Best Business Checking Accounts for LLCs

Small business owners and entrepreneurs have been moving toward forming limited liability companies (LLCs) due to their flexibility, personal asset protection, and tax advantages. However, one vital mistake new business owners make is not understanding the need for a dedicated business checking account and the benefits it provides in terms of legal compliance, financial management, professionalism, and risk mitigation.

All LLCs have specific banking needs that differentiate them from other business structures. It's imperative that LLCs maintain a clear separation between personal and business finances to maintain protection for limited liability. The unique banking needs of an LLC require a dedicated business bank account to ensure the LLC remains in good standing with legal and financial regulations. Every LLC owner should consider a business checking account as an essential aspect of their business' long-term success.

Why LLCs Need a Specialized Business Checking Account

Limited liability companies are required to separate their business and personal financial records. This includes having a designated business banking account. Although LLCs aren't required to have a business checking account, they need to have a designated bank account of some type for their business.

With a separate business bank account, owners can provide financial transparency resulting from the legal separation of their personal and business accounts, offer a higher level of professionalism when dealing with clients and vendors, streamline accounting and tax filing processes, and take advantage of the banking features that business-specific accounts offer.

Legal separation of personal and business finances

The legal separation of an LLC owner's personal account from their business checking account preserves the protection a limited liability business offers. Having a separate account for the business helps maintain a clear legal separation between personal finances and business finances. A dedicated business account also makes tracking income and expenses specific to the company easier, which is essential for financial transparency and legality.

Professionalism in dealing with clients and vendors

Using a personal account for business transactions lacks professionalism and sends a less-than-ideal message to your clients and vendors. With a checking account that was created for your business, you add a professional appearance to your company's name, demonstrate credibility to clients, and convey a message of trustworthiness and commitment to financial best practices. It helps you present your business as a reputable and well-organized entity.

Streamlining accounting and tax processes

By maintaining separate business and personal checking accounts, you can streamline accounting, bookkeeping, and all tax filing processes and make them easier to manage. With a dedicated business account, all your business-related income and expenses are in one place, offering clarity and organization. This makes transactions easier to categorize and track.

Having separate accounts helps prevent the commingling of personal and business funds, reducing the risks of errors in your financial records. This is crucial for maintaining accurate records and simplifying tax reporting. When it's time to file your business taxes, having a separate account allows you to identify your business income and expenses. You'll be able to claim tax deductions, and in the event of a tax audit, a well-organized financial record can help make the process more efficient and much less stressful.

Taking advantage of business-specific banking features

To attract and support business customers, many banks offer a range of services that business customers can take advantage of. Some of these services include:

• Business loans and credit
• Merchant services
• Business savings accounts
• Overdraft protection
• Online banking tools
• Business credit cards
• Payroll services
• Business insurance
• Financial advice
• Specialized support
• Rewards programs

Educational resources for business owners to expand their business The specific advantages and services offered vary from bank to bank, so it's advisable to shop around and compare offerings to find the bank that best suits your business' financial needs.

Key Features to Look for in a Business Checking Account for an LLC

Finding the best checking account for your LLC involves shopping around and finding a bank that has offerings that fit your specific needs and preferences. Some of the key features you need to look for include:

• No or low monthly fees: Look for an account that offers fee waivers or discounts for businesses that maintain a minimum balance. If there are fees, make sure they're reasonable.
• High transaction limits: Consider the number of monthly transactions you'll need to make, and make sure the bank you choose can accommodate that. Some banks offer unlimited transactions, while others have clear limits. Banks that have limits often allow customers to go past them, but they may have to pay a per-transaction fee once they exceed them.
• Integrated accounting software tools: These tools may reduce manual errors, help streamline workflows, and optimize resource utilization.
• Online and mobile banking capabilities: Make sure the account you sign up for has online banking so you can check your balance anytime, anywhere. Online banking services can also enable a business to transfer funds, pay bills online, and contest an incorrect transaction.
• Overdraft protection and other financial safeguards: Look for a bank that offers overdraft protection options so checks aren't returned unpaid.
• Multiuser access with different permission levels: If your business partners ever need to use your account, having a bank that allows multiple users on the account is a good idea.
• Interest-bearing options: While business accounts don't often have high interest rates (or pay interest at all), some banks offer the benefit of earning a small amount of interest. You should compare interest rates if this is a factor for your business.
• Availability of merchant services: Some banks offer a range of financial services tailored to business accounts, such as payment processing, setting up payment gateways, and possible loyalty programs. When shopping around for a new account, look to see if these options are available.

Top Business Checking Account Options for LLCs

Let's compare some of the top banks offering LLC checking accounts and compare them by reputation, key features, and fee structures.

Bluevine

Overview and reputation: "With no monthly fees, an impressive APY, and increased FDIC insurance coverage, Bluevine is a solid business checking option for savvy business owners who don't make regular cash deposits." – NerdWallet

Key Features Beneficial for LLCs:

• Interest Rates: Earn up to 2% APY
• Lending: Funds available with a click and no opening or prepayment fees
• Rewards and Benefits: Deposit cash and checks at Green Dot locations
• Support: Phone support during business hours, as well as email, chat, and support docs
• Fee Structure: No maintenance fee - $4.95 per cash deposit

Novo

Overview and reputation: "With (almost) no fees and unlimited refunds for ATM charges, Novo business checking is a good option for small-business owners on the go." – Nerdwallet

Key Features Beneficial for LLCs:

