Can I Use My Personal Bank Account for My LLC?

What your bank’s account agreement says

Start with the contract for your account. A bank’s deposit agreement can limit what a personal account is for. The table quotes three agreements. Your bank may use different words, so read your own agreement before you rely on this table.

A bank can act on these terms. Bank of America’s agreement says it may “convert your account to another type of account, revoke privileges or close your account.” One example it gives is “if you use a personal account for business purposes.” Chase’s agreement also says “Either you or we may close your account at any time for any reason or no reason without prior notice.”

Bank of America’s business guide answers the question in one line: “Using a personal account for business transactions is not recommended.”

Checks can also be a problem. The U.S. Small Business Administration (SBA) says a business account lets customers “make checks out to your business instead of directly to you.” A check written to your LLC is payable to the company, and the company does not own your personal account. Chase’s agreement says it may refuse “any third-party check (for example, a check originally payable to another person/entity that you attempt to deposit or cash).” Ask your bank before you try to deposit an LLC check into a personal account.

What the IRS and the SBA recommend

IRS Publication 583, Starting a Business and Keeping Records, says “One of the first things you should do when you start a business is open a business checking account.” The next sentence says “You should keep your business account separate from your personal checking account.” The publication also says “Use the business account for business purposes only.”

An IRS small business FAQ says “It’s a good idea to keep separate business and personal accounts as this makes it easier to keep records.” That FAQ answers a sole proprietor who pays personal expenses from a business bank account. Publication 334 says you are “a sole proprietor for income tax purposes if you are an individual and the sole member of a domestic LLC unless you elect to have the LLC treated as a corporation.”

The FAQ also explains the tax side. It says “You would include the money used to pay personal expenses in your gross business income when your business earned it.” It adds that “Personal, living, or family expenses are generally not deductible.” A personal account can hold paychecks and gifts next to customer payments, so your records should show where each deposit came from.

The SBA gives the same direction. Its guide says “As soon as you start accepting or spending money as your business, you should open a business bank account.” It adds that “Business banking offers limited personal liability protection by keeping your business funds separate from your personal funds.”

How mixing money can put your liability protection at risk

The SBA says “LLCs protect you from personal liability in most instances.” Courts can set that protection aside in some cases. Lawyers call this piercing the corporate veil, or treating the company as the owner’s alter ego, which means a second self. Mixing personal and company money is called commingling.

Cornell Law School’s Legal Information Institute says “While the law varies by state, generally courts have a strong presumption against piercing the corporate veil, and will only do so if there has been serious misconduct.” It names “intermingling of personal and corporate assets” as an example. That entry is about corporations.

The test for an LLC depends on your state and your facts. The table shows how three states describe it.

A lawyer in your state can tell you how courts there treat your facts. Our guide to keeping a low-volume LLC separate covers the records a small company can keep.

Does a single-member LLC need a separate bank account?

You should open one, even with one owner. The confusion comes from an IRS label. The IRS says “For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and affirmatively elects to be treated as a corporation.” If the owner is an individual, the LLC’s activity generally goes on the owner’s federal return, on a schedule such as Schedule C.

That label has limits. The same page says “for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.” Liability is a different question, and it comes from state LLC law. Wyoming’s statute, for example, says a company’s debts “Are solely the debts, obligations or other liabilities of the company.”

With one owner, you will still move money to yourself. The goal is to record each transfer. Publication 334 says “You can’t deduct your own salary or any personal withdrawals you make from your business.” Our guide to how much an LLC owner should pay themselves explains draws and how profit is taxed.

What you need to open a business bank account

Federal rules set a minimum, and each bank adds its own list. Under 31 CFR 1020.220, a bank must get a customer’s name, address, and identification number before it opens an account. For a company, the address is “a principal place of business, local office, or other physical location.” A bank that checks documents may use “documents showing the existence of the entity.”

The SBA says “You can open a business bank account once you’ve gotten your federal EIN.” EIN means Employer Identification Number. The table shows how two banks list what they want, and the lists differ. Check your bank’s current list before you apply.

Foreign owners should read the eligibility rules first. Bank of America’s LLC application page says “Applicants should be US residents.” Chase’s checklist, which carries a 2019 copyright date, says non-U.S. citizens who do not have a green card must provide a passport or Matricula Consular Card.

Banks also ask for addresses, and each bank decides which ones it accepts. Our guide to business bank account address requirements explains each address field.

What to do if you already mixed personal and LLC money

Move the LLC’s activity out of the personal account first, then write down what happened. These steps improve your records. They do not erase past transfers, and nobody can promise how a court or the IRS will view them.

1. 1Open a business checking account in the LLC’s name. Publication 583 says “You should deposit all daily receipts in your business checking account.”
2. 2Download your personal account statements from the day the LLC started doing business. Mark every deposit and payment that belongs to the LLC.
3. 3Label each LLC deposit by source. Publication 583 suggests a checkbook that lets you “identify the source of deposits as business income, personal funds, or loans.”
4. 4Record personal money that paid LLC costs as money you put in. An accountant may call this an owner contribution.
5. 5Record LLC money used for personal costs as money you took out. An accountant may call this an owner’s draw. Publication 334 describes a drawing account as one “you should keep to record the business income you withdraw to pay for personal and family expenses.” That account is a record in your books.
6. 6From now on, pay yourself with a recorded transfer. Publication 583 says “Write checks payable to yourself only when making withdrawals from your business for personal use.”
7. 7Keep receipts, invoices, and statements with each entry. Date each note with the day you actually wrote it.
8. 8Ask a tax professional to review past returns, and ask an attorney if a debt claim or lawsuit is involved.

Our guide to a single-member LLC’s initial capital contribution explains how to document money you put in.

You may hear about a “$3,000 bank rule” when you move money. One rule people may mean is FinCEN’s funds “travel” rule, which covers “transmittals of funds equal to or greater than $3,000.” For those transfers, the sender’s bank must send details such as the sender’s name and address to the next bank. Banks keep the records for five years. Transfers “governed by the Electronic Funds Transfer Act (Reg E) or made through ATM or point-of-sale systems” are outside the rule.

FinCEN says the rule itself does not require reporting to the government. A Suspicious Activity Report is required if a transfer seems suspicious to a bank that is subject to that reporting rule. The rule sets duties for banks. Your own task stays the same: record the transfer in the LLC’s books.