Finance Management of Your LLC Formation
If you have decided to go into business by yourself and become the owner and manager of your own limited liability company (LLC), you will most likely have a multitude of questions regarding the financial maintenance of your enterprise.
LLCs are a business formation that comes with an impressive scope for maneuverability. They are relatively simple to register and start up with the help of top online llc formation service – and they come with a couple of alluring perks: pass-through taxation and limited liability. This limitation on liability is the key ingredient at the foundation of building a business this way.
With that in mind, although it is not a legal prerequisite when it comes to making the arrangements for your company finances, having a separate business account for your LLC company is absolutely essential.
The Foundation of LLC Services
Firstly, the entire point of an LLC company is the limitation of liability on you, the owner (or yourself and other members if in a business partnership). This means that your LLC business formation is kept on one side of the fence while your personal assets are kept safely on the other side.
This legal division of your financial affairs between those of your LLC and those of you personally means that your house, car, and other personal, private, assets are protected and will not be seized by debt collection agencies in the event of your LLC going bankrupt. Should your business take a bad hit in any form of legal action against it – your personal assets are safe behind the limited liability barrier.
To not have a separate business account for your limited liability company cancels out the entire purpose of an LLC business formation to begin with.
Requirements for an LLC Services Business Bank Account
Three things you will need to set up a separate business account for your LLC company:
- EIN confirmation;
- Articles of Organization;
- Operating Agreement.
As with the opening of a personal savings and/or checking account at any bank, the first thing you will require at an appointment with a representative of your financial institution of choice will be your personal ID. This can be a passport, driver’s license, or your State ID card.
Then you will need proof of either your SSN (social security number) or your EIN (Employer Identification Number). You will have received an EIN from the IRS (Internal Revenue Service) via the assistance of the online llc formation company you registered with when initially setting up your LLC company.
It is very probable that the bank will tell you that your social security number is sufficient, however, it is strongly recommended that you use your employer identification number instead. This number used for the new business banking account will keep the line between your personal finances and those of your LLC company defined.
Mixing personal finances with the business revenue of your LLC formation is called commingling and doing so leaves you wide open to precisely the liabilities an LLC company structure is designed to protect you from. Thus, it is imperative to keep your business finances isolated from the personal.
It is also worth mentioning at this point that you will be able to have either a debit or credit card (or both) for your new LLC business bank account. Once issued to you, it is essential that you only use any debit or credit features for business activities and never for personal use.
Next, with the help of your LLC creation services, you will have filed Articles of Organization with the Secretary of State. Depending on which state you and your LLC company are located in, this could alternatively be referred to as your ‘certificate of formation.’ The bank will make photocopies of all this formation documentation and keep them: this acts as evidence of the genuine existence of your LLC business.
A side-note to this step in opening a business account for your LLC is that the bank may possibly ask for a ‘certificate of good standing’. This is a certificate, which is also available via the Secretary of State informing the bank that your records are up to date and that the business is currently operational and in legal order. This means the likelihood of being asked for such certification when your LLC has only just gone into business is of course unlikely due to lack of establishment time, but if you open an account for it further down the line, you should expect the possibility of this certificate being requested.
The bank will also require you to show them your LLC operating agreement. This document is an important one, specifically in relation to multi-member LLCs. This piece of paperwork lets the bank know who is permitted to use the account (for the signature-required withdrawal of funds in particular). For MMLLCs, it is considered best for all parties to be present when a business-only account is opened.
Worth noting here is that if there is a wish for each member to have a business credit card assigned to them, their personal credit history will be a factor in the decision by the bank of whether or not to issue them one.
You may also be considering requesting the bank for a company checkbook. Should you do so, something not everyone is aware of – especially first-time entrepreneurs – is that you can ask the bank to begin the first checkbook at #1000 or even at a higher number. This way, you will not have to worry about the possibility of you and your enterprise appearing to be some hopeful business ‘pretender’ dishing out checks (with your LLC business formation name on) but numbered only #001, #002, #009, and so on. Such early numbers may not inspire confidence in the recipient so it is good to know that this can be worked around via a simple request with your bank representative.
The specific documentation requirements can, and often will, vary between institutions, but the above items are essential when arranging the vital separate business account for your LLC company finances.
