When starting a new business, one of the first decisions you will need to make is how to structure your business. Two common options are forming a limited liability company (LLC) or using a “doing business as” (DBA) name for a sole proprietorship or partnership. If you’ve chosen one of these options, you may be wondering whether it’s possible to have separate bank accounts for your LLC and DBA. In this article, we’ll explore the answer to that question.
First, let’s define what an LLC and a DBA are. A limited liability company, or LLC, is a business structure that provides limited liability protection to its owners while still allowing them to enjoy the benefits of pass-through taxation. A DBA, on the other hand, is a fictitious name that a business uses instead of its legal name. DBAs are often used by sole proprietors or partnerships that want to do business under a different name.
So, can an LLC and DBA have separate bank accounts? The short answer is yes, they can. In fact, it’s a good idea to keep your business finances separate, regardless of how you’ve structured your business. This will help you keep track of your income and expenses and make tax season much easier.
If you have an LLC, you will need to open a business bank account in the name of the LLC. This account should be used for all business-related transactions, such as paying expenses and receiving income. If you have a DBA, you can either open a separate bank account in the name of the DBA or use the same account as your LLC, but keep track of the income and expenses separately.
When opening a business bank account, you will need to provide documentation, such as your articles of organization (for an LLC) or your DBA registration certificate (for a DBA). You will also need to provide identification for all authorized signers on the account.
It’s important to note that while an LLC provides limited liability protection to its owners, having a separate bank account for your business is not enough to protect you from personal liability. You should still take steps to protect your personal assets, such as obtaining adequate insurance coverage and following all applicable laws and regulations.
Conclusion
An LLC and DBA can have separate bank accounts, and it’s recommended to keep them separate to simplify bookkeeping and taxes. Opening a separate account for your business is a straightforward process that requires proper documentation and identification. However, having a separate bank account does not absolve you of your personal liability, so it’s important to take other steps to protect your personal assets.
Video Transcript
Can an LLC and DBA have separate bank accounts? That is the question I am answering today for Rosemary Love and Company, who posted that question on YouTube.
I am Aaron Hall, an attorney for business owners and entrepreneurial companies. I provide these public educational videos for business owners to help you spot issues to discuss with your attorney. Don’t rely on these before you consult with your own attorney. But this general education is for business owners to empower you to have a stronger business and a better life. If you don’t already have my free resource for other common business owner mistakes, you can get it aaronhall.com/free. It is a PDF followed by a series of educational videos, and again, there is no charge. The whole idea is to help educate business owners on how to avoid common legal problems.
Alright. Can an LLC and a DBA have separate bank accounts? Well, let me put it to you by analogy. I am known by a few different names. Aaron, Mr. Hall, dad, son, brother, etc. Could I go to the bank and ask the bank to give me a bank account under my different names? The answer is no, and the reason is I am one guy. One person can have as many accounts as you want, but the accounts are under the person. It doesn’t matter what name is offered. So if you have a DBA, a DBA is like a nickname. It is like son, father, dad, brother, Aaron, Mr. Hall; it really doesn’t matter. It is the same LLC or corporation. So if your business wants to open bank accounts, it opens bank accounts under the business. It doesn’t really matter what nickname you give because, ultimately, banks know, and you need to disclose who the underlying company is.
Conclusion
Can an LLC and a DBA have separate bank accounts? Essentially, no, because an LLC and a DBA are the same, and all bank accounts are under the LLC.
Hopefully, that answered the question today. If this is helpful and you like other videos like this, you are welcome to subscribe or like this video, so you get notified about future videos like this in the future and some of the best videos I put out with common problems faced by business owners, you can get access to at aaronhall.com/free. Enter your email address, and you will start getting access to those exclusive videos.