How to open a US business bank account for your LLC

Why the LLC needs its own account

• Liability protection. An LLC protects the owners because it is treated as separate from them. Paying personal bills from the business, or business bills from a personal card, blurs that line. In a lawsuit, that blurring is one of the things a court looks at when deciding whether to hold owners personally liable. See business account vs personal account.
• Clean books. When every transaction in the account belongs to the business, bookkeeping and tax returns come straight from the bank statements.
• Tax filings. Money moving between you and the LLC has to be recorded, and for a foreign-owned single-member LLC it is reported on Form 5472. A separate account makes every such transfer visible.

What the bank will ask for

Requirements vary between banks, but most ask for:

• The stamped formation document from the state, such as the Articles of Organization.
• The EIN confirmation from the IRS. See what an EIN is if you do not have one yet. If you have lost the confirmation, see how to get a 147C letter.
• The operating agreement, which shows who owns the LLC and who can act for it.
• Identification for each owner and signer, usually a passport or driver's license.
• A certificate of good standing if the LLC is not newly formed. Some states issue these free online.
• A description of the business, its expected monthly activity, and where the money comes from.

Banks must identify the people behind a business account. Under federal customer due diligence rules, that generally means each individual who owns 25% or more of the LLC, plus one individual with significant control, such as the managing member. Expect to give their names, addresses, dates of birth and identity documents.

Choosing where to bank

Traditional banks and online business accounts

You can open an account with a traditional bank, usually in a branch, or with an online business account provider. Many online providers are technology companies rather than banks. They hold customer money at one or more partner banks, which carry the actual banking license and deposit insurance. That is not a problem in itself, but it matters when you check insurance and what happens if the provider itself runs into trouble.

What to compare

The trade-offs between fintech accounts and traditional banks are in online vs traditional banks for an LLC.

Deposit insurance

The FDIC insures deposits at insured banks up to $250,000 per depositor, per insured bank, for each ownership category. An LLC's account counts separately from its owners' personal accounts. When an online provider uses a partner bank, the insurance comes from that bank, and it only protects you against the bank failing, not the provider. If your balance may go above $250,000, ask how the provider spreads funds across banks.

Opening the account, step by step

1. Collect the documents

   Make sure the LLC's name matches exactly across the state filing, the EIN letter and the application.

2. Choose the bank or provider

   Check their eligibility rules before you apply, especially for your industry.

3. Apply as the LLC, not as yourself

   The account holder is the LLC, using its EIN. You are the authorized signer.

4. Answer the due diligence questions

   Describe the business specifically. "Consulting" or "online sales" with no detail slows reviews.

5. Fund the account from your personal account

   Record the transfer as a capital contribution in the books. A foreign owner reports it on Form 5472.

Running the account

• Pay yourself by transfer, not by paying personal bills from the business account. How to record it depends on how the LLC is taxed. See how to pay yourself from an LLC.
• Use a business card for business spending.
• Reconcile the account every month against your books.
• Keep the statements. They are the backbone of your tax records.

For business spending, a card in the LLC's name keeps purchases separate too. See business credit cards for a new LLC.

Common mistakes

• Opening the account in your own name instead of the LLC's.
• Mixing personal and business spending "just this once".
• Applying before the state has approved the LLC or before the EIN arrives.
• Assuming every online account is a bank with direct deposit insurance.

Why accounts get frozen or closed, and how to avoid it, is covered in why banks freeze new LLC accounts.

This guide is general information. It is not tax or legal advice for your situation.