EIN and Business Checking Account?

[Barry Cooley]

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. 

[Matt Horwitz]

@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!