While you can use a personal bank account for your LLC, it’s not a great approach. An LLC has to have a dedicated business bank account to get most of the legal and financial benefits that the LLC designation offers. In this guide, we’ll explain the top 5 reasons why you need a separate bank account for your LLC.
1. Protect Yourself from Liability
The number one reason to establish a separate business bank account for your LLC is to protect your personal assets from business liabilities.
If your personal and business funds are mixed together in a single account it’s hard to distinguish which funds belong to you and which belong to your business. In fact, a court is very likely to declare that any bank account that’s used for business transactions belongs entirely to your business. This means that if your business were to face a hefty debt or even declare bankruptcy, any personal funds in the same account as your business funds could potentially be seized.
When your LLC’s funds are segregated in a business bank account, only that account is at risk. Any money you have stored in a personal bank account—including from salary lawfully paid to you by your business—should be safe from legal actions against your business.
2. Simplify Your Tax Preparation
Every business owner knows how difficult and time-consuming it can be to file taxes. However, the process is dramatically simplified if your business finances are managed in a separate account from your personal finances.
When you have a separate bank account for your LLC, you can track all of your business income and expenses through that account. There are no personal payments or non-business-related income streams to worry about. If you use accounting software, you may even be able to link your LLC’s bank account directly to the accounting software to make tax prep easier.
3. Make It Easier to Get a Business Loan
If your business needs a loan, the bank is going to want to take a close look at your business’s finances.
Handing the loan officer a bank statement that includes both personal and business transactions means they’re going to have a hard time determining how much your business makes—and they could decline your loan request. On the other hand, if you hand over a statement that neatly shows all your business’s income and expenses, the loan officer’s job is easy and they can grant your loan request faster.
In addition, many banks require that business loans be paid into business bank accounts. So—if you’re thinking about taking out a loan—your LLC may have to have its own bank account to complete the loan process.
4. Enhance Your Business’s Credibility
Another reason to have a business bank account for your LLC is that it boosts your business’s credibility. Sending payments from your personal checking account doesn’t look very professional by comparison—especially if you work with large companies.
Vendors can receive payments by bank transfer or check with your business’s name and address. You can also ask clients to make payments out to your business.
5. Accept More Payments Easily
Establishing a business bank account for your LLC can also enable you to accept a wider range of payments than just checks and bank transfers. Many business bank accounts accept debit and credit card payments, online payments, and mobile payments like Google Pay or Apple Pay.
The easier you make it for customers to pay, the more likely your business is to be paid on time for services and the more customers you can attract.
The Best Business Bank Accounts for an LLC
Now that you know why you need a separate bank account for your LLC, it’s time to find the right one. We’ll take a closer look at 3 of the best business bank accounts for an LLC.
Lili
Lili is a business banking service specifically designed for small business owners. The platform offers a ton of useful tools such as invoicing software, a write-off tracker, and a savings category to put away money for taxes throughout the year.
Lili business bank accounts are completely fee-free and offer access to more than 38,000 in-network ATMs around the country. Business accounts at Lili also don’t charge overdraft fees or foreign transaction fees, which makes this bank more flexible for your LLC. All accounts include mobile banking and a fee-free Visa debit card for your business expenses.
Anyone 18 or older with a social security number can apply for an account. At least some of your income should be generated through a business, freelance work, or gig work to qualify.
Bluevine
Buevine offers business checking accounts with no fees. There are no minimum balance requirements and your business can make an unlimited number of transactions each month. In addition, Bluevine offers business loans for current account holders, making it easy to get a cash infusion for your business.
Another benefit to Bluevine is that you can create sub-accounts for individual employees. This is a great option if you co-own your business or have a finance manager who needs access to your business bank account. Bluevine also offers automatic bill pay, making it easy to streamline your business’s monthly expenditures.
Bluevine accounts are available for business owners in the US aged 18 or older. There is no minimum deposit required to open an account.
Novo
Novo is another LLC bank account provider offering fee-free accounts with no minimum deposit. The platform offers useful business features like integrated invoicing and reserve sub-accounts, which let you set aside money for taxes and payroll. Novo also has a partnership with Stripe, making it easy to process online debit and credit card payments.
Other benefits of Novo include free mobile check deposits, integrations with accounting software, and support for Apple Pay and Google Pay. Novo also offers a Mastercard debit card and offers international payments with low fees through Wise.
Novo is available for any business owners in the US aged 18 or older. You must have certified articles of incorporation and a signed operating agreement to apply.
.20220126090031.svg){kind=icon}
Conclusion
Having a separate business bank account for your LLC is important for getting all the benefits of your LLC designation. It protects your personal assets from liability, simplifies your business taxes, makes it easier to get a loan for your business, and more.
Ready to set up a business bank account for your business? Open an LLC bank account online today with Lili, Bluevine, or Novo to better manage your business’s finances.
