Getting a Business Bank Account Opened for Your LLC


After having your paperwork and fees paid, the next step I getting your LLC ready for business is to open up a bank account. This is a pivotal step as it demonstrates that you are truly operating as a proper business, and not as a hobby or a sole proprietorship. Even if you have established an LLC taxed as a single-member disregarded entity, you are still in a better position if you set up a separate account and operate the LLC separately from your personal funds. This helps to make it clear that the LLC is operating independently, and will help to preserve your asset protection shield.

Co-mingling business and personal funds is probably the #1 way to sabotage the asset and liability protections provided by your LLC and will soon have the IRS sending you audit notices.

This is a very important point for you to understand. In order to receive the tax benefits the IRS makes available for LLCs, and to receive the liability protection LLCs have under the law, you must be seen to be acting as an LLC on the outside, but as well on the inside. That means you can’t co-mingle personal and business funds, or use the business’s account as your own personal piggy bank.

Foreign residents take note: although there is no provision in the Patriot Act (that we are aware of) specifically prohibiting a US bank from opening an account for an LLC with foreign-resident owners, the sad reality is that most US banks will refuse, citing the Patriot Act as the reason. There are some options, but they are typically expensive and involve an outside nominee owner.

Getting your LLC’s bank account established allows you to keep business expenses and income separate from your own. You must make sure that business-related accounts are paid from the LLC’s account, and income is deposited into that account as well. Do not sign over checks made out to your LLC to yourself and deposit that money into your personal account. If you need to take money from your LLC, record the transaction as a profit distribution in your LLC’s bookkeeping records, and write yourself a check. That paper trail may seem like extra work, but it is one of the things that will stand between you and a serious problem, should your LLC ever be selected for audit.

When you go to the bank to open your business’s account, it may be easier if all of the people who will be signers on the LLC’s account go together. The Patriot Act has made banks far more vigilant about checking credit histories and identification of check signers. The days of taking a signature card away to have it signed and returned are over. It’s become very difficult for people in different states to sign onto a bank account without appearing at the main bank in person. And, if you have a check signer with a troubled personal financial history that includes bouncing checks, you may not be able to open an account for your LLC at all, at least as long as that person stays on the record as a check signer.

Unfortunately, non-U.S. residents are often barred from opening a bank account in the United States altogether. This doesn’t mean you can’t open a bank account in your home country, but that will depend on local laws. It is often easier for non-residents to use a traditional C Corporation.

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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