If you’ve incorporated your small business as an LLC, congrats! While you now enjoy liability protection, there are still a few operational hoops you’ll need to jump through, including setting up a separate business bank account for your company.
You'll need a business account to pay vendors, hire contractors, buy supplies, purchase equipment and pay for other business-related expenses. Using a dedicated business bank account is essential for separating your business and personal finances.
If you were previously running your small business as a sole proprietorship (that is, with no formal legal structure), you'll need to open an entirely new bank account for your LLC. Luckily, the process is fairly straightforward.
These days there are a number of different business bank accounts to choose from. You can use a traditional brick-and-mortar bank, a digital-only bank or even an online bank that caters to entrepreneurs and freelancers. To help you make a decision, consider the following:
Do you need to make a minimum opening deposit?
Will you need to maintain a minimum balance?
Does the bank offer good interest rates on savings accounts?
What fees exist? (e.g., ATM, wire transfers, transaction fees, ACH daily batch fees)
How strong is their customer service? Are customer representatives available to help 24/7?
How many physical branches are there? Is there one near you?
Do they also offer credit cards or lines of credit to businesses if you need one?
If it’s a free business account, do you need to maintain a minimum balance for it to remain free?
How many deposits and transfers do you get free each month?
If it’s an online-only bank, can you use checks? Which ATMs can you withdraw money from? How do you submit payments?
While this may seem like a lot of questions, it’s important to ask them before you apply for a business bank account. Otherwise, it may be more costly than you realize or a poor fit for your company’s needs, which can result in headache, stress, and money wasted down the line.
Opening a Business Bank Account
While there’s quite a lot to consider, once you narrow down your choices and decide on the bank you’d like to work with, here are the general steps to apply:
1. Provide your personal information: This will include your full legal name, home address, Social Security number and phone number.
2. Provide your business information: You'll need your business name, entity type, (i.e., LLC, S Corp, C Corp, Partnership) and business address.
3. Provide any necessary formation documents. Depending on the bank’s specific requirements, this might include your Articles of Organization, Statement of Information, your company letterhead, an operating agreement, ownership agreements or a business license.
4. Provide your EIN. This is your business ID number for taxes; think of it as a Social Security Number for your company. You’re required to obtain an EIN if your business is incorporated as a:
Single-member LLC (if you plan on hiring employees within the next 12 months)
LLC taxed as a corporation
Sole proprietorship with employees
Once approved, you’ll need to sign any required paperwork and make a minimum deposit if necessary. While opening a business bank account for your LLC is fairly straightforward, knowing what’s required and what the process looks like will set you up for smoother sailing.
If you have questions about getting an EIN in preparation for setting up your business bank account, reach out to an Incfile specialist today. We also have many resources available to help you start and manage your business, whether you already have a bank account or not.