Benefits of opening a business savings account

4 Replies

Hey there,

I am finally about to close on my first multi-family. The hustle has been strong for 4 years now. I created an LLC a couple years ago and was wondering if there is a benefit to opening up a business savings account with that LLC. Are there any advantages for using a business savings account rather then a normal personal savings account where I may get higher interest rates? I would love to hear some feedback and thoughts on what I should do.

Are you required by your state to keep security deposits in cash?  If so, you might opt for the higher interest rate.  Otherwise I would avoid holding more cash than you need to sustain your operations.

All security deposits are held in a separate escrow account and can't be touched until the resident moves out. Just wondering if a business savings account will also help build credit for the LLC as there currently isn't any.

@Anthony Spera the main benefit of having a business operating account (either checking or savings) is to keep the corporate veil in place. If the money paid to your LLC goes directly into your personal accounts it is called comingling of funds and would be one factor in a future decision of whether the LLC is merely an alter ego of you personally.

That said there is nothing that prevents you paying most of the money to yourself after it has entered the LLC account. In that case I would suggest the higher interest account for growth. This is all said with the knowledge that interest rates are not particularly high. I am not positive of how having business savings will affect your business building credit.

Originally posted by @Brendon Woirhaye :

Are you required by your state to keep security deposits in cash?  If so, you might opt for the higher interest rate.  Otherwise I would avoid holding more cash than you need to sustain your operations.

 Irrelevant in the case of NJ.  All interest goes to the tenant.  So there's no incentive to keep security deposits in an interest bearing account.