single member LLC banking, do you have to open a "business account" or can you open a dedicated "personal account"

Question

I have a single member LLC and was wondering about regulations around what banks advertise as "business account" vs "personal account". Do you have to open a business bank account for the LLC or can you open a regular dedicated personal account? What does the law says in this matter?

Here are a few banks I've looked at:

• https://lili.co/
• https://www.bankofamerica.com/smallbusiness/deposits/checking-accounts/

The first one offers an account without a proper "business" label attached. I find it interesting and if law allows, then would use them.

PS: I heard there are regulation differences between the two types of bank accounts and one can get into trouble if audited. This is just hearsay and that's why I asked this question here.

Answer 1

• You must have a separate bank account for the LLC.

https://www.nolo.com/legal-encyclopedia/opening-business-bank-account.html

if your business is structured as a limited liability company (LLC) or corporation, a separate bank account is necessary because your business is legally distinct from any individuals — such as LLC members and managers or corporation shareholders, officers, and directors — and the business’s accounts must be kept separate from people’s personal accounts

• With almost all banks in the US, you can very simply have more than one account. (For example, you may have one for "car expenses" and another one "general" and so on.) This is all you need - just click or call to open yet another account, which will have it's own account number and so on.

• Regarding the accounts labelled "business" accounts by the marketing departments of banks. This means utterly nothing. You can use an account labelled "everyday account!" or "youth saver account!" or "what's in your wallet account". It means literally nothing.

• You must have a separate bank account for the LLC.

Has it been mentioned,

• You must have a separate bank account for the LLC.

"I heard there are regulation differences between the two types of bank accounts..."

That is completely wrong, fortunately. All bank accounts are identical, other than logos/names. The only requirement is:

• You must have a separate bank account for the LLC.

It is absolutely ok to use a so-called "personal" account at a CU or bank for your LLC. However,

• You must have a separate bank account for the LLC.

Thus you headline question:

single member LLC banking, do you have to open a “business account” or can you open a dedicated “personal account”

You can indeed use a dedicated "personal" account.

The terms used by banks such as personal, business, premiumetc are completely meaningless.

Answer 2

The type of bank account doesn't matter, even having a bank account or not doesn't really matter. You just want to be able to simply and easily show that your spending was separate and discernible to this business purpose.

The question is, in event of an audit can you convince an auditor. Don't try to avoid the audit, do every action as if you are trying to pass an audit 8 years from now, or any arbitrarily unforeseeable time in the future.

It would be a lot easier to convince an auditor if there was a separate account that had clear revenue and spending towards a particular business purpose. It would be congruent if it was the institution's business account offering, but easily explainable if it wasn't.

Remember you are appealing to humans that have discretion, whether its an auditor or judge or jury. If you think that human wouldn't take you seriously because you chose the personal bank account even though it satisfied criteria of having easily discernible spending, then don't do it. Otherwise, if you plan on going through the effort of arguing your case and separating your co-mingled records at the time of contingency, then feel free.