Can You Open a Business Account Before Your LLC Is Fully Set Up?

As a new business owner, so much is on your plate, and one of the top things to consider is opening a business bank account. But when all timelines align perfectly, and it seems that you’re just waiting on the state to process your LLC paperwork and you’re not in receipt of anything official yet but your EIN, receipt of filing, and you’ve got to start processing payments for clients and vendors, what can you do? If you open a business account beforehand, is everything out of whack?

You can open a business account before everything is set up with your LLC, most times. However, to apply and have approval means more than just being fully set up. It means understanding what the banks truly need, what “set up” means to their legal satisfaction, and how it all becomes clear so that down the line, nothing becomes a pitfall or issue.

What Do Banks Need to Know for Approval?

To be approved by a bank for an application is more lax than most assume. A bank does not need your business to be running at full throttle with state approval for them to feel comfortable lending. All they need to know is that your business exists (or soon will) and that there is someone authorized to act on its behalf.

The most important document that legitimizes this action? An EIN. An EIN is the Employer Identification Number provided through the IRS, a nine-digit number associated with your business like a social security number. It’s the number with which the bank has on file once the account is created.

Interestingly enough, an EIN can be applied for on the same day that LLC paperwork is submitted (even without approval coming in from the state). This means that with the IRS, there is no waiting for state approval; they issue EINs almost immediately after fair request on a standardized application online. They ask business owners questions relevant to their business structure, and all of that equates into finding that most people are ahead of where they think they should be.

How Much Documentation Do I Need?

Different banks require different levels of documentation for those not-quite-finished businesses. Some will take an EIN and Articles of Organization (the documents you filed to create your LLC) as their first-time review. Others require a stamp of approval from the state or a state letter of processing approval or even a Certificate of Formation proving it’s been officially approved.

This creates an inherent problem, filing in one state takes hours; filing in another state takes weeks. If you’re filing an LLC in Delaware, most times, it will get approved within 24 hours. Open it in California, and you could be waiting weeks. Too many entrepreneurs find themselves in precarious positions where they need banking before the state determines whether they’re approved because there is too much pressure operating to let it go without appropriate banking.

However, smart business owners take advantage of the ability to open business bank account with ein only through select banks that offer this convenient option. If you have your EIN and filing receipt and operating agreement, that may be enough documentation in hand to move forward with banks that don’t need final determination from the state.

What Does “Fully Set Up” Mean?

“Fully set up” is arguably the most subjective term anyone can use in this case. Ask ten business owners what it means, and you’ll get ten different answers, some think they need to secure a business license first; some assume taxes need to be filed already; and most assume they need an approval stamp from the state with the LLC determined first.

However, from a financial perspective, “set up enough” requires that the following operate: LLC (filed with the state, even if not approved yet); EIN through the IRS; Operating Agreement showing how best your company operates; and identification for whoever opens an account on behalf of your LLC.

It’s important to note that operating agreements get brought up here the most because banks want to see them as they justify a person who can open accounts and sign on behalf of the company for future transactions. Even single-member LLCs should have them, they don’t need to be extensive, just a basic template transformed into business-like effort, but they should exist.

Where You Apply Matters – Online vs Traditional

For many banks, “fully set up” applies more stringently than others based on whether traditional banks are physical locations or online banking capabilities. Traditional banks are stricter, they want final approval with certified copies of documents from the state and even a sit-down where bank employees receive at least two forms of identification for verification purposes.

Online banks expedite the efforts, sometimes even taking “not-quite-there-yet” documentation more easily than in-person branches have created systems confirming EINs or LLC paperwork without needing the stamp of approval from the state or lending too much credence to efforts needing physical presence since they can verify legitimacy more electronically than anything else. This doesn’t mean they’re any less secure, they’ve just taken portions of this process digitally.

That doesn’t mean that online banks won’t place caps on how much can be moved until they’re literally operationally recognized. You can deposit checks and pay amounts, but general payment processor features may be limited until sent through new documentation showing final approval from the state once everything has gone through and closes all loops behind it.

When Is the Best Time to Open My Account?

There is no right or wrong time, or only when it can help support appropriate outcomes instead of putting unnecessary holds on an application for excessive channels for all involved. For example, if you apply too soon, you’ll find yourself at your bank begging for leeway after they’ve put a temporary hold until it’s official. If you wait too long, you scramble without capabilities of processing payments from debit cards for larger purchases if a client payment rolls through or an unforeseen opportunity acquisition comes up shortly thereafter without functioning properly from day one.

