Most people choose to start LLCs because they want to enjoy the protection that comes with having such an entity. The law looks at you as a separate person from the business unlike with other setups where it does not differentiate between your personal finances and your operations. This distinction safeguards you by ensuring that people cannot come after you. However, for you to safeguard it, you have to go an extra mile for your limited liability company as we cover in this article.
What is a Business Bank Account?
As an individual, you can open an account where you save money, transact on the go and even make transfers. The bank refers to this as a personal account that is what most people have. Nevertheless, as a business, you cannot open such an account and banks will not even allow you to conduct business using it. From an LLC perspective, using a business account would limit your protection, as the law would find it hard to distinguish you and the business finances. As a result, you must open another account known as a business account in which you can keep what you make from your operations, and what you will use as expenses. It ensures you can enjoy separate financial entities.
How to Open a Business Bank Account in Pennsylvania
Choosing the right type of account is quite simple once you understand what’s instrumental to running a successful account. When finding the best bank for your LLC, you need to factor in things such as understanding the costs of running such an account, benefits accrued from such an undertaking and how many services you will get. Accessibility also matters.
1. Choose the Best Type of Account
Most people start with a checking account, in which you will find two option – online checking account or accounts with traditional banks. You can either go with the traditional accounts where you visit the facility directly or you can opt to do everything online. The latter option works for businesses that do not need cash deposits and are often the cheaper alternative. However, you lose out on the variety of services and products seen in the traditional settings. Other than checking services, you may also want to look into savings to help you set aside money for future expenses and business expansion.
Free Account
If you don’t want to maintain a minimum balance, or to pay monthly maintenance fees, consider such an option. It works great if you will not handle cash often. A good example would be Chase Bank.
Traditional Checking Account
Some institutions, like the Bank of America, offer services such as electronic transfers, checks and a vast array of withdrawing and deposit options. With such institutions with a traditional business checking account, you can land yourself an offer, plus they offer low operational fees, introductory offers and are easily accessible, thanks to their wide coverage and flexible network availability. You can even get a huge sign-up bonus.
Online Checking Account
Suppose you do not need to visit a physical branch location or do not have the need to handle cash every day, you can handle your operations online. Institutions such as First Internet Bank have made it easier for people to access their money from the comfort of their homes using an online banking platform without having to incur high maintenance costs.
Business Savings Account
It’s always good to have some money stored away for a rainy day and with banks offering investment options such as money market accounts to go with the business savings accounts for LLC, many people also consider this option. You can easily access the fund if you run into an emergency or need to access the money on short notice or to expand your business.
2. Find the Right Bank
Next comes the question of which institution is most suitable for you. It’s easy to settle on a choice once you factor in:
- Prior Links: If you have ever dealt with a bank before and had a previous banking relationship with it, you would better start there. Your past with the financial institution will enable you to get terms you would not get elsewhere.
- Affordability: Learn how much money you will spend on each transaction and overall costs and fees and add this up, comparing it to other options.
- Coverage: If you need to access your money often, you have to figure out where the ATMs are as well as where the branches are.
- Online Experience: You also need to look into how seamless the online banking experience will be and whether it suits your business.
- Support: Finally, you have to look into whether there’s a possibility of accessing a loan or a credit line if you ever want to expand your business or handle an urgent need.
3. Check the Operational Costs
Different institutions will have different charges and you need to look at how much you will end up paying based on the account type:
Checking
The fees range from:
Monthly fees ($0 to $18 per month);
Transaction fee (40 to 50 cents per transaction);
Cash deposit fee (2% to 3% per deposit);
ATM fee ($2 to $3 per transaction);
Wire transfer fee ($15 to $45 per transaction).
Savings
Monthly fee ($0 to $15 per month);
Monthly balance transfer fee ($5 to $20 per transaction);
Cash deposit fee (2% to 3% per deposit);
Wire transfer fee ($10 to $45 per transaction).
4. Gather the Required Documents
The paperwork needed will depend on the kind of entity you’re starting and you need to check with the institution before initiating the opening processes:
Sole Proprietorship
You will require:
- Personal ID such as Social Security number, personal ID, driver’s license and Social Security card;
- A DBA if you’re conducting business under another name.
Partnership
You will need:
- Business ID which can be anything relating to the business e.g., your registration documents and federal Employer Identification Number (EIN) and a copy an article of organization;
- Organizing documents such as a business partnership agreement and organization documents;
- Others e.g., business licenses and a signed declaration of unincorporated business.
Limited Liability Company (LLC)
You should provide:
- A Business ID such as a federal EIN and a copy an Articles of Organization;
- Registration documents such as form either LLC and organization documents;
- Others e.g., business licenses and a signed declaration of unincorporated business.
Startups
You will need:
- Business ID such as personal identification for a sole proprietorship and Social Security card or EIN;
- Registration documents such as a fictitious business name certificate and an LLC Operating Agreement;
- Others such as license documentation.
5. Open an Account Online or In Person
Once you have the right paperwork and have chosen the best option for you, it’s up to you to follow the bank’s requirements. If you have the options to apply online or in-person, you can weigh both options and decide which one makes the most sense. For example, doing it online means you do not have to wait in line. However, doing it physically enables you to interact with the customer service.
6. Deposit Your Funds
Finally, you can deposit funds to activate the account using any of the means available based on the institution. You can write a check, do an e-transfer or check what else is acceptable such as an electronic funds transfer and QuickBooks. After that, you can send and receive money as you please.
Benefits of Opening an Account
It comes with several advantages such as:
- Protecting you in the event that you get into legal trouble. If someone tries to come after what you have, they can only get paid from what you have made in the business. That way, you can avoid losing what you already had prior to starting your company by separating your business and personal bank accounts.
- Making it easy to know how much you have made and spent and having an easy time when accounting for income tax seasons. If ever you are subject to an audit, it will be easy to show the stream of income rather than having to show what went to your personal expenses.
- Giving off a professional vibe to people who wish to work with you. Investors and suppliers will see that you are serious about your business if you have taken the time to create such an account for it. Even if you operate your business from home, it helps to have such professional services.
- Enabling you to access more credit in the future. As you build a relationship with the financial institution, it will become easier to obtain high amounts of money over time and with better terms. If you want to grow your business, it’s good to consider this.