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Every cent counts in a small business, and tracking every penny shouldn’t be your job. With a business bank account for your LLC, you can efficiently manage your funds and access additional services to fuel your growth. Discover how to open one in just four simple steps.
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How to Open a Business Bank Account for an LLC in 4 Steps
Determining the best business bank account for your LLC can be an overwhelming task. This guide has everything you need to open a business bank account in no time.
Step 1. Decide on a Business Bank Account Type
Before anything else, analyze the different types of available accounts and decide what your business needs. While you may settle on one, you’ll likely select a couple to get the biggest bang for your literal buck.
Here are the five most commonly used business bank account types:
Business Checking Account
In every circumstance, you’ll want to have a business checking account as the foundation of your financial operations. These accounts allow your business to transfer funds, pay vendors, and accept deposits from customers or other businesses.
Most business checking accounts also have ways to deposit and withdraw money from ATMs part of a particular network. Keeping the lion’s share of your funds in this account is important to cover outgoing expenses, lest you experience an overdraft.
Most of these checking accounts have transaction limits, forcing you to plan a monthly strategy to avoid penalties. Exceeding a set amount each month typically results in per-transaction fees. Some of the best business checking accounts remove these restrictions.
While few and far between, there are interest-bearing checking accounts where you can earn monthly interest on money. Rates are low, although Bluevine sets the bar high here.
Business Savings Account
Business savings accounts are often a great place to store funds you don’t plan to use immediately. A business savings account is likely the best option if you’re saving up for a larger investment, such as a store expansion or equipment purchase.
Here, your money will accrue interest at an advertised rate. If you shop around, you’ll find accounts with higher interest rates than others. The determining factor here is a minimum balance requirement to lock in a rate and negate service fees.
The downside of business savings accounts is limited withdrawals. Taking out funds over six times a month is impossible, potentially leaving money inaccessible. In most cases, you can’t write checks or use a debit card to pull cash from this account type. Some banks may limit deposits into the account as well.
Business Money Market Account
Business money market accounts function similarly to business savings accounts. They often feature higher interest rates and may allow you to write checks or use debit cards to pull money directly from the account.
This extra flexibility comes at a cost. Money market accounts usually have higher initial deposits and monthly balance minimums. Some may have unavoidable fees and come with a limited number of transactions.
Business Certificate of Deposit (CD) Account
Business Certificate of Deposit accounts take money savings to a whole new level. CDs often have the highest interest rates but come with a significant catch.
When you place money into a CD, you agree not to touch those funds for a set amount of time, referred to as the term of the CD. Depending on your chosen CD account, this time can range from months to years.
The rate you earn from a CD comes from the amount of your deposit and the term of the CD you’re storing money in. You need to be sure that this is money you won’t have to use under any circumstance for its duration.
The consequences can be dire if you need to pull your money out before the CD comes to term. Be prepared to pay steep penalties that could destroy any earnings you hoped to attain.
Merchant Account
If your small business accepts credit or debit card payments either in person or online, you’ll need a merchant account. Merchant accounts serve as a temporary medium for these payments before automatically moving to one of your other accounts. The entire process can take a few days to see the result in your account.
The bank or company you’re using to set up your merchant account likely has hardware or software you’ll need to use to accept payments. Besides fees for equipment or setup, there will be transaction fees and maybe monthly charges to contend with.
You’ll usually enter into a contract for a merchant account for one to three years with specific terms. While a merchant account is necessary for accepting card payments, weigh all these fees before signing on the dotted line.
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Step 2. Find the Ideal Bank
With a good idea of which business bank account types your company needs to operate, it’s time to hunt for the perfect bank. Consider the following factors when searching so you don’t end up paying too much or find yourself without the features you really need.
Fees
Banks have staff to pay and lights to keep on, so they have to make money somehow. For businesses, this often means monthly service fees or charges for using certain services.
It’s common for banks to charge maintenance fees to keep accounts open. The best options provide the means to waive these charges through specific criteria. Some cannot avoid these fees, so be sure to investigate. Online banks like Axos and Lili have free business banking accounts without any monthly fees.
Fees pop up in other areas as well. In-network ATMs are free to use but expect to pay for out-of-network machines. Since online banks don’t have physical locations, they often charge for cash deposits through an ATM.
Most banks charge for transactions and cash deposits beyond a listed amount each month. You’ll likely pay a flat rate for wire transfers into and out of your business.
Required Minimums
Banks typically require a minimum balance to waive the monthly service charges mentioned above. Make sure this amount is well within your company’s capability while considering your regular business expenses.
Balances can also set the stage for the interest rate on your checking or savings account. The more you have, the higher your rate can be. Some banks do have a flat rate you can’t do anything about.
An initial deposit may be required to create your account. This amount typically runs higher than the minimum balance needed for maintenance to ensure you won’t go under.
Interest Rates
If you have funds to spare, storing them in a savings account or interest-bearing checking puts some extra money into your company’s pocket each month.
These accounts offer interest rates simply for setting money aside. It’s an even bigger win if this money goes toward a big purchase or upcoming expense and won’t be used for business operations.
With the national average interest rate at 0.23%, anything around this number or higher should taste pretty sweet.
Online Banking
Even before the rise of online banking, many traditional institutions started turning to it for convenience. Not only does an online presence allow a bank to attract members from across the country, but it also allows businesses to use financial services from anywhere with an internet connection.
