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Do I Need A Business Checking Account For My Llc

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Do I Need A Business Checking Account For My Llc

Do I Need A Business Checking Account For My Llc

Starting a new business takes time and commitment, but the most important aspect is money management. Most small businesses that attempt this process will open a business checking account to make the company’s legitimacy more concrete.

Checking Account: What Type Of Bank Account Is It? A Guide To Checking Accounts

The sooner you open a business account, the better because it strengthens the relationship with your bank. As you develop this relationship, you may find that your bank will be more willing to help with an access loan for your business so your company can grow.

“Setting up a business checking account ultimately helps keep your business and personal assets clearly separate, provides greater protection for your personal assets, and makes it easier to track your business expenses throughout the year for tax purposes,” says Tony Pica , vice president of business solutions at Navy Federal Credit Union.

To open a business account, you must provide the appropriate documentation, which varies from bank to bank. Some of the personal and business information you need to open a business checking account is:

There are many forms of business accounts, so before you open one, do your research and consider what types of services your company will need. Deposits, invoices and who can sign checks are all things that need to be considered before your account becomes active.

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For new and smaller businesses, there are accounts with lower fees during the initial establishment of the company. These profitable accounts include only the basics, as they are a place to put money and a debit card. If you’re looking for an account with advanced features, you may be able to avoid fees if you provide an accurate forecast of how much money you’ll earn and spend on a regular basis.

You must look at all available banking options and take precautions before opening a business checking account. Pica says you should “shop around and see what deals are available in the small business market. Consider fees, interest, transaction limits, cash deposit limits, account maintenance requirements and access to digital banking tools.

Compared to a personal account, business bank accounts allow your business to secure loans, obtain a business credit card, and process large amounts of transactions. These accounts are also useful when dealing with complex income management and provide the ability to accurately fill out tax returns. Fit Small Business content and reviews are editorially independent. We may earn money when you click on links to our partners. Learn more.

Do I Need A Business Checking Account For My Llc

You should have a business bank account for your company’s finances, regardless of the size of your business. With one, you can keep your personal and business assets separate, which protects both your company and your personal finances. Having a business bank account also allows you to build a relationship with your business bank, which will help you if you need additional banking products, such as retirement planning, merchant services and small business loans.

Getting A Business Bank Account

Almost any business owner can benefit from a small business bank account. If you operate as a separate legal entity, you must have a business account. Many are free to open and have no minimum balance or initial deposit requirements, and some even earn interest.

Small business owners can choose from several business bank accounts. You need to find an account that fits the needs of your small business.

A business checking account works much like a personal checking account. Once you open an account, you can make deposits and withdrawals, write checks, send ACH and wire transfers, and use your debit card to make purchases. Both, however, give you access to overdraft protection and FDIC insurance.

With business verification, the account can be set up for access by one person or more people. You can usually get a few debit cards to help you keep track of your spending. Just like personal verification, you can download the app or visit the website to access your business account information.

Do I Need A Business Bank Account

Linking all of your business transactions to a business account allows you to use financial software, such as QuickBooks, to manage your finances. To learn more about this business accounting software, read our guide to what QuickBooks is.

Keep in mind that opening a business bank account will often take longer and require more paperwork than opening a personal bank account. However, most banks will allow you to open and deposit an account on the same day. Fees for business accounts tend to be higher than personal accounts, and the thresholds for waiving those fees are also higher.

The table below highlights some of the differences between business and personal bank accounts, especially when it comes to costs.

Do I Need A Business Checking Account For My Llc

Typically, personal checking accounts are free or have very low deductible fees and no minimum balance or initial deposit requirements. More often than not, they have no transaction limits, no cash deposit fees, and can be opened in minutes.

Business Debit Card

However, you will not be able to access the bank’s business services, such as merchant services, with a personal account only. If you operate as a separate legal entity, opening a personal account for your business is not an option.

While some banks offer free business checking, usually online accounts only, most traditional banks charge fees that can be waived. Those fee waiver thresholds are usually higher than for personal accounts. Some banks have minimum balance and initial deposit requirements, and there are fees if you exceed monthly transaction limits or cash deposits.

If you’re interested in opening a fee-free account, check out our guide to the best free business checking accounts.

Why do you need a business bank account? There is almost no reason not to open a business bank account to support your small business:

Business Checking Accounts

There are very few disadvantages to opening a business bank account. The items listed here should not deter you from opening an account as these are just things you should know before opening a business bank account:

Once you’ve learned the benefits of a business bank account and decided to open one, there are a few things to consider when choosing a bank for your small business:

Before opening a new account, there are steps to be taken and documents to be submitted. First, check out our guide on how to open a business bank account.

Do I Need A Business Checking Account For My Llc

Depending on how your business is organized, additional documents may be required. Whichever bank you choose will provide you with a list of exactly what you need, but here is a list of documents you will need to provide, regardless of what type of business you run:

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For added convenience, you can choose to use online banking to open a business bank account. Check out our roundup of the best online business banks to discover the right provider for your company.

Although sole traders and single member limited liability companies can legally use a regular bank account for business activities, it is not recommended. If your business operates as a separate legal entity, you must open a business bank account.

You should have a bank account for your business, no matter how small your business is. Furthermore, you should use a business bank account, not a personal bank account. If you earn enough money to include it on your tax return, having a separate business bank account will make your tax preparation easier. This will help you avoid potential problems with the tax authorities.

You should avoid paying personal bills from a business account. This makes it difficult to determine the cash flow of the business, which can cause tax problems. Additionally, if you are a corporation or limited liability company, you can negate the protection of your personal assets by paying your personal bills from a business account. This can get you in trouble with the IRS and open you and your fellow owners to personal liability if the business is sued or fails. Avoid it at all costs.

What Do You Need To Open A Bank Account

While it may be convenient to use a personal bank account when you’re running a very small one-owner business, we recommend that you open a business account instead. Some of the benefits of a business bank account are that it will give your business more credibility with customers, help you build a business relationship with the bank, and simplify tax preparation. At the same time, it limits your exposure to potential tax and liability risks.

Robbie Mansueto is a banking writer for Fit Small Business. He has 10 years of experience as a banking associate in the Bank of the Philippine Islands. She also previously worked as a Client Services Officer at CIMB Securities in Singapore. The US Small Business Administration recommends opening a business checking account as soon as your business receives its own EIN (Employee Identification Number) from the IRS. Setting up an account as soon as possible means you are building credibility as a business owner as soon as possible. This can lead to better chances of applying

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