Banking problem can't open a bank account for my LLC

[Carlo D.]

I just came from the bank to open a bank account for the newly formed LLC that will hold the property I am purchasing. My LLC is formed in PA and I live in NY.

In the incorporating documents, I put my trust as the owner of the LLC. When I went into the bank they said they cannot open the account with this kind of set up. And the branch manager said he doesn't know of any big banks that does that as well as he's worked with a few of them.

I was shocked! Is this accurate? How do these conglomerates with holding companies and different sub companies do banking then?

[Charles Carillo]

@Carlo D.

Maybe it is true for their bank but not for other banks.

My wife and I have a (more complicated) trust that owns several LLCs. You need to provide them with the LLC information and the trust documentation when opening an account.

I have opened bank accounts for the trust and for LLCs owned by the trust at multiple institutions, including one of the four major US banks, local banks, local credit unions, online banks, multiple major brokerage houses, etc. The most difficult thing I had was opening an account with one of the top four US banks, but after a couple of visits for more documentation and signatures, they opened it.

[Carlo D.]

Quote from @Charles Carillo:

@Carlo D.

Maybe it is true for their bank but not for other banks.

My wife and I have a (more complicated) trust that owns several LLCs. You need to provide them with the LLC information and the trust documentation when opening an account.

I have opened bank accounts for the trust and for LLCs owned by the trust at multiple institutions, including one of the four major US banks, local banks, local credit unions, online banks, multiple major brokerage houses, etc. The most difficult thing I had was opening an account with one of the top four US banks, but after a couple of visits for more documentation and signatures, they opened it.

Thank you @Charles Carillo

[Joseph Collier]

it depends on if your trust is a business trust or a family trust. A lot of banks will not open a business trust. You would need a business friendly bank, Not a big bank. What state is your LLC?

[Stuart Udis]

This will be bank specific. It's also common to encounter retail branch employees who are  not familiar with  the entities and various ownership structures real estate investors utilize since they are normally opening personal bank accounts. I always get a good  laugh when I sit down at a retail branch to open a business banking account and the banker glances over my operating agreement for 2-3 minutes. Meanwhile I sit there there thinking to myself  this person has no idea what the heck they are looking at. 

I post frequently about the unnecessary complexities of most real estate investors asset protection structures and the point I normally emphasize is the lack of attention placed on the day to day operations that are far more critical to reducing liability exposure. However this post brings attention to another topic which is ease in banking. 

I have no doubt @Carlo D. will be able to open the bank account he desires but when it comes so submitting loan applications the lender's underwriting team not only has to underwrite the property and review the borrowers PFS and personal information but also has to make sense of the ownership structure and who will be required to guarantee the loan. Meanwhile,  its not unfathomable for the bank who is approving your loans to wonder why this particular borrower feels it's necessary to take such extreme steps to protect themselves...what is it about them or their operation that is leading them to take such extreme measures? It can lead to pause on the review process. I've seen it happen or at the very least dig in deeper with their underwriting and review of your loan request. 

 Why make the origination process any more complexed than it has to be? I am not suggesting investors shouldn't use entities, but the entity formation structure @Carlo D. described is more  complexed than the formation structures my last employer utilized and they owned a portfolio that exceeded $1B. The objective should be to protect yourself and properties without adding unnecessary complexities to your business and greater emphasis should be placed on reaching better balance. Loan originations are something I constantly see being interrupted for this very reason. 

[Carlo D.]

I found a bank that will open it. And my original bank also called today to say they can do it. So It looks like it was simply lower level employees with lack of knowlege.