I've got some questions on business bank accounts...

[mjr]

Every now and then I start thinking about starting up my own "side" business and gradually growing it.

It would mainly be for software/web application development.

I have some ideas as to what I want to name the business, color schemes, logos, etc. That's not really the issue.

I'm considering starting this as an LLC.

Anyway, I'm trying to figure out something regarding bank accounts. I am trying to figure out if I should set up the account after I set up the LLC but before I make my first sale/money, or if I should set up the account at the same time.

I'd think that in order to set up an account, even a business account, I'd have to have money to "seed" the account with (i.e. $250 to open an account, or whatever).

I also want to have something in place in case one of my apps gets to the point where I might be able to actually sell it.

Any thoughts on this? I know there are a few here who work in banks.

[Automan Empire]

You should consult an accountant to see if it would be better to start out as a sole proprietor or S corp, rather than LLC. Incorporating costs over $800 a year in California!

You will need to determine your company structure as above before opening a bank account as each uses a different type of account. I started out as sole proprietor and had to open a new account when I incorporated.

Starting out as a sole proprietor is the least initial investment; once you have it off the ground and money is coming in, that's when you incorporate. There are tax and other advantages/disadvantages to each depending on revenue level, again a good accountant can get you pointed in the right direction for your case.

You might even want to start off smaller, maybe use a personal paypal account and do e-lancing type jobs; this is a side business for now, after all. Once you have a unique product ready for the marketplace, you'll need a more formal business entity to protect your ideas and products.

90% of new small business fail within the first few years; if you're starting on a shoestring, see if you can make your birdie fly in the marketplace before spending big bucks setting up too big of a corporate structure too soon. You can easily burn through 4-5 figures of seed money before serving your first customer, starting cold in a physical location. For that, it helps to have established some clientele and revenue before taking the leap.

Good luck to you! This is my 15th year in business. Still trying to get a few days off for vacation!

[Javarod]

I second most of what AE mentioned, but i'll point out a couple things from my own experience.

LLC might be a waste of money, i've been both an LLC and a sole proprietor, and basically there's no difference. For taxes LLCs can work on a pass through basis making them no different than a sole proprietorship, the advantage is some extra legal protection over the sole proprietorship.

You'll need to start the company first. In both cases i used an account type that was indistinguishable from a free personal checking account, but was required to provide company paperwork to open the account. The amount needed to open the account varies, the first one was a credit union, which required only a $25 buy in to open the account for example, i think PNC required $100 when i opened it.

You'll prolly want an EIN if you're in the US, its easy to set up online, and you may need it. This also needs to be done after setting up your company with the state. My last contract required an EIN for example.

Be happy to answer any questions you might have to the best of my ability, based on my experience running a pair of one man delivery companies (Tachyon Transportation LLC in AZ, Tachyon Express (sole proprietor) after i moved to MO).