An LLC, or Limited Liability Company, is a legal structure designed to shield business owners’ personal assets from liabilities associated with their business. This structure is essential for maintaining a clear separation between your business and personal finances, particularly if you are a sole proprietor or operate an unincorporated business on your own.

Using a personal bank account for your LLC is not ideal. To fully leverage the legal and financial benefits of an LLC, you need a dedicated business bank account. In this guide, we’ll outline the top 5 reasons why maintaining a separate bank account for your LLC is crucial.

How a Separate Bank Account Protects You from Liability

The primary reason to set up a separate bank account for your LLC is to safeguard your personal assets from business liabilities. When personal and business funds are mixed in a single account, it becomes challenging to differentiate between them. A court may consider any account used for business transactions as fully belonging to the business. This means that if your business encounters significant debt or bankruptcy, any personal funds in the same account could potentially be at risk.

When your LLC’s funds are kept separate in a dedicated business bank account, only that account is at risk. Any personal money, including salary legally paid to you by your business and stored in a personal account, should remain protected from legal actions against your business.

Simplify Your Tax Preparation with a Dedicated Business Account

Filing taxes can be a challenging and time-consuming task for any business owner, but it becomes significantly easier when your business finances are kept separate from your personal finances.

With a dedicated bank account for your LLC, all business income and expenses are tracked through that account, eliminating the hassle of sorting through personal payments or non-business income. If you’re using accounting software, you can often link it directly to your LLC’s bank account, streamlining the process and making tax preparation more efficient.

Easily Secure a Business Loan with a Separate Bank Account

When applying for a business loan, banks will closely review your business’s finances. If you provide a bank statement that mixes personal and business transactions, it will be challenging for the loan officer to assess your business’s financial health, potentially leading to a loan denial. Conversely, if you present a statement that clearly delineates all your business’s income and expenses, it simplifies the review process, making it easier for the loan officer to approve your loan request more quickly.

Additionally, many banks stipulate that business loans must be deposited into a business bank account. Therefore, if you’re considering taking out a loan, your LLC will likely need its own bank account to complete the loan process.

Boost Your Business’s Credibility with a Dedicated Account

Another key reason to have a business bank account for your LLC is that it enhances your business’s credibility. Using a personal checking account for transactions can appear unprofessional, especially when dealing with larger companies. A business account allows you to issue payments and receive funds using your business’s name and address, making your transactions look more official. Additionally, you can request that clients make payments directly to your business, further establishing your professional image.

Streamline Payment Acceptance with a Separate Business Account

Setting up a business bank account for your LLC can also expand your payment options beyond just checks and bank transfers. Many business accounts accept debit and credit card payments, online payments, and mobile payments such as Google Pay or Apple Pay. By offering a variety of payment methods, you increase the likelihood of receiving timely payments for your services and can attract a broader customer base.

Top Business Bank Accounts for Your LLC

Now that you understand the importance of having a separate bank account for your LLC, it’s time to choose the right one. Let’s explore three of the best business bank accounts for an LLC to help you make an informed decision.

Bluevine

Bluevine provides business checking accounts with no fees and offers interest rates of up to 1.5% APY. There are no minimum balance requirements, and you can make an unlimited number of transactions each month. Additionally, Bluevine offers business loans to existing account holders, making it convenient to secure funding for your business.

Another advantage of Bluevine is the ability to create sub-accounts for individual employees, which is ideal for co-owners or finance managers needing access to the business bank account. Additionally, Bluevine provides automatic bill pay, simplifying the management of your business’s monthly expenses. Bluevine accounts are available to U.S. business owners aged 18 or older, with no minimum deposit required to open an account.

Novo

Novo is another option for LLC bank accounts, offering fee-free accounts with no minimum deposit requirements. It provides useful features such as integrated invoicing and reserve sub-accounts for setting aside money for taxes and payroll. Additionally, Novo’s partnership with Stripe facilitates easy processing of online debit and credit card payments.

Additional benefits of Novo include free mobile check deposits, integrations with accounting software, and support for Apple Pay and Google Pay. Novo also provides a Mastercard debit card and allows for international payments with low fees through Wise. Novo is available to U.S. business owners aged 18 or older, with the requirement of having certified articles of incorporation and a signed operating agreement to apply.

Lili

Lili is a business banking service tailored for small business owners, offering a range of valuable tools. The platform includes invoicing software, a write-off tracker, and a savings category to help you set aside money for taxes throughout the year.

Lili business bank accounts are entirely fee-free and provide access to over 38,000 in-network ATMs nationwide. They do not charge overdraft fees or foreign transaction fees, offering greater flexibility for your LLC. Each account includes mobile banking and a fee-free Visa debit card for managing business expenses. To apply, you must be 18 or older with a Social Security number, and some of your income should come from business, freelance, or gig work.

Bottomline

Having a separate business bank account for your LLC is crucial to fully leverage the benefits of your LLC designation. It safeguards your personal assets from liability, simplifies tax preparation, facilitates easier access to business loans, and more.