• Interest rates: Earn 0 percent APY
• Lending: Business financing options of up to $75,000
• Rewards and benefits: Free ATM access, discounts on some software, and direct integration with common platforms, such as Stripe and Shopify
• Support: App and email support, support docs
• Fee structure: $50 to open

American Express

Overview and reputation: "The American Express Business Checking account checks a lot of boxes, with no monthly or incidental fees and a competitive APY." – Nerdwallet

Key Features Beneficial for LLCs:

• Interest rates: Earn 1.3 percent APY on up to $500,000
• Lending: Between $2,000 and $250,000; no prepayment penalty
• Rewards and benefits: Membership reward program
• Support: Via phone or app
• Fee structure: No maintenance fees

Capital One

Overview and reputation: "Capital One business checking boasts unlimited transactions—a rare feature from a brick-and-mortar bank—but its service area is small, and its opening deposit is high." – Nerdwallet

Key Features Beneficial for LLCs:

• Interest rates: Promotional interest rate for the first 6 months—afterward, the rate is based on a standard interest rate, which is variable
• Lending: Business credit card, loans, and lines of credit
• Rewards and benefits: Unlimited digital transactions
• Support: Full-service support
• Fee structure: Basic checking accounts have a $15 monthly fee, which can be waived by maintaining a minimum balance

Considerations for E-Commerce LLCs

An e-commerce LLC should also consider having a separate bank account, but the features it needs differ a bit from brick-and-mortar businesses. These include but aren't limited to:

• Seamless online transactions
• Integration with payment gateways and e-commerce platforms
• Fraud protection and secure online banking features

When all business transactions are conducted online, it's imperative that owners of e-commerce businesses choose banks that offer all the above features to make their online operations and banking transition seamless.

International Considerations for LLCs Doing Business Abroad

Companies considering international banking need to evaluate the most suitable payment methods for their business, such as wire transfers.

Currency conversion rates and fees

Depending on the countries in which the business operates, business owners will need a bank that deals in and manages multiple currencies and can provide competitive exchange rates with low fees.

International wire transfer capabilities

Businesses considering banking internationally need to evaluate the most suitable payment methods for their business, such as wire transfers.

Multicurrency account options

Depending on the countries in which the business is planning on operating, there may be a need to manage different currencies. Owners need to ensure their bank can handle currency accounts and provide competitive exchange rates in that country. Other considerations when choosing a bank for foreign financial markets include regulatory international compliance, tax considerations, and data protection.

Additional Banking Services Beneficial for LLCs

Let's look at some of the most beneficial banking services for LLCs.

Business credit cards

Business credit cards may offer a multitude of benefits for LLCs, including:

• Emergency funding
• Building business credit
• Rewards and perks
• Tracking expenses
• Purchase protections
• Travel benefits
• Convenience

Business loans and lines of credit

For businesses that require access to more funds, business loans and lines of credit may offer the following benefits:

• Access to capital
• Structured repayment options
• Fixed interest rates
• Longer term financing
• Flexibility
• Working capital management
• Quick access to funds
• Emergency funds when needed

Merchant services and POS systems

Merchant services and point-of-sale systems offer valuable tools and services to businesses, which, in turn, may help them:

• Improve operations
• Enhance customer experience
• Streamline financial processes

Payroll services integration

Integrating payroll services may benefit LLCs for many reasons, including:

• Reducing the time and effort it takes to distribute employee wages
• Accuracy in wage distribution
• Compliance with tax laws
• Tax reporting
• Scalability

Common Mistakes LLCs Make When Choosing a Business Checking Account

Getting a business checking account separate from personal finances is a great move for business owners, but many people make a few mistakes when getting an account for the first time. Some of these mistakes include:

• Not reading the fine print on fees
• Overlooking transaction limits
• Failing to consider future growth and scalability
• Not checking integration capabilities with existing business software

Tips for Switching to a New Business Checking Account

When switching to a new business checking account, there are a few steps you'll need to take to make the process as smooth as possible. Business owners can get their new accounts with minimal effort if they plan ahead.

Steps to ensure a smooth transition

1. Evaluate your business’ needs: Before making the switch, assess your business’ needs and consider factors such as transaction volume, account balances, and services required.
2. Research banks: Different financial institutions offer different features and services. Look at account types, fees, interest rates, online banking, and branch locations before making your decision.
3. Ask for assistance if needed: If you encounter any issues or have questions during the switching process, don’t hesitate to reach out for support and assistance.

Handling recurring payments and direct deposits

When you switch accounts, make sure you redirect incoming payments, such as sales revenue or direct deposits, to the new account. You'll also need to update bank account information with payment processors, payroll services, and online payment platforms. Update your tax information and monitor any stray payments that may still come out. It's also beneficial to keep an old account open during the transition, in case payments coming in or going out are already in progress.

Communicating with stakeholders about the change

When switching accounts, business owners need to notify customers and vendors about the upcoming account changes and inform them of the new account details and any necessary payment instructions. It’s also important to notify any employees who have access to the business account of the change and provide the new account details.

Conclusion

Mixing business with personal accounts may cause confusion when starting an LLC, and selecting the right business account is important. By assessing current and future business needs, an LLC can ensure the chosen account aligns with its unique requirements. A well-suited business checking account streamlines financial operations and ensures compliance with banking regulations.

About The Author

Andy Chang

Founder of TheCreditReview

Andy Chang is the founder of TheCreditReview, a review site started in 2017 that is dedicated to helping consumers find the best companies in financial services. Andy is passionate about financial education and wellness, and helping others reach financial freedom. He consistently writes about topics ranging from credit to banking and lending.

Articles by Andy Chang

---