Many small business owners prefer the simple and flexible business structure of a limited liability company (LLC). It offers many tax benefits, including tax passthrough and expense deductions, reducing taxable income. Also, it has a straightforward formation process, so you can have your LLC up and running within a few days.
However, forming your LLC doesn’t end with filing all the papers the state requires and obtaining all the necessary documentation. Other crucial steps after formation include establishing business credit using a credit card, hiring an accountant, getting business insurance, and opening a bank account.
When opening an LLC bank account, you must thoroughly research the available options, the banking rules and regulations, and the documentation you need to open an account. You must also check how to create an LLC bank account non resident if you’re a non-resident operating in the US. Regardless, the steps of opening a bank remain the same. The only difference is that you’ll need more documents to prove your identity.
This article provides a quick guide to opening a business account. It explains the reasons and steps for creating a separate business account for your LLC.
Reasons To Open An LLC Bank Account
Aside from allowing you to separate your personal finances from those of your business, opening an LLC bank account makes it easier to calculate your taxes and track your company spending.
Getting a business account also qualifies you for a line of credit loan. It’s a financing option for small businesses that operate like credit cards. It has a set limit of capital you can get. Such options benefit businesses as they’ll be helpful during emergencies.
In addition, some clients may prefer to direct checkouts to the business instead of your personal account. Banks offer purchase protection to all your clients who pay through your company. It protects their details, securing them from identity thefts and other frauds they may fall victim to if their information falls into the wrong hands.
Steps For Opening A Bank Account
Here are the main steps for opening a bank account:
1. Set Up Your LLC
You must first register with the State Department and IRS. The formation process varies from state to state, and you need to understand the LLC requirements before actually going through with it.
Also, check with your local state to know if you need additional licenses and permits. Ensure you obtain the necessary documents, as you’ll need them to open a bank account.
2. Find The Right Bank
Many banks offer business account services to entrepreneurs. However, their features, terms, and fees differ. Some may require you to have a certain amount in the account before withdrawing, while others only focus on the minimum monthly balance you must have in your LLC account.
In addition, some banks offer excellent overdraft protection, while others don’t. Therefore, determine your business needs and explore options that meet your business needs.
3. Gather The Necessary Documents
Most banks will want to see some LLC formation documents and operating documents. You can check with the bank to see the primary documents they need for verification, but the most common ones include the following:
- Employer Identification Number (EIN): An Employer Identification Number (EIN) is an identification number from the Internal Revenue Service (IRS) for US businesses. You must register with the IRS before you can start your business operations. Once you register, the IRS issues an EIN Verification Letter (147C) or EIN Confirmation Letter (575 CP). You’ll provide this letter when opening an LLC account.
- Articles Of Organization: These are LLC formation documents you file with the State Department. Most banks will require a copy of the Articles of Organization signed by the LLC member to open an account.
- Operating Agreement: If your LLC has many members, you must provide an Operating Agreement to the bank manager. It gives details of the members who can make financial decisions and withdrawals from the bank.
These are the documents you need to have to open an LLC account. You’ll also need to provide the personal details of each member and government-issued IDs. It could be passports or driving licenses. After you provide all the papers, the bank will issue a Declaration of Beneficial Ownership document, disclosing the LLC owners.
4. Open Your LLC Bank Account
Once the bank confirms all your details and documentation, you can open an account. Determine the type of business accounts you need for your LLC and fill out the necessary documents. You may consider opening checking, tax, and profit accounts to separate your finances.
You can use a checking account to monitor your daily transactions, such as purchases, customer payments, and non-sale income. The tax account ensures you have enough funds for tax payments, and the profit account displays LLC earnings, allowing you to make informed decisions on capital expenditure.
The best part is that you can complete your application online. You don’t need to visit the bank physically if they have verified your papers.
All serious organizations need a business bank account. A separate bank account contributes to a more professional appearance to clients, co-owners, and other team members. It also leads to better finance management. When you understand the process, opening an LLC bank account isn’t that challenging, even for non-residents.
Author Bio: Amanda Nelson is currently a professional content writer.