EIN and Business Checking Account?

EIN and Business Checking Account?

Athens, AL · Member since 2017 · 62 posts · 12 votes

Good evening BP members. I am going to purchase my first single family investment property within the next few months. I have money in a couple of different personal accounts that I want to use to purchase properties. I want one account for this money, but when I checked with my bank (online) about a business checking/savings account, it said you need an EIN number or tax returns for the business, and proof of business to open the business account. I have none of this at the moment, since I haven't done a deal yet. Should I get an EIN and open the business account? How did you handle situations such as this? I know I can call the bank, but it's after hours and I am curious. Thanks in advance. 

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Philadelphia, PA · Member since 2011 · 155 posts · 124 votes
9y

@Barry Cooley, here are the steps. Apologies it's a bit long... Alabama does thing a bit differently ;)

1. LLC Name. Search your desired LLC name to make sure it's unique and available to use. Here's the Alabama database search page: http://arc-sos.state.al.us/CGI/CORPNAME.MBR/INPUT. Your LLC name must end with LLC, L.L.C., or Limited Liability Company.

2. Name reservation. Alabama requires you to reserve the name before registering/forming your LLC. You can do this by mail, but it takes a few days. Online is nearly the same cost ($28) and it's an instant approval. Go here: https://www.alabamainteractive.org/sos/welcome.action > Name Reservation Menu > Name Reservation > click “Non-Subscriber” (at the bottom).

3. Registered Agent. Choose a Registered Agent for your LLC. A Registered Agent is a person or company who agrees to accept legal mail on behalf of your LLC in case your business gets sued. Your Registered Agent must have a street address in Alabama (PO Boxes are not allowed). You can list yourself, a friend, or a family member as the LLC's Registered Agent. You can also hire a professional Registered Agent (called a Commercial Registered Agent). Once you make this decision, you'll include this info in your Certificate of Formation.

4. Certificate of Formation. This can only be filed by mail. There is no online filing. Download form and complete 3 copies: http://sos.alabama.gov/sites/default/files/2017-03/sosdf-8.pdf. Send the Certificate of Formation, along with a cover letter (we've made one you can use here), Name Reservation approval, and filing fees to the probate judge's office located in the same county of your LLC. You'll need one check for $100 made payable to "Secretary of State" and one check made payable to "Probate Judge". There are 67 counties in Alabama, and probate judge fees range $50 - $65. You'll need to call your probate judge's office and ask what their "LLC recording fees" are. You can find all phone numbers here. You'll likely need a large envelope to send the following: 3 copies of Certificate of Formation, Name Reservation, 1 check for Secretary of State, and 1 check for Probate Judge. Do not mail the filing to the Secretary of State. Mail to the Probate Judge (ask for mailing address when you call). They'll record your LLC there (at the county), then forward your filing to the Secretary of State. Total turn-around/approval time will be 10-15 days.

5. LLC Operating Agreement. Sign an Operating Agreement, which states who the LLC owners (called members), how much they own, how profits are split, how taxes are paid, how the LLC is managed, and more.

6. Federal Tax ID Number (EIN). Wait for LLC approval from state, then apply for EIN with the IRS. Can all be done online in 10-15 minutes and it is free. Only available M-F, 7am-10pm. https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

7. LLC bank account. Open an LLC checking account. Call around and shop rates. A lot of banks charge monthly maintenance fees on business accounts, but a few do not. Bring approved Certificate of Formation, Operating Agreement, EIN, and driver's license.

8. Annual Report. Unlike most states where the Annual Report is filed with the Secretary of State, in Alabama, the Annual Report is filed with the Department of Revenue. Within 2.5 months of your LLC being formed you need to file the Initial Business Privilege Tax Return (Form BPT-IN). Minimum fee is $100. Then every year (due by April 15th), you need to file the Business Privilege Tax Return (Form PPT). You have to include your federal tax return, Schedule BPT-NWI, and Form BPT-V. A minimum tax of $100 is due, but you may owe more depending on your federal taxable income and your net worth. I certainly recommend you get help from an accountant for this step as well as federal and any local taxes as well.

Hope that helps!

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  • Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y

    @Matt Horwitz WOW! I admire people who structure the information in such easy digestible form.

    Hat off - very impressive!

    I guess, it's too complicated in Alabama. I Need to read more how it's in other states. Very interesting info.

  • Investor · Jacksonville, FL · Member since 2017 · 8 posts · 5 votes
    9y

    You can open your LLC whenever you are ready, no hurry. I haven't yet, but I have a money market account set up for each rental and then one main money market account for buying any new houses or major expense that may exceed the balance of an account that need a big repair. I give each tenant deposit slips that belong to that house so they can make the payments directly at the bank or setup automatic payments. Any expenses or repairs I have for each house are taken out of their respective accounts. This is how I keep up with the expense and income of each property. Good Luck!

