Why Do LLCs Need A Business Bank Account?
First of all, separate business accounts for LLCs help to protect an entrepreneur’s personal assets. For example, if someone sues your LLC and wins the case, the court will cease both business and personal money.
Also, a separate business banking account will protect your reputation under a separate legal identity, which is your LLC. Hence, if someone has legal questions or claims against your company, the owner will be granted a limited legal and financial liability.
Finally, the best business bank accounts for LLCs help to manage the transaction flows and tax reporting and assess the overall financial performance of your company.
Things To Know When Opening A Business Bank Account For LLC
If you have decided to open a separate bank account for your company, there are some things to remember. Let’s review them more closely:
- Closely examine all the possible pitfalls
The market is oversaturated with extremely profitable offers at first glance. However, the actual deals contain numerous pitfalls. For example, the provider can offer a lucrative annual percentage yield (APY), but the minimum starting deposit is required to be $100,000. Needless to say, it is impossible for small businesses.
- Never neglect the paperwork
Make sure that you have all the necessary documentation for creating a business account. Otherwise, the integration process will take much longer or even lead to the refusal of your application.
- Use only the EIN number for the LLC business checking account
Some banks allow or even encourage entrepreneurs to use their Social Security Number instead of Employer Identification Number. Never do this, as EIN is much better for security, fraud prevention, and record keeping.
What To Consider When Choosing A Bank
When you already have a clear vision regarding your future business account, there is another headache. We mean selecting the bank that you will cooperate with. It’s probably the most crucial thing to consider, as you wouldn’t like to change the bank partner every year. So, make your life easier with our step-by-step guide on selecting the best business accounts for LLC:
Fees
Obviously, each business would like to get a sufficient solution with no fees at all. But, most likely, you will need to compare the fee structure of each bank to see if the fees charged are really worth the benefits you receive. For example, there might be monthly payments, but free checks are offered. Or you are charged for each transaction, but the maintenance is granted for free. Other common fees across most LLC bank accounts may include overdraft fees, minimum balance fees, wire transfer fees, or returned deposit fees.
Interest Rates
One of the most common features many banks offer is earning interest rates on the deposited funds. Of course, this is not the prioritized feature for businesses with dynamic funds flow. However, if a certain amount of funds stays within your business account for a certain time, you can earn a bit with interest rates. For example, the best banks for LLC business accounts offer relatively high APY for 12-month deposits. Yet, you will not be able to withdraw them before the stipulated term. So, never put all the funds into interest rates.
Access To Branches
Another important factor to consider when selecting the bank is access to its branches. Even if you like to do everything online, it may be useful to have the branch nearby. For example, not every bank offers perfect online customer support. Also, some banks apply a fee for using an out-of-network ATM. So, if you plan to withdraw at least some cash from time to time, the nearby branch access will grant you ATM access as well.
Digital Services
In contrast, these days, the best banks for LLC accounts offer a considerable level of digitalization. You should be able to transfer funds between accounts using only your phone within a user-friendly mobile app or online cabinet. Moreover, the ability to see the transaction history and statements online, as well as compatibility with mobile banking applications, is essential. Ideally, you should be able to sign the necessary documents online. Such features provide you with the ability to perform everyday banking tasks fast and conveniently.
Account Options
When considering which bank to select, you should also remember that there are different business accounts tailored for different types of business. So, always take a look at all options offered before selecting the best one. For example, a merchant account would be the most suitable if your clients mostly pay with electronic payment methods and credit cards. A business credit card account is perfect if you are only starting a business and want to build your business credit score. Business savings accounts offer a huge interest rate, whereas business checking accounts are ideal for LLCs with constant cash flows.
Fraud Protection
A thriving business always comes with strong security measures implemented at every level. Hence, the best business account for LLC has at least a multi-factor authentication to add an additional layer of security to your account. By default, there should be encryption of transmitted data, which will protect you against unauthorized access. As for fraud detection, an ideal business bank account has real-time transaction monitoring or alerts for suspicious activities.
Minimum Opening Deposit
Not all banks want to deal with small or even medium businesses. So, they implement a high deposit threshold for opening an account or charge bigger fees for smaller opening deposits. It is not a problem for well-established companies, while the best small business bank account for an LLC will be the one with no minimum deposits and zero-balance fees. Therefore, always check all the conditions for each type of account.
