What is a Business Bank Account?
When you create your LLC, you create a separate entity from yourself. That is an entity with its own life, expenses, income, records and other aspects separate from you. It thus follows that this newly created entity would have a separate account from yours. Opening a Business Bank Account allows you to separate your transactions from it, which comes with benefits which we will cover in this article.
Navigation
Why does an LLC need a bank account?
Here are some compelling reasons to have one:
- Better Record-Keeping: often, people want to save money when starting a business and will try to save costs at every stage. Opening an account might seem like something you can forego in favor of keeping some money in your pocket. However, think about it like this. When paying your taxes, you need to go through a long list of revenues and expenses. And if business details are mixed in with personal transactions, you will have quite a lot of work cut out for you. Are you ready to go through this separation each year? Are you willing to pay for a tax expert to try and segregate the costs? To save time on record-keeping, open a separate account to make tracking much easier.
- Professionalism: look at it this way. There will come a time where you will need to start accepting card transactions either in your physical store or other means. It is especially so when running a retail business where you handle a wealth of transactions each day. Having a separate account makes you look professional and organized, compelling more people to work with you.
- Audit: you will probably do your best to avoid a run-in with the IRS but that is not an assurance that it will not happen. In most cases, you will be in the clear. It helps to have your accounts separate such that the auditor can get on with their work fast. Having combined accounts raises more questions than it gives answers and it can turn a simple activity into a complex inquiry.
- Credibility: suppose you run your business from home, you might need to prove that you are serious about business. Having a business bank account for LLC would be a great place to start. Also, the IRS may have it out for you if you have been recording losses and having this account may help you stay on their good side.
- Loans: the longer you stay with the bank, the easier it will be to convince them to finance your business if the need ever surfaces. It would be hard to get such financing when working with a personal account. The first step lies in signing an LLC resolution to open bank account.
- Protection: Not every business will need such separation. For example, a sole proprietorship will do just fine without one. However, with an LLC, you must have one to protect your limited liability status. The minute you mix your finances, you create a situation where the law can come after your personal funds to cater to business debts.
What is the Difference Between a Business Bank Account and a Personal Bank Account?
The major difference lies in the types of funds held by the two. A business account handles income and expenses that relate to the business operations while a personal account handles personal funds. Most banks will not allow businesses to operate using personal accounts.
Best Business Bank Accounts for LLC
You will notice that such accounts are in abundance in the state and you may face some struggles in choosing what works for you. Below are some options you can consider:
- Chase Total Business Checking: this ranks as best for Rewards
- U.S. Bank Silver Business Checking Package: this ranks as the best Brick-and-Mortar Bank
- Radius Bank Tailored Checking: Best Interest-Bearing Business Checking Account
- Axos Bank Basic Business Checking: Best Online Business Checking Account
- Wells Fargo Platinum Business Checking: Best For Cash Deposits
Please keep in mind that there is no such thing as a universal best option for everyone. As such, research all options available to you and check if they meet your preferences and needs. Factors to look out for include monthly operating fees, minimum allowable balance, how much you need for the deposit, who must be present and other such determinants. In most cases, all members should be present, unless otherwise stated in your resolution.
Are you looking for the best bank where you can open an account for your LLC? Ask Registered Agents who help open an LLC in Virginia every day.
Can I Open a Business Bank Account Online in Virginia?
If you would rather avoid the hustle and bustle that is characteristic of physical banks, you can go for an online LLC bank account. It also works for foreigners who lack standard documents to open a traditional account. Also, where you cannot make it to a physical setting, for whatever reason, this can be a good alternative. Please note that such options have shortcomings in the way of cash deposits and checks. However, they should serve most business purposes. Good online bank accounts for LLCs include Mercury and Azlo.
What Do You Need To Open a Business Bank Account?
Banks are different and you should thus be aware of what your institution of choice will require from you. Generally, you should have the following documents ready:
- Articles of Organization – these should have undergone approval and your business should have a license to operate.
- Your EIN confirmation letter – you must apply for an EIN before opening an account as the bank will require verification of this ID.
- Your ID – you should bring in at least one form of government-issued ID, with at least one having a photo. The other ID can be non-governmental such as a utility bill.
- Operating agreement – some banks may require that you show the guiding principles of the business. Additional documentation may also be necessary based on the institution’s rules.
- Beneficial Ownership – the bank will provide you with this document that outlines the ownership in your company.
In some institutions, all members of the company may have to be present. It would be best to call ahead to figure out if this is the case. Also, where you operate under a DBA, please provide documents that show the same.