If you’re about to open your business to customers, you might be wondering, “Can I use my personal bank account for my LLC?” Is it even worth the hassle to open a business bank account? Why does it matter?
The short answer: it’s best practice to save your personal bank account for your personal use and keep a dedicated business account. In this guide, we’ll cover what a business bank account is, the types of accounts you might open, and why at least one business bank account is a good idea.
A business bank account is an important tool for any business; it allows an entity’s owners to separate their personal and business funds completely. There are a wide variety of account types available: business checking accounts, business savings accounts, merchant accounts, business credit accounts, and more. These options aren’t one-size-fits-all, but it’s generally recommended for a business to have at least a business checking account.
To apply for a business bank account for your limited liability company, you’ll probably need to have an employer identification number (EIN). This code acts like a Social Security number for a business, and most banks require one to open an account. It’s free to obtain one from the IRS. Your bank might also ask to see your business license or your operating agreement, but that varies from one bank to another.
The benefits of a business bank account far, far outweigh the risks, from liability protection to professionalism and accepting credit card payments.
If you’re worried about the cost of opening a business bank account, don’t worry — our small business banking partners can help.
The most important reason to maintain a business bank account is that it helps maintain your personal asset protection. An LLC has a corporate veil that usually prevents creditors from seizing your personal assets if the LLC gets into financial or legal trouble. But that corporate veil only lasts when the LLC is run compliantly. If not, a judge might rule to pierce the LLC’s corporate veil, removing personal liability protection.
To be compliant, the LLC has to be treated as a separate entity from its owners, especially with its finances. You shouldn’t intermingle your business and personal finances. A separate bank account makes it easier to do that.
When you have to balance your checkbook or prepare your expense reports for tax season, the last thing you want is extra work. But if you had a combined personal and business bank account, you’d have to sift through hundreds of expenses to isolate your business expenses and profits.
Maintaining a dedicated LLC bank account saves you from that hassle. You can easily consult your bank statements for a full look at your business’s finances. Plus, it’s easier to prove your tax documents in an audit when you use a business account exclusively.
Some clients are hesitant to accept personal checks for business transactions; other clients reject them all together. But they’re often quite comfortable taking a business check. That’s because there’s an extra degree of professionalism with a business bank account — and with that professionalism comes more trust.
Granted, a business bank account won’t instantly make your entire business the paragon of professionalism. But it’s a big step in the right direction.
While you don’t have to get a business credit account, it can be advantageous. Just like individuals, businesses can have good or bad credit. And building a good business credit score can give you more purchasing power down the road. Later on, you might find yourself looking to buy an expensive piece of equipment. A good credit score can help you get the business loan or credit limit you need to make that happen.
A business credit card can also be a helpful tool to keep your cash flow going while you’re waiting for clients to pay their invoices. This can be especially helpful for businesses that need to purchase raw materials to make commissioned products. As long as lines of credit are used responsibly, they can make a big difference in your business growth rate.
Opening a merchant account can be another key business decision because it can allow you to accept credit and debit card payments — even electronic payments. With so many customers feeling comfortable shopping online — or just not carrying cash anymore — card payments are a big plus.
Think of it this way: you’d hate to send a would-be customer (and their money) away because you couldn’t take a debit card transaction.
Dealing with business finances can feel overwhelming, but you don’t have to go it alone. ZenBusiness can help. Whether you need to get an EIN, you’re ready to open your first business bank account, or you want a streamlined app for managing your money, we’ve got your back. With our help, you can stress less about red tape and focus on what really matters: helping your business succeed.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
ZenBusiness is a financial technology company and is not a bank. Banking services provided by Thread Bank; Member FDIC. The ZenBusiness Visa® Debit Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. Your funds are FDIC insured up to $250,000 through Thread Bank; Member FDIC.
It’s best practice to have a separate business bank account for your LLC. It facilitates the process of keeping your personal and business finances separate. That’s absolutely essential to protecting your LLC’s corporate veil, making a business bank account invaluable.
For example, if you have a separate business debit card that’s distinct from your private card, you’ll be less likely to accidentally spend business funds on personal expenses.
What’s a “good” business choice varies from business to business. Generally, it’s best practice to create a business that’s distinct from you as a person, which might require a unique name. But for some small business owners, naming your business after yourself makes sense.
If you do go that route, you should be very, very careful to treat your LLC as a distinct entity.
Technically, you won’t find any laws against using a personal bank account for your business. But doing so as an LLC is extremely risky because it’s very easy to intermingle your business and personal funds and not treat your LLC like a separate legal entity. Using a personal account is also unsustainable if you’ll have multiple business owners for your LLC.
Since it’s very easy to obtain a separate business bank account, it’s best to simply open one and not run the risk.
Yes, provided you follow the proper procedure. You can send money from your personal account to your LLC in the form of a member contribution. These contributions should follow the procedure set out in your LLC’s operating agreement. It’s best practice to keep careful records each time you make a contribution.
And remember that after you make a contribution, that money doesn’t belong to you anymore; it belongs to the LLC.
A sole proprietorship doesn’t offer personal asset protection, so there isn’t a corporate veil that needs to be maintained. That said, it’s still very helpful for a sole proprietor to maintain a business bank account to streamline their accounting and bookkeeping.
Every bank has slightly different terms for opening an account, so be sure to read the fine print. Some require a minimum initial deposit and charge a monthly maintenance fee if you don’t meet their minimum balance. Online banks tend to have better interest rates for savings accounts and checking accounts. Some banks charge termination fees when you close an account.
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