  • Philadelphia, PA · Member since 2011 · 155 posts · 124 votes
    9y

    @Barry Cooley, yes, you'll need to include the designator (ending) in your name reservation. You can also use a comma or leave it out. Up to personal preference, but both are acceptable. 

    Example: "My House, LLC" or "My House LLC".

    @Irina Belkofer, thanks for the kind words! It's only taken me a handful of years to be able to distill it all and simplify ;-) Alabama is among a minority of states where there are quirks on quirks on quirks, as I like to say lol. The association of probate judges has lobbied the Secretary of State quite hard... looking for that extra $50-$60 per LLCs in their county. That's the biggest quirk. 2nd would be the required name reservation. 

  • Athens, AL · Member since 2017 · 62 posts · 12 votes
    9y

    @Matt Horwitz

    Thanks again Matt. You have been most helpful!

  • Philadelphia, PA · Member since 2011 · 155 posts · 124 votes
    9y

    You're welcome @Barry Cooley!

  • Arlington Heights, IL · Member since 2017 · 36 posts · 6 votes
    9y

    @Barry Cooley

    Who did you choose for your registered agent??? I'm also looking to set up an LLC in Alabama.

    Thanks

  • Philadelphia, PA · Member since 2011 · 155 posts · 124 votes
    9y

    @Kasia I., do you have a street address in Alabama, or have a friend or family member that lives there? If so, you/they can serve as your LLC's Registered Agent. If not, I recommend IncFile ($99/year) or Northwest Registered Agent ($125/year). IncFile is cheaper, but Northwest has better customer service (and is far easier to reach by phone).

  • Arlington Heights, IL · Member since 2017 · 36 posts · 6 votes
    9y

    @Matt Horwitz. I do not know anyone in AL. I was looking at Incfile, as they offer free 1st year Registered Agent. Any reviews of Incorp??

  • Athens, AL · Member since 2017 · 62 posts · 12 votes
    9y

    @Kasia I.

    Kasia, I have registered a business name, but haven't formed the LLC yet. However, I will be the registered agent, since I am the only one involved with the LLC.

  • Philadelphia, PA · Member since 2011 · 155 posts · 124 votes
    9y

    Hi @Kasia I., InCorp is okay, but I prefer the other two companies. If you get other mail besides service of process (which is quite common), InCorp charges extra to forward to you. Northwest Registered Agent on the other hand, will scan it into your online portal for you to download, no questions asked... and they don't charge extra. Hope that helps

  • Arlington Heights, IL · Member since 2017 · 36 posts · 6 votes
    9y

    @Matt Horwitz. Very helpful. Thank you.

  • Real Estate Investor · Orange County, CA · Member since 2013 · 39 posts · 4 votes
    8y
    This discussion has been very helpful! Thank you so much
  • Real Estate Investor · Orange County, CA · Member since 2013 · 39 posts · 4 votes
    8y

    Hi @Matt Horwitz, 

    Just want to double check. Where do you send the Certificate of Formation to? 

    The Probate Judge of the county that your LLC is located? Or do you send it to the Probate Judge that is located in the same county as your Registered Agent? My LLC is located in Montgomery County, but my Registered Agent is located in Houston County. Could you please clarify? Thank you

  • Philadelphia, PA · Member since 2011 · 155 posts · 124 votes
    8y

    @David T., good clarifying question. Your LLC is technically located wherever your registered office is (the address of your Registered Agent). That's the only address field on the Certificate of Formation. So in your case, that'd be Houston County. Hope that helps!

  • Real Estate Investor · Orange County, CA · Member since 2013 · 39 posts · 4 votes
    8y
    Thank you Matt Horwitz ! That makes a big difference where I have to send it to
  • Real Estate Investor · Orange County, CA · Member since 2013 · 39 posts · 4 votes
    8y

    Hey @Matt Horwitz, I just realized I made a big mistake when I reserved the LLC name reservation. Instead of putting the address in Montgomery, AL, I actually put my location in CA. Is there a way to correct this?

  • Napa, CA · Member since 2017 · 57 posts · 27 votes
    8y

    Thank you @Matt Horwitz - very informative!

  • Philadelphia, PA · Member since 2011 · 155 posts · 124 votes
    8y

    @David T., no need to correct it. Just file as-is along with your Certificate of Formation. You should be good to go :)

  • Real Estate Investor · Orange County, CA · Member since 2013 · 39 posts · 4 votes
    8y

    Thank you @Matt Horwitz! You have certainly helped me a lot!

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