Every LLC should open a business bank account. It protects assets by avoiding comingling, and can help save taxes if you are ever audited by making business expenses easier to isolate and justify. Every banking institution is different, but the common set of requirements are:
- Articles of Incorporation / Certificate of Formation
- Employer ID (EIN/FEIN)
- Operating Agreement
- Photo ID
- Business Address
- List of Members (Owners)
The above show the company exists and who owns it. Every bank has different rules, and every banker reads them differently, so you may experience a different set of requirements, but this is the place to start. Ultimately you must check with the bank you have in mind.
Open LLC Bank Account Online
If this sounds like a bit much, don't worry. We include a free bank account opening service for clients who purchase our EIN service. We have most of the information already and make the process seamless so you can focus on running your business. There's no need to visit a branch - everything is done online.
Common Business Bank Rules
As an effort to prevent fraud, money laundering, terrorism and other criminal activity, nearly all institutions will require the following:
- Names and IDs of All Owners w/ More than 25%
- Names of IDs of Anyone with Signing Authority (e.g. CFO)
- Pass KYC, AML and OFAC Checks
- Names of All Owners w/ More than 25%
- Line of Business & Specific Activities
- Contact Address for Everyone on the Account
While this list seems extensive, or even intrusive, most of the details are contained on the Articles, Operating Agreement, EIN and Photo IDs. We also include a resolution to open a bank account in case the bank wants it.
Single Member LLC Accounts
While a Single-Member LLC (SMLLC) is taxed as a Sole Proprietorship, this does not mean you should treat it as one. It should have it's own EIN and business bank account.
If you pretend the LLC doesn't exist (by comingling funds), then a judge is likely to say it doesn't exist and you will not be afforded asset protection, i.e. the corporate veil's limited liability or charging order protection.
If anything this account is the easiest to open as there is only one Member and you don't need to organize everyone to send documentation to the bank.
Can a Manager Open the Account? Yes.
So long as the Operating Agreement states the Manager has the authority to open the account, then a Manager may legally open the account. This ability does not obviate the banks needing to know who the owners of the company are however.
Non-Resident Bank Accounts
Non-Residents face unique difficulties opening accounts. Due to not having a SSN it's more difficult to verify their identities. Fortunately, many online banks have recognized this difficulty and offer online business bank account openings without needing to visit the US. Contact us for more information.
Money Laundering & Sanction Rules
These requirements are meant to establish the business exists, that it has been registered with the IRS (via an EIN), and who the owners are. In the last decade banks have become much more stringent about verifying client's identity due to new KYC (Know Your Customer) and AML (Anti-Money Laundering) laws which have been passed by Congress and the Treasury.
With sanctions against North Korea, Russia, Iran, Syria, etc. banks are now checking all clients against OFAC (Office of Foreign Assets Control) to ensure no owner, manager or signer is subject to sanctions.
While this undoubtedly sounds like a lot, it's ultimately all done by the bank and is largely automated using the Photo ID and SSN you provide them. It's sent through an automated system with most bankers being able to establish your account the same day and provide account numbers, routing numbers, and a debit card.
Account Opening Benefits
The three largest benefits are asset protection, organization and taxes. Running your business through your personal account ignores the corporate formalities and can lead to a judge piercing the corporate veil. It also makes it unclear when doing books what expenses are truly business expenses. The same issue occurs if you're audited and now forced to explain every expense.
If you have partners, then you also run the risk of a partnership dispute if you cannot provide accurate accounts and numbers. Knowing that your money, or theirs, is tied into someones personal account (and potentially subject to a personal creditor's seizure) does not bode well.