Reputation And Reviews
Reliability is another paramount criterion for the bank when you are choosing the best LLC bank account. We advise you to look into the bank’s adherence to regulatory guidelines (possessing relevant licenses) and its compliance with industry standards. Do not neglect to look into the past of the bank, whether there were any problems like data leaks, and how they addressed them. Remember that a trustworthy provider will demonstrate solid financial standing and have a high industry ranking and positive customer reviews.
How To Open A Business Bank Account For An LLC
Now that we have settled what the signs of the best business bank accounts for LLCs are, you may want to know where to begin. Hence, our team has prepared a detailed step-by-step guide for choosing the bank and receiving the first checks.
Choose A Bank Or Credit Union
The first and most important thing to do is to research the available providers on the market. Your goal is to find the solution with the best ratio of cost/sufficiency. We know it might be a challenging task, so our team of experts has developed the eight most important indicators worth considering the banks available above.
Gather Your Business Documentation
Before contacting the bank, make sure you have all your documentation gathered and organized for further steps. You will find the exact list of necessary documents on the website of the bank, as it can vary. But, generally, you will need an Employer Identification Number (EIN), certain formation documents (e.g., letterhead of the company, operating agreement, ownership agreement, etc.), business name, and address.
Set An Appointment With The Bank
The next stage in opening a business bank account for an LLC is contacting the provider. Use the website of the bank and fill out the application form, where you indicate what services and payment solutions you need. Also, you will be asked for some basic information about your company. Afterward, the manager will contact you and set an appointment.
Complete The Business Account Application
If you made sure that this bank can address all your needs and really offers the best LLC bank accounts, it’s time to create an official application. Be ready to provide all the documents on your LLC and maybe some additional info to complete the application.
Provide Personal Information
Of course, to make the application 100% full, you will also need to provide some of your personal information. Usually, it’s a valid ID, place of residence, personal phone number, and email. Also, you will be asked for the date of birth and Social Security Number (SSN).
Make Your Opening Deposit
If all the necessary information is provided, the bank will review it and approve your request. After you get a notification with the application authorization, the creation of your business account for the LLC is at the finish line. Still, you will need to make your opening deposit (the sum usually varies between $100 and $100,000).
Accept The Business Banking Agreement
Within a few working days after your transaction is completed, the bank will offer your LLC the official agreement. The document will contain all the terms of your cooperation, including services you ordered, exact fees, contract termination causes, etc. Carefully review it and sign if everything suits your company.
Activate Online Banking
Once the provider sends you a notification that your bank account is completely ready, enter and activate it. Spend some time to learn how everything works and create a user manual for co-workers (if needed). Also, use the dashboard to decide who is authorized to access it and connect it with your bookkeeping software.
Get Approved And Receive Your Cards And Checks
If everything is done right, your access to the account will be approved, and you can start using it for daily transactions. Update all the payment methods for your business, and start managing the cash flow. We advise you to keep accurate records of all deposits and withdrawals and conduct constant reconciliations to avoid problems with taxation.
The Best Business Bank Accounts For LLC
Even though you are now familiar with the process of opening an account, choosing the bank is still time-consuming. Hence, we have meticulously selected the providers of best business accounts for LLC on the market. Let’s review them:
| Product | Fees | Interest rates | Benefits | Customer service |
|---|---|---|---|---|
| AXOS | From $0 to $10 per month | From 0% to 1.01% | ATM fee reimbursements | 24/7 phone support |
| Novo | No fees, but $50 is an opening deposit | 0% | Great mobile app, free ATM access | Phone support during business hours |
| Bluevine | No monthly fees, but $4.95 per cash deposit | Up to 2% | Ability to pay bills, get small loans, and earn APY without monthly fees | By phone, email, and chat during business hours |
| Lili | From $0 to $4.99 per month | From 0% to 1% | A build-in expense tracking | Email support during business hours |
| Chase business | From $15 to $95 per month | Unknown | Deposits within 24 hours | By phone and email during business hours |
Best For Digital Businesses
AXOS
Minimum start deposit: $0 - $25,000
Minimum balance: $0 - $5000
APY: 0% - 1.01%
Monthly maintenance fee: $0-$10
ATM fee reimbursements: Yes
Mobile banking: Free in advanced plans
Business perks: QuickBooks integration, small business loans, 50 checks free
Axos is a neo-bank offering all its services online; hence, you can manage everything remotely. The provider offers 4 plans for your LLC business bank account. Most of these plans charge very low fees with minimum requirements for the cash balance. However, AXOS is not suitable for earning huge interest rates.