For many business owners, applying after getting their EIN but before getting approval from their state will allow enough time to ease into everything without feeling overwhelmed during that small transitory period where you’d need it most desperately in that interim timeline. Once everything is set up, however, linking accounts and payment processors happens easily when there’s a physical item needing determination, and within few days/weeks thereafter, everything should be set up so it can operate when it needs to operate on its own accord immediately.

Business owners are also concerned if denied because their LLC hasn’t been officially approved by the state yet, and it appears they’ll never be able to reapply again. This isn’t true, a denial allows someone to take a different approach down the line, but it’s annoying if time could’ve been saved when action needed to occur at the time but someone didn’t verify what documentation they’d need ahead of time. Just call ahead, a bank will tell you what they’ll accept so you’re not left spinning your wheels later unnecessarily as time will be too late for everyone involved trying to justify cross-purposed efforts.

What About a Single-Member LLC?

Does it all matter during single-member LLC situations? Some note that single-member LLCs look like sole proprietorships which do not have stringent requirements given what other financial institutions believe since they’re not multi-member LLCs, they carry credit documentation requirements as necessary as if one person is creating everything without recourse or necessary documentation involved with anyone else involved.

They need approval from your personal end, which translates into bank requirements expecting credit checks, but they also need valid verification from your personal end so proper identity surrounds everyone involved.

This does not treat your business as your personal finances, they just want to know who’s controlling the business account from the start instead of one name on one line, and something random on another, without justification why there should be one line holding operating agreement expectations instead while re-emphasizing something else without basis for your efforts once things operate down the line, but truly not meaning they don’t belong together under any circumstances, for they certainly do if they have realistic rationale.

If You Don’t Have a Business Account?

Many new LLC owners think it’s good enough to use their personal accounts until things settle down, that the taxes will keep everything blended. This is incorrect. It creates more problems than it’s worth, you’ll bank will close your personal account if it discovers you’re doing business through it, you lose liability protection because whatever creating an LLC would’ve done does not create protection as you’re commingling everything.

When it comes time to sort things out during tax season, separating what you have personally from what’s attributable solely to your professional efforts becomes convoluted, and incredibly improbable, in favor of making everything clear instead by all means not at best status opaque for anyone involved trying to keep things separate when that’s what was supposed to happen all along.

But since a bank won’t have any incentive, them finding out that you’ve got no liability protection or there are fines involved makes it exponentially worse since they expect everyone operating with integrity without intent of wrongdoing. They’ll stick up for anyone else involved, but not here. They haven’t helped anyone here who still runs operations illegally.

They cared once dealt out cross-purposed actions, it has no meaning here. A lesson should’ve been learned. Don’t get caught without caring. School-aged children learn better opportunities around integrity, and now audits dig deeper into what’s going on, which doesn’t make sense, but peer pressure does.

So, this isn’t about breaking rules. It’s about getting recognition otherwise. Why does this happen? You’ve already added expenses, and not been held accountable why? Because protecting you wasn’t protecting others, that’s why. But now they did, and it worked. It helped others learn through others’ mistakes immediately.

Dealing With In-Between State-Like Reactions Before Approval

You’d be surprised how many people open their accounts well ahead of getting everything else processed, in between done while they’re paying payroll weekly. The banks understand you’ve literally just opened thousands of new LLCs, it’s powerless over parts all it’s expecting honesty that shall value between both parties. So where are you waiting? If you’re still in process of getting state approval, let them know. Don’t go by to another point. They’re better off knowing what’s going on. You can recertify otherwise assuming proper channels and loopholes verified.

Plus, once you’re through with whatever you’ve achieved through your state, as you recertify. Wells Fargo needs it in their files even if you’ve opened this issue without; others might bring some temporary holds down until they ascertain; either way, if you take action on your end while what’s added through those loopholes never makes sense unless they’re closed! It’s better this way.

It was never complicated. It takes more time than it looks like it’s taking from outside, but as long as you’ve gotten things done halfway done with whatever you’ve gotten, at least if you’ve gotten your EIN from those units, you’re fine opening up a banking relationship even before you’ve received final state approval from your home bank either!