Congratulations! You’ve formed your LLC and are ready to move on to the next step: opening a business bank account. Keeping your business and personal assets separate is one of the best things you can do to protect your business.
Banks are required by law to collect your personal information, including your full name, the physical address of your business, and your employee identification number (EIN). While it may not seem like a big deal to you, choosing the wrong physical address is one of the biggest deterrents when it comes to opening a business bank account.
In this article, you’ll learn about three common address-related mistakes that remote business owners make when opening a business bank account, as well as how to avoid making them yourself.
Mistake #1: Signing up for a PO Box
Although PO boxes were designed with a specific purpose in mind, managing mail and packages while protecting your privacy, you cannot use one when opening a business bank account. Since a PO Box is a standalone lockable mailbox located within a post office, it is not considered a physical address.
What is a physical address? A physical address is defined as a location that can be attributed to a tangible building. This can be a home, office, or an office suite inside of a corporate building. Whether or not you will be permitted to use a residential address will depend on the bank you choose.
Mistake #2: Renting a Mailbox Address
You know that you can’t use a PO box, but perhaps you were thinking about renting a mailbox address from The UPS Store or another third-party facility. This type of mailbox address might have been sufficient at one point in time, but banks have started cracking down on fraudulent addresses in recent years. This is because of The Patriot Act, which was passed to prevent money laundering and fraudulent activity.
The main concern with address fraud is the wealth of information it opens up. Things like your credit card and loan statements all contain information that can be exploited. A thief could access and change information within your financial accounts, or even sign up for new credit cards with just an address.
To prevent that from happening to you, your physical address will be scrubbed against the USPS address database.
What banks don’t know won’t hurt them – right?
Not quite. Banks can (and will) cross-examine your address against the USPS address database to see if it's a mailbox address. Some banks will check your address to see if it's a registered agent address, since that's not acceptable either (you’ll learn more about that later).
Banks require a physical address that shows business being conducted within the state you are located. Any address attached to a tangible building is considered an acceptable physical address. Without a proper physical address on file for your business, a bank can close or suspend your account after 30 days.
What about a Virtual Mailbox or Virtual Office?
Virtual mailboxes serve a variety of purposes, but opening a business bank account is not one of them. If you attempt to use a virtual mailbox address, it will be flagged as a Commercial Mail Receiving Agent (CMRA) address in the postal address database.
For the same reason, you cannot use the address provided when you signed up for a virtual office.
Mistake #3: Using Your Registered Agent’s Address
One of the most common questions regarding business bank accounts is if you can use the address of your registered agent in lieu of the other address options listed. It makes sense. You’ve already gone through the hassle of acquiring a registered agent for your LLC, so you might be hoping you could use it for this, too.
In a perfect world, you’d be able to reach out to your registered agent, let them know you are planning to use that address to open a business bank account, and call it a day. Unfortunately, the law does not allow business owners to do such a thing. The main role of a registered agent is to receive service of process and other legal correspondences addressed to you and your LLC from the state.
You should be prepared to show either a lease or a utility bill to confirm your physical address (i.e. proof of address) when opening your business bank account. Don’t be dissuaded, though. There’s a quick and easy way to get a business address that meets federal banking requirements.
How to Obtain Proof of Address for Your Business
If a bank asks you for additional proof of address, you’ll need some way of verifying your physical address. The most common forms of proof of address are:
- Property tax receipts
- A lease agreement/mortgage statement
- Postal mail with the name of the applicant
- Insurance cards
- A voter registration card
- Utility bills
Do you still need proof of address for your business? If so, you can get it as soon as today with TruLease! Here’s how it works: VPM partners with commercial building owners to provide you with a physical office space. You’ll sign a lease agreement to show proof that you have an office space. If needed, you can request a utility bill for additional proof of address.
Opening Your Business Bank Account
In addition to your business address, mailing address, and proof of address, you’ll need to provide copies of the following documents in order to open a business bank account:
- Your LLC’s certificate of formation to show that your business is registered within the state.
- Your LLC’s operating agreement to make sure that you are authorized to open a bank account on behalf of the business.
- Your federal tax ID number (EIN), it’s free and can be obtained online.
- A valid photo ID belonging to the company owner(s) or members.
Once you’ve acquired these documents, you are ready to open a business bank account. Be sure to do your research beforehand; it’s important that you choose a bank that best fits the needs of your remote business.
When opening your business bank account, there are three major mistakes you’ll want to avoid: signing up for a PO box, renting a mailbox address, and using your registered agent’s address.
None of these will help you get any closer to opening a business bank account. In fact, using any of these physical address options will lead to an automatic rejection from the bank. But there is an easy way to get an address that’ll follow federal banking requirements.
Ready to take the next step?