Opening a bank account is the second most important step, only behind forming the LLC. Obtaining an EIN and opening an account provides asset protection and avoids comingling personal and business assets. It also provides a paper trail if you are audited to justify business expenses and helps minimize taxes.
This page will cover how to open a bank account, free account options, requirements and rules, non-resident accounts, single member LLCs and more.
By far, the easiest way to open a business bank account is with Relay. Relay is a no-fee, online business banking and money management platform that helps small businesses take control of their cash flow and get crystal clear on what they’re earning, spending and saving.
Uncomplicate your finances, with Relay.
FDIC insured banking with no account fees, overdraft fees, or minimum balances.
A majority of banks handle business and personal banking. The second easiest option after Relay is to use the bank with your personal accounts as they have your information on file and will only need your limited liability company's details.
Regardless of the institution you choose, they generally require the Articles of Organization, Employer Identification Number (EIN), Operating Agreement to prove ownership, a Photo ID and your SSN.
Going in person allows you to speak with a banker and hopefully develop a relationship. They also provide more guiding as to what's needed than online banks. Wells Fargo, Chase and Bank of America are popular and many clients have used them.
The banks must verify the identity of any owner above 25%. This is referred to as the UBOs (Ultimate Beneficial Owners) and is required for Anti-Money Laundering (AML) and Know Your Customer (KYC) laws meant to fight terrorism and tax evasion.
For US residents this is relatively straight forward. You present your ID and tell them your SSN. For international clients, identity vertification is more difficult, but fortunately newer banks offer a simplified onboarding without needing to visit the US. When you use our LLC formation service, we will open a business bank account for you free of charge.
Each bank has rules unique to them. You must check their requirements individually, but they don't differ too greatly as the laws they follow are the same.
Being a Single Member LLC does not absolve you of the need to open an account. The same asset protection and tax scrutiny rules apply to your company, if not even more so. Judges can be tempted to throw out a SMLLC if the sole-owner does not separate the business from themselves. This is referred to as the alter-ego doctrine for piercing the corporate veil.
Non-residents face unique challenges for the identity verification. It's not always easy, or even possible given visas, to visit the United States of America. Plus, it's rather expensive to book a flight and hotel just for a bank account if it can be avoided.
Five years ago, frankly, there wasn't much to do about the situation. Traditional banks dominated the landscape and there were no alternatives. Since then so called "neo" banks have popped up.
They require a six second video and a copy of your passport. That's it. If they can verify your identity, then you can open your account. No trips or American representative are required.
99% of our clients and people have an easy time with their bank, but the following face large hurdles given federal regulations and general bank wariness:
For these clients specializes institutions are required. For example, cannabis companies often use Credit Unions as they're largely governed by state rather than federal law. These industries are still able to exist and do well, but must go through additional work to find reasonable banking partners. If you fall into the above, please contact us. We have a number of relationships and can make introductions.
LLC Managers have authority over the company and can open accounts, sign contracts, etc. So long as they're listed in the operating agreement it's no problem. The bank will still want to know who the owners are.
Opening a bank account used to be as easy as making a phone call. Those days are gone and now banks face significant scrutiny to ensure they do not finance tourism, assist in tax evasion or evade sanctions list. For US residents this is easy, just show an ID, but for international you must find a willing banking partner.
We mentioned above asset protection and surviving an audit, but there is also the benefit of easier organization and potentially selling the company. Having personal and business funds mix can make planning for projects difficult. It also makes showing a clean set of records to a potential buyer much harder.