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f you’re running a limited liability company (LLC), opening an LLC bank account to separate your personal and business finances is a smart move. The best business checking account for LLC helps you do bookkeeping more efficiently and makes tax reporting more straightforward. Whether your LLC has several owners or a single-member LLC, opening a business checking account helps preserve your limited liability status.
Let’s discuss why LLC business accounts make sense and list the best business checking accounts for small businesses.
Why do LLCs need a business bank account?
One of the main advantages of forming an LLC is that you get a separate legal identity and limited financial liability. In case of a lawsuit, the LLC will be sued instead of you, shielding you and fellow LLC owners from legal and financial liability.
However, if your LLC doesn’t have its own business checking account, your personal and business finances will mix. In such a case, your personal assets would be in danger of seizure if you got sued and lost the case or failed to honor your commercial obligations, like failing to pay vendors.
If your small business is an LLC, but you don’t have a business bank account, you may negate your liability protection if creditors pursue your business because of non-payment. Without liability protection, creditors can find ways to reclaim their money by coming after the LLC’s owners’ assets.
Thus, every small business registered as an LLC should have a business bank account, even if no federal or state law mandates LLC owners to operate a separate business bank account. Fortunately, you can choose from many business bank accounts depending on what you want to accomplish. Your options include:
- Business merchant account: Ideal for processing electronic payments and credit and debit card transactions.
- Business checking account: Ideal for daily transactions such as withdrawals, bill payments, purchases, and deposits.
- Business savings accounts: Ideal when your business has excess capital you want to save and earn interest on.
- Business credit card account: Ideal when you need to tap into a business line of credit and gradually build your business credit score.
Benefits of business bank accounts for small businesses
Small business enjoys the following benefits when they open a business bank account:
It makes tax reporting more manageable
When you manage all your business financial activities under one bank account, you create a central source you can reference in real time. Thus, it’s easy to pull up or quickly prepare the financial documents the Internal Revenue Service (IRS) requests from small businesses. These tax documents include:
- Business expense documentation
- Year-end balance sheet
- Year-end business bank account statement
- Profit and loss statement
While you’ll probably need an accountant to prepare these tax documents for IRS reporting, it will be easier and faster as your bank account statements will show essential details of each transaction. These are details such as transaction date, amount, and recipients.
Adds an aspect of professionalism and credibility to your business
To complete your business operations, you must pay vendors, employees, deliveries, and other recurring expenses. Settling all your bills from one business account for LLCs with your business name indicates professionalism. Customers will feel more secure when sending money to a business account than a personal account. Particularly if they’re paying online and it’s their initial interaction with you and your business.
Naturally, customers and vendors trust a business bank account more because they know it requires sensitive and extensive documentation like an employer identification number (EIN), business license, personal identification, and Articles of Organization to open a bank account for an LLC.
Opens more business credit options
Because your business bank account records all your financial transactions, it provides proof of income and cash flow that lenders need when reviewing a loan application. When you have accurate financial documents systematically detailing your company’s growth, lenders will have enough information to gauge your company’s cash flow health.
Such information helps them make a quick and accurate loan decision. That way, you can access as many funds as your business qualifies. Lenders can evaluate your company’s cash flow health, which tells of your ability to repay a loan.
It enables you to track the financial performance of your company
When tracking the financial performance of your company, you rely on your cash flow statement, balance sheet, and income statement. Collecting the data needed to prepare these documents is time and resource-consuming without a business bank account. However, a business bank account archives all the transactions you complete via the account.
You can retrieve the transaction records for a particular period and leverage the information, plus other relevant financial data, to review your company’s performance. Evaluating the performance of your business is essential because it helps you shape growth strategies and know what is working and what is not.
Are big banks good for LLCs? (Nope)
The terms and conditions of big banks may be prohibitive to LLCs, particularly those without a solid financial background. The drawbacks of big banks compared to small credit unions and community banks include:
- Higher account management fees
- Higher loan interest rates
- Most big banks offer automated customer service
- Higher minimum monthly balance
- Higher minimum opening deposit
- Some banks charge customers for using out-of-network ATMS
Fortunately, more players have entered the banking industry and dislodged the traditional monopoly of big banks. Today, you’ll likely find some of the best business checking accounts for LLCs at credit unions, online banks, and community banks.
List of the best business bank accounts for LLCs
Here are our top ten picks:
- Novo online business checking account: Best for independent contractors, solo business owners, S-Corps, and freelancers who operate single-member LLCs.
- Bluevine business checking account: Best for LLCs desiring digital banking and a high annual percentage yield (APY).
- Relay business checking account: Best for LLCs desiring flexible and cost-free online banking. Relay has no account charges and overdraft fees, and you can open up to 20 checking accounts.
- Grasshopper checking account: Best for LLCs desiring a digital account with zero monthly fees, unlimited transactions, a 2.25% APY, and free VISA debit card.
- Lili basic business checking: Best for LLCs seeking a checking account that’s also a savings account and with many modern features such as multi-user access and integrations with external banks.
- LendingClub tailored checking account: Best for LLCs seeking digital banking and ATM accessibility. This business account for LLCs supports rich digital integrations such as Quicken and QuickBooks and reimburses ATM fees without limits.
- Mercury business bank account: Best for cash-rich LLCs as it provides FDIC insurance coverage of up to $5 million and offers up to 5.43% APY.
- Navy Federal Credit Union: Best for LLC owners who are retired or active service members, Department of Defense employees, and families of military members.
- U.S. Bank Silver Business Checking: Best for LLCs looking for a free checking account from a traditional big bank.
- AXOS business checking account: Best for LLCs looking for the most cost-effective online bank. AXOS charges zero monthly fees, offers unlimited transactions, has no ATM fees, and refunds out-of-network ATM charges.
Why Novo business checking account tops the list
Novo is more than a business checking account. It offers faster and more efficient ways of transferring money through ACH transfers or Express ACH. You can also send and deposit checks on the Novo app, enjoy unlimited transactions and get smart, done-for-you business insights. Novo’s checking account has no monthly fees, and your deposits are FDIC-insured for up to $250,000.
Sign up for Novo’s business checking account today and experience first-class online banking experience and the best business checking account for LLCs.
Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.
Novo is a fintech, not a bank. Banking services provided by Middlesex Federal Savings, F.A.: Member FDIC.
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