Choosing a bank with a top-tier mobile banking app like Capital One or Chase can make life much easier. You no longer have to drive to a location and wait in a queue to render services.
The best mobile banking apps allow you to perform transactions, monitor accounts, and set alerts to inform you when money moves around. With a tap, you can even deposit checks with your phone’s camera and find the nearest in-network ATM.
Business Services
Business bank accounts come with additional services you can use to help your company grow. Tools for accounting and payroll are often available, and institutions like Bank of America offer rewards for doing business with them. Make a list of what your business needs and pursue the banks with those services.
Some banks specialize in a particular field. For instance, Novo is an excellent option if most of your sales come from online sources. The business banking platform integrates with popular e-commerce sites like Shopify and Etsy, making sales easier than ever.
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Step 3: Gather Your Documentation
After deciding on a bank, you must round up your business paperwork. Financial institutions may differ on what they’re looking for, but you should be in good shape if you have the following:
Articles of Organization: Your articles of organization reveal your company’s structure and purpose. In some states, this document is known as a Certificate of Formation or a Certificate of Organization.
Employer Identification Number (EIN): As an LLC, requesting an EIN from the IRS is always a good idea. You’ll need one if you have more than one employee or you plan to hire people elsewhere. Single-employee LLCs can get by with a social security number, but this muddies the water between personal and business. You can usually get an EIN online quickly through the IRS but plan for delays just in case.
Operating Agreement: An operating agreement outlines how your company functions financially and who can sign off on your behalf. Banks will want to know who they can do business with from your company and who doesn’t have the power to make decisions.
Photo Identification: When you go to create your account, have two forms of identification ready. One must be a photo ID (driver’s license or passport), while the other can be a bill, voter registration card, or credit card.
Business License: Your business license will come from the state once you’re an officially registered business. It shows the bank you are a legitimate entity and the state you can operate out of.
Step 4: Sign Up
With documents in hand, it’s time to make your business bank account a reality. If the bank you chose has a branch nearby, stopping in can be a quick and painless experience.
A banker will sift through your paperwork and ensure you’ve brought everything you need. While the documents listed above should be enough, researching in advance can save you from making an additional trip if you forget something.
Some banks can create an account for you on the spot, while others may take a few days to process everything. You’ll need to have all the members of your LLC present at this point to avoid any snags.
Alternatively, many financial institutions allow you to sign up for their services online. The process can vary immensely from bank to bank.
FinTechs like Lili boast that signup takes a few minutes from start to finish, with nothing more than a cursory view of your paperwork. Others require careful scanning and submission of documents through an online portal for review.
Check with your preferred bank before you go down this route, as it can just as easily save time as add several headaches when things don’t go exactly right.
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Does My LLC Need a Business Bank Account?
By law, LLCs aren’t required to have a business bank account to operate. Still, every LLC should have one for the many benefits they provide.
Protection
LLCs offer limited liability protection, meaning your personal assets are typically safe in the event a lawsuit targets your business. If you don’t use a business bank account, there may be no way for the court to tell where personal ends and company finances begin.
In effect, you’re risking your personal assets by not having a separate account specifically for your business. Opening your business account with an EIN instead of a social security number helps protect you from cyberattacks that can sell your identity on the dark web.
Transfers
For the most part, it’s quite a challenge to move money around in your business without a business bank account. These accounts allow for all sorts of transfers, from wires to direct deposits and sending money from one account to another.
Many offer several free deposits and withdrawals each month without you having to pay. Without a business bank account, it’s unlikely that you’ll be able to accept credit or debit card transactions.
Tracking
There’s no better way to track your business funds than having all your transactions occur from a single location. You can see your monthly costs and revenue at a glance while tallying exactly where those big expenses go.
Knowing your bottlenecks and what affects your bottom line can help you build a better financial structure. It also gives you a sense of your overall business and areas for improvement.
Taxes
With personal funds out of the picture, tax time becomes much more straightforward. A bird’s eye view of all your debits and credits helps you quickly identify what you owe when the IRS comes knocking.
Thorough documentation also helps you spot deductions you might otherwise miss. Clarity on your end may also reduce the likelihood of an audit.
Credibility
Setting up an actual business bank account helps you look more favorable in the eyes of potential clients or vendors. Checks and payments coming from a bank account with your business name appeal to the masses. They’re much more likely to jump on board with a company series enough to have a business account of its own.
Many banks will want to build credibility with you before offering tools like business credit cards or lending options. Starting early puts you in a prime position to get approved when you need these services.
How to Open a Business Bank Account for an LLC Frequently Asked Questions (FAQs)
Want to learn more about how to open a business bank account for an LLC? This section answers some of the most common questions about the topic.
Bottom Line on How to Open a Business Bank Account for an LLC
To open a business bank account for your LLC, begin by evaluating the types of accounts you need. Next, select a bank that offers features to support your business growth, with manageable fees and balance requirements. Gather your formation documents and complete the sign-up process either in person or online.
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Best Business Bank Accounts by State
Below you will find an interactive U.S map that can help you locate and compare different banks and financial institutions that offer business accounts in your area.
Noah is an American copywriter on a mission to help clarify the nuances of the business world through unique insights stemming from backgrounds in both engineering and the medical field. When not working, you’ll likely find him running or traveling.
