How To Open a Business Bank Account
Once your LLC is approved, one of the first tasks you will want to accomplish is to open a business banking account. A business banking account is important for your LLC so that you are not mixing personal income and expenses with your business income and expenses. Most banks or credit unions have a fairly simple process for opening a business account that requires only a few basic documents:
- Articles of Organization
Every bank/credit union will require the state-approved Articles of Organization (sometimes referred to as the Certificate of Organization or Certificate of Formation, depending on what state you are in.) The Articles of Organization typically tell the bank/credit union the LLC's name and address, the nature of the LLC's business, the name and address of the LLC's registered agent, and the names of the owners or managers of the LLC. The Articles of Organization must be approved by the state before applying for a bank account, as this is the only way the bank/credit union knows the LLC is legally authorized to do business in your state.
- The Employer Identification Number (EIN)
The EIN number (also called a Federal Tax Identification Number) is a nine-digit number issued by the IRS and is used to identify a business entity. Because an LLC is a legal entity subject to federal taxation, all banks and credit unions require an EIN number in order to open an account. In short, the EIN is to a business what a Social Security Number is to an individual. TotalLegal is able to obtain an EIN for your LLC at the time you purchase your LLC. Typically, your EIN number will be emailed to you within 24 hours.
- Personal Identification and Information of the LLC's Owner(s) or Manager(s).
Every bank/credit union will require at least one form of government-issued identification of each of the owner(s) or manager(s) who will be listed on the account, as well as their Social Security Number, date of birth, physical address, phone number and email address. Some banks/credit unions will also require each person who will be listed on the account to be physically present when opening the banking account.
Complete the Bank/Credit Union Application
Most banks/credit unions have multiple business account choices that are designed to fit varying business needs and have a variety of options and benefits (online account management, business savings accounts, lines of credit, etc.). It's best to determine ahead of time what type of business account is available at your bank/credit union and which one best suits your needs. Additionally, most banks/credit unions allow you to apply for an account in person, online, or over the phone. Making sure you have all the information needed before you apply will save a lot of time and frustration.
Complete the Signature Card
Each owner (member), manager, or additional person who will have authorized access to the business account will need to fill out a signature card. Each bank/credit union has a different format and design of the signature card, but generally contains the following sections:
- Institution Name and Address
- Owner/Signer's Personal Information
- Type of Account (ex: Business Checking) and Address
- Ownership of the Account (ex: Limited Liability Company)
- Beneficiary Information
- Signature Area
- EIN Number and Tax Information
Know What Documents Your Bank Requires Before You Apply For an Account!
The last thing you want to hear when you show up at your bank/credit union ready to open your account (armed with your personal information, your approved Articles of Organization, and your EIN number) is that they need another document you didn't know about and may not have ever even heard of before.
It;s much easier to know exactly what type of bank account you are going to open for your LLC and to call ahead and ask exactly what documents will be required to open that bank account. Doing so will ensure your time spent applying for and opening an account is not wasted.
Additional Documents That May Be Required
If you have chosen to open an account for your LLC at a bank or credit union that requires more than the standard five items listed above, you basically have two choices: 1) Find a bank or credit union that only requires the standard documents, or 2) Spend the time acquiring the additional items.
- State Business License
- Certificate of Good Standing
- Operating Agreement
- California - can be writtern or oral.
- Delaware - can be writtern, oral, or implied.
- Maine - can be writtern, oral, or implied.
- Missouri - can be written or oral.
- New York - must be written.
- Additional LLC Information
- Date the LLC was established
- Number of employees
- Annual revenue
- A list of all of the owners of the LLC
- The percentage of ownership of each owner of the LLC
Licensing requirements vary depending on the type of business you are operating. Depending on your industry, a license may be required at the federal, state, or local (city, county, or town) level. If your bank/credit union requires a copy of your business license, understand that you must have already applied for and received the license before you can open an account.
A Certificate of Good Standing (also called a "Certificate of Existence" or "Certificate of Authorization") is a document obtained from your state agency that shows your LLC is authorized to do business in that state. The Certificate of Good Standing confirms your LLC is up-to-date on any fees or payments, has filed its annual report, and has paid any applicable taxes. It shows that the LLC is in 'good standing' with the state. Typically, states charge anywhere from $5 to $50 to order a Certificate of Good Standing. Some states allow you to order them online, whereas other states require you to mail in an order form. Keep in mind if your bank/credit union requires a Certificate of Good Standing in order to open a bank account, you will need to know the time frame for receiving the Certificate back from the state. If you want to open your bank account tomorrow, and your bank/credit union requires this Certificate, you may live in a state where you have to mail in an order form, and will have wait for the state to mail you back the Certificate.
The LLC Operating Agreement (sometimes referred to as "By-Laws" by banks) is a document containing rules and procedures that address the LLC's financial and functional decisions. It contains business concerns such as listing of the members and their ownership percentage, voting rights and responsibilities, powers and duties of members and managers, distribution of profits and losses, notice requirements for meetings, quorums, and buy-sell or buyout rules. The Operating Agreement is signed by all the owners (members) and acts as an official contract binding all of the owners to the terms of the Agreement. Operating Agreements are not filed with the state, only kept on record by the LLC. In fact, only five states require LLCs to have an Operating Agreement:
While it is a good idea to have an Operating Agreement in place, if you don't live in one of the states that require your LLC to have an Operating Agreement and you don't have one written yet, you may find yourself scrambling to accomplish this task if your bank or credit union requires one in order to open an account.
In addition to the personal information of the owner(s) of the LLC, some banks/credit unions may ask for some or all of the following information that may not be included in the Articles of Organization:
What the Top Banks in the U.S. Require to Open a Business Account
| Bank Name | Documents Required to Open an Account |
|---|---|
| Bank of America |
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| Capital One |
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| Chase |
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| HSBC |
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| PNC |
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| U.S. Bank |
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| Wells Fargo |
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It is important to note that the above requirements are those that are listed on each bank's website. This doesn't mean that this is all that may be required at your local branch or credit union. Always call to make sure you have the documents that will be required to open the account you desire. If you do your research ahead of time, you should be able to find a bank or credit union that has the type of account that will meet your needs and has the least amount of extra documents required for you to open that account.