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limited liability company (LLC) provides owners with a few notable benefits—like personal liability protection from business debts and lawsuits. However, to maintain the protection, you must keep all aspects of your personal and LLC finances separate. That means you can't use your personal bank account to accept client payments or pay your employee's salaries. Instead, you'll need a business bank account for your LLC.
What to know about business bank accounts
A business bank account provides similar functions as a personal checking account. You can use it to make deposits, write checks, withdraw funds, or transfer money via the Automated Clearing House (ACH) network. Most business bank accounts come with debit cards, which you can use at ATMs and for online or offline purchases.
While business accounts provide the same functionality as a personal checking account, many financial institutions charge monthly fees for their services. Some banks will waive their fees if you meet certain requirements, such as maintaining a minimum balance or spending a certain amount each month with your debit card. However, the requirements for waiving fees are typically higher than those of personal checking accounts. (Tip: Novo's business checking accounts are no-cost, with no minimum balance requirements!)
When opening a business bank account, look for Federal Deposit Insurance Corporation (FDIC)-insured institutions. The FDIC provides $250,000 in coverage for accounts opened at insured financial institutions. If the bank fails, you'll be reimbursed up to the coverage amount for the balance in your business bank account.
Is my LLC eligible for a business bank account?
Have you ever wondered, "What kind of bank account should I open as an LLC"? Most LLC owners can open a business bank account if they can provide certain documents to substantiate their organization and their identity. A few items that you may need to furnish include the following:
- Articles of organization or similar business formation documents
- Any business licenses required for your state or city
- An employer identification number (EIN), which you can obtain from the IRS
- Ownership agreement identifying all the business owners of your LLC
Every bank has different requirements to open a business banking account, so it's essential to check with your provider to determine what documents they need from you.
Step-by-step guide to opening a business bank account
Follow these steps to open your LLC's business banking account. Or you can skip ahead and check out our guide of Best Business Bank Accounts for LLCs.
1. Determine which bank suits your business needs
Most banks within the U.S. serve both consumers and business owners. Therefore, it's a good idea to shop around to see what features each bank offers and their fees. Don't assume that the bank you use for your personal transactions is the best option for your business needs, too.
Features that your business may benefit from include:
- Access to a debit card
- Personalized business checks
- Wire transfers
- Range of business financial services, such as working capital and credit cards
- ATM or branch access
- Invoicing
- Integrations with the apps and tools you use, such as Stripe, Quickbooks, and PayPal
Some business checking accounts allow you to earn interest on your balance, which can help offset (or eliminate) any monthly fees incurred. Online banking platforms (such as Novo) may include tech-forward features, such as integration with software and apps you use—allowing you to manage business operations alongside your checking account.
2. Gather your documentation
Once you decide on a business checking provider, ensure you have all the documentation needed to open your account. If you plan to open your account in person at a local branch, talk with an account representative to find out what you need. You can also search the bank's website for specific details about the required documents.
Some examples of documents you'll probably need to provide include your business formation details, driver's license or similar identification, and EIN.
Banks typically require you to complete an application when opening a business banking account. The application will ask for additional information about your business. Some of the details you may need to provide include:
- Company address and phone number
- Type of business you have
- Your industry
You may need to speak with a bank representative during the application process, whether over the phone or at a local branch.
3. Fund your account
Once the bank approves your business banking application, you can deposit money into your new account. Most banks accept cash, checks, ACH or wire transfers, and similar resources for funding. If your bank provides a debit card, you may receive it at the time you open your account or through the mail within a few business days.
What are the benefits of a business banking account?
Opening a business banking account provides a few distinct advantages.
Exude professionalism
With a business bank account, you can accept customer credit card payments and checks made out to your company. You can also draft checks under your business name. If you have staff handling your company's finances, you can authorize them to approve daily business banking tasks for you.
Maintain personal liability protection
Separating business and personal checking accounts guarantees you maintain the inherent personal liability protection obtained through the LLC business structure. You lose the protection if you mingle personal and business financial transactions in one account.
Access to business credit and loans
Some banks provide their business banking customers with access to additional financial services, such as loans or credit cards. If your LLC could benefit from financing, a business checking account may make it easier to obtain the funding you need.
What are the drawbacks of a business banking account?
There are a few disadvantages to look out for when opening a business bank account for your LLC—but you can overcome them by choosing a financial institution that aligns with your needs.
High fees
Banks generally charge higher fees for business checking accounts than consumer ones. To avoid the fees, you may need to keep a high balance or have a few direct deposits made to your account each month. Check with your financial institution to learn about the fees they charge and what you can do to avoid them.
Limited FDIC insurance
LLCs with business checking account balances that regularly exceed the FDIC's $250,000 coverage limit may be at risk if a bank failure occurs. You can mitigate your risk by spreading your business assets across multiple financial institutions rather than concentrating them in one single bank.
Opening a business bank account for your LLC is easy with Novo
Owning an LLC provides unlimited earning opportunities, but it's essential to set yourself up for success with a business bank account. When you keep your business and personal financial transactions separate, you'll maintain the personal liability protection afforded to you by the LLC structure.
When you choose to bank with Novo, you can say goodbye to monthly fees. Novo has no monthly minimum balance requirements, and your deposits are FDIC-insured, through a partner bank, Middlesex Federal Savings. You'll have access to all the features you need, including a debit card, personalized checks, ACH transfers, and knowledgeable customer support. Plus, Novo integrates with many apps you might already use in your business, including Square, Stripe, and Shopify. Learn more about Novo's business banking services today!
Novo is a fintech company, not a bank. Banking services provided by Middlesex Federal Savings, F.A.: Member FDIC.
Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.
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