) and possibly a banking resolution.  

Personal Identification

You will need to bring personal identification for each member or other authorized party to be listed on the account.  Sometimes banks will require two types of personal identification.  At least one needs to be government-issued, such as a passport or U.S. driver’s license, and the other may be verification provided by a different party, like a financial institution or utility company.  

In addition, each member will also need to provide their social security number, date of birth, physical address, and contact information.  Depending on the institution, each member may be required to be physically present in the bank when opening the account.  

Federal Employer Identification Number

After successfully forming your LLC and prior to setting up a bank account, you may need to to apply for an Employer Identification Number (EIN) with the IRS.  The EIN (also referred to as a Federal Tax Identification Number) is a nine-digit number used to identify a business entity for tax purposes, much like what a Social Security Number is for a person.

In most cases, the bank will allow a Single-Member LLC to use the owner’s Social Security Number provided they elect to be taxed as a sole proprietorship and have no employees as they the IRS does not require them to have an EIN. Regardless, a few banks will still request the EIN.

This process is easily completed online through the IRS’s website.  Once you or your designated third party complete the application online, a page containing a unique EIN for your company will be generated.  You will need to provide this number to the bank when setting up your LLC account.  

LLC Formation Documents

When the LLC is initially formed, the Secretary of State (or similarly named entity registration department) will send back the filed formation documents such as the Articles of Organization, Articles of Formation, Certificate of Formation, etc.

The bank will make a copy of the filed formation documents proving the existence of the LLC.

Banking Resolution

A banking resolution is a document that denotes a vote by the members of the LLC permitting the establishment and management of a business bank account.  Many banks probably won’t require a banking resolution or copy of your LLC Operating Agreement to set up your account.  However, having a banking resolution among you and other members is good documentation to have in your business file. 

Most often the bank will want a banking resolution for multi-member LLCs that don’t specifically name someone in the Operating Agreement to open the account.

If your bank does require a banking resolution to establish an account, you can draft your own.  Prior to doing this, be sure to see if the bank has its own specific form they prefer.  

How to Sign Checks 

Knowing how to properly sign checks in your business capacity is another important aspect of maintaining liability protection.  Just as signing any legal document personally when acting on behalf of the LLC can create a problem, you must ensure that you sign a check with your correct title.  

When signing a check on behalf of the LLC, you must properly write your name and role within the business along with the legal name of the company and the account number funds are being deposited to.  

When endorsing a check to the LLC, you must also include your full name, legal name of the LLC, and your official title. 

Does an LLC credit card require this much documentation?

Often when applying for a business credit card under the name of the LLC, all that is required is the name and EIN of the LLC in addition to the cardholders name and social security number. The ability to get a credit card for the business is usually dependent on the credit history of the individual card holder.

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