Pros:
- 4 different plans
- No monthly fees
- Unlimited transactions
- Free mobile banking
Cons:
- No physical locations
- Relatively low APY
Best For Startups And One-Person LLC
Novo
Minimum start deposit: $50
Minimum balance: $0
APY: 0%
Monthly maintenance fee: $0
ATM fee reimbursements: Yes
Mobile banking: Free
Business perks: Free ACH and wire transfers, QuickBook compatibility, “set aside money” feature
Novo offers the best business account for an LLC consisting of one person. The reason for that is hidden in the fee structure: Novo does not charge any fees and has no minimum balance requirements. Even the classical wire and ACH transfers are completely free. It is also compatible with bookkeeping software. Yet, if you expect to earn interest, then Novo’s is not one of the best LLC bank accounts for you.
Pros:
- Unlimited invoicing
- All payment methods are free-of-charge
- Easy integration with other software
- Compliance with the best industry standards
Cons:
- No APY
Best For Small Business Bank Accounts For LLCs
Bluevine
Minimum start deposit: $0
Minimum balance: $0
APY: Up to 2%
Monthly maintenance fee: $0
ATM fee reimbursements: Unknown
Mobile banking: Free
Business perks: Sub-accounts, 2% of interest rates for deposits up to $100,000, business loans
Given that Bluevine is the only provider that offers decent interest rates and charges no monthly fees, it is one of the best business bank accounts for an LLC. Moreover, if you will need to divide your funds, you can open a sub-account. However, be aware that there are ATM withdrawal limits, and you will be charged for using out-of-network ATMs. Also, there is a $4.95 fee per cash deposit.
Pros:
- Very few fees
- Sub-accounts available
- Huge APY
- Free checkbooks
Cons:
- Out-of-network ATM fees
- Cash deposit fees
Best For One-Person Businesses
Lili
Minimum start deposit: $0
Minimum balance: $0
APY: 0% - 1%
Monthly maintenance fee: $0 - $4.99 per month
ATM fee reimbursements: Unknown
Mobile banking: Free
Business perks: A build-in expense tracking, tax optimization tools, unlimited invoices through mobile app
Both Lili Standard and Pro bank accounts do not ask for a minimum open deposit and do not charge you when the account balance drops down to $0. Also, the best small business bank accounts for LLC by Lili have no monthly maintenance fees in the standard account and charge a small $4.99 for premium features. Those include cashback, a free debit card, cash flow tools, and much more.
Pros:
- No minimum balance is required
- User-friendly mobile application
- Additional security layers
- Two types of business bank accounts
Cons:
- No APY with free account
Best for Medium and big merchants
Chase Business
Minimum start deposit: $0
Minimum balance: $2,000-100,000
APY: Not specified
Monthly maintenance fee: $15 - $95 per month
ATM fee reimbursements: Yes
Mobile banking: Free
Business perks: Cashbacks, bank cards payments with POS, bills payments with mobile apps
Chase Business is among the best banks for LLCs with bigger financial capabilities. With all 3 available plans, you need to maintain a few thousand dollars in your account otherwise you’ll pay significant fees. However, Chase Business is perfect for those who love to maintain business processes through personal visits to branches or use ATMs often.
Pros:
- $300 bonus for the first deposit
- A well-developed infrastructure of ATMs and branches
- No requirements for the minimum deposit
- Mobile banking is available
Cons:
- Impossible to open an account without a personal visit
- Big fees
Final Thoughts
To summarize, opening a business bank account for an LLC allows every type of business with limited liability to manage its cash flows way much easier. Most banks provide fast, all-in-one solutions with convenient mobile apps, so you can deposit, withdraw, and earn interest without the need to visit a branch. However, there are numerous providers with different conditions and benefits, so the biggest challenge is to select the best bank.
