Why You Need a Business Bank Account for Your LLC

Women doing accounting for LLC

As an LLC owner, neither federal law nor state LLC statutes require you to have a separate business bank account. Still, there are several reasons accountants, lawyers, and some banks recommend you do.

And the reasons might surprise you!

Together, we’ll look at what those reasons are, why you might need a business bank account for your LLC, the available options, and how to apply for them.

Can I Operate my Business with my Personal Bank Account?

Yes, you can operate a sole proprietorship or an LLC using your personal bank account, but it isn’t advisable. 

Let’s look at why:

Sole proprietorship

Sole proprietorships aren’t required to have a separate business bank account unless they trade using a fictitious DBA name (doing business as). 

However, not having one and mixing your business and personal funds could make organizing your finances challenging come tax time.

Limited liability company

There isn’t a federal law saying an LLC owner must have a separate business bank account, but you may get penalized indirectly if you don’t – such as potentially losing limited liability protection, and “unintentional” tax evasion. 

An LLC is a pass-through entity, and as the owner, you’re responsible for estimating and paying the right amount of tax. If you add your personal finances to the bookkeeping mix, you could have a recipe for disaster.

Why Should You Get a Separate Business Bank Account for Your LLC?

Whether you are starting an LLC or already own one, opening a separate business bank account for your brand transactions makes sense.

It’s easier to track your business income and expenses, helps protect you and other LLC members from personal liability, and improves your brand image.

Business vs personal checking accounts

At first glance, business and personal checking accounts look the same. 

You can use both to make deposits and withdrawals, hold and manage your money, draft checks, pay your expenses, and make purchases using a debit card. 

However, there are several ways a business account can help your LLC that a personal one cannot.

Helps protect your limited liability

The LLC structure provides you with limited liability protection, which can secure your assets should your business face litigation or liability.

If you commingle your personal and business financial transactions, your protection is at risk. 

For example, if you deposit non-business income into your business account or use it for your expenses, you could be removing the curtain of protection between you and your LLC’s legal responsibilities, which could allow creditors to claim against your assets should your LLC be sued. 

A separate business account for your LLC can help prevent that from happening.

Manage your tax season

The U.S. tax season is between January 1st and April 15th.

It’s when individual taxpayers, like LLC owners, prepare their financial reports for the previous year and file a Schedule C form with their tax return form 1040.

By having separate bank accounts, it’s easier to distinguish your profits and losses. And that can help lower your tax bill, as your accountant can determine what expenses are tax-deductible before submitting your tax bill.

Makes bookkeeping easier

A business account also makes bookkeeping easier and tax compliance more manageable, saving you time and reducing your end-of-year accountancy bill.

Because when you have a separate account, it acts as a ledger that enables you to reconcile your bank statements, calculate what you’ve earned, what you’ve spent, and what’s tax-deductible.

Your business account also helps you create a clear audit trail, which is essential if the IRS should audit you. It can also project cash flow, which can help you apply for a business loan.

Provides professionalism and credibility

A separate business account looks more professional to vendors and suppliers, as your LLC business name appears on payments.

It’s also more credible with consumers, which can help influence purchasing decisions.

Plus, business accounts provide your customers with more payment options, and you can allow an employee to look after daily banking needs on your behalf.

More credit options

When you open a business account, you enter the world of business banking, which often comes with optional lines of credit that could otherwise be unavailable.

These credit options, such as business credit cards, overdrafts, and business loans, can help fund your LLC when it’s most needed.

Can provide customer purchase protection

A business account can also increase sales because consumers can pay using debit cards, credit cards, checks, electronic transfers, and mobile payments. 

All of those have inbuilt protection, enabling customers to make multiple and substantial purchases confidently.

Different Types of Business Bank Accounts

There are several business bank accounts to choose from, ranging from standard checking accounts and others with additional features like a business debit card, online banking, 24/7 customer support, and cash management services.

Business savings account

Savings accounts suit businesses with excess capital they’d like to keep and earn interest on. Some banks don’t charge a fee for a savings account if you meet a minimum monthly credit. 


Business savings accounts provide higher interest rates, low to zero fees, and help set aside your quarterly estimated tax payments for the IRS.


A business savings account isn’t suitable for day-to-day business. Most come with tight withdrawal restrictions and have a higher minimum balance requirement than a business checking account.

Business checking account

Business checking accounts are for everyday use and transactions, allowing you to pay bills, make purchases, deposits and withdrawals, use a debit card and business checks. 


A business checking account suits daily business use and ensures legal separation between you and your business, and some offer lines of credit


A business checking account takes time to get and costs more than a personal account.

Business merchant account

A merchant account enables your business to accept and process credit and debit card transactions and other electronic payments. 

Any business that wants to process payments online or via a physical card reader needs a merchant service account and a regular business bank account. 

Merchant accounts aren’t like traditional business accounts, as you mostly use them for transactions, not storage.


A merchant account provides your customers with flexible payment options and protection. 


Most electronic transactions come with fees. Some merchant accounts charge a percentage of each transaction or a flat fee, others are a mixture of both.

Business credit card account

Businesses of all sizes can benefit from a business credit card account.

Accounts provide you access to a pre-set revolving credit line and help build a business credit score and improve your borrowing terms. 

It’s best to use business credit cards sparingly and as a backup to your other lines of credit. 


You have regular access to extra credit, it’s more easily accessible than getting a loan, there’s extra convenience, it’s useable online, and it provides a financial cushion.


Credit cards are more expensive than a credit line or loan, and you’re liable for any debt.

Opening a Business Bank Account for an LLC

The documents you’ll need to open a business bank account for your LLC depend on your state and bank.

But while they can differ, most banks ask for the following:

Social Security Number (SSN)

Single-member LLCs with no employees and aren’t liable for excise tax can use their SSN to open a business bank account. 

You can find your social security number on your SSN card or W-2 wage and tax statement.  

Employer Identification Number (EIN)

A multi-member LLC – or single-owner LLC with employees or that is liable for franchise tax – must use an EIN to open a business bank account.  

You apply for an EIN via the IRS website.

Legal business name

As an LLC owner, you register your legal business name when filing your article of organization. 

Your business name is the official name of your LLC and is not to be confused with a DBA (doing business as).

DBA name

When an LLC operates under a DBA, your bank might request a certified copy of your DBA registration before providing you with a business bank account.

Article of organization

An article of organization is the legal document used to create a legal entity with your secretary of state.

Operating agreement

Operating agreements outline how an LLC with 2 or more members is run and help ensure a single-member LLC remains a separate entity. It should also show which member is the legal signee for the business bank account.

Business licenses

Many small businesses require a business license at either state or federal level to trade.

The business license you need depends on the industry you’re in and where you’re doing business.


To open a business bank account for an LLC, you must designate a signee in charge of direct payments, signing checks, or withdrawing funds. 

It can be one or more members or a manager. The authorization can either be in your LLCs operating agreement or agreed upon with your bank upon opening your LLC business bank account.


Before reading this post, you may have wondered, “Do I need a separate business bank account for my LLC?”

If so, I hope we’ve helped you decide. 

Ultimately, a business bank account for an LLC can provide security, peace of mind, help run your business more efficiently, and free up your precious time.

This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.

Terry is a serial entrepreneur with over 25 years of experience building businesses across multiple industries – construction, real estate, e-commerce, hotelier, and now digital media. When not working, Terry likes to kick back and relax with family, explore Taoism’s mysteries, or savor the taste of fine Italian red wine.