Is it possible for a currently-credit-troubled person to get my LLC off the ground?

February 27, 2012 3:02 PM

Will I have to undergo a credit check in order to form an LLC and open a business checking account for that company?

I have some not-yet-resolved credit/tax-related issues in my personal financial past, and I've been assuming that I need to wait until those are cleared up before I can form my own LLC and get a business checking account.

But some Google searching has been suggesting that I'm wrong about this, and I might actually be able to pursue the LLC path before my personal crap is cleaned up. That would be totally awesome if so.

My sense is that forming the LLC is probably not the problem, but that even to try to get a basic checking account under the business's name I'll also have to provide my personal SSN... and I'm assuming that that will bring things to a screeching halt (and maybe even get me on the radar of organizations I'd prefer not to until I've got my act more together). Can anyone who has been through or has other basic-level insight on the LLC-creating process let me know if I should just put it out of my mind for the time being, or if there might be a way to make this work? Any book or website recommendations would also be welcome. It seems like there's a lot of confusion (and scamminess) in the info I'm finding so far.

If the general sense here is that it's a non-starter, I won't go through the trouble of paying an accountant/lawyer/tax adviser... but if it looks like there might be a way, then I'll happily seek the services of the appropriate professional.

I'm in upstate NY, if it matters. Thanks all!!

posted by anonymous to Work & Money (10 answers total)

Call the bank(s) where you're thinking about opening an account for the LLC, tell them you're starting a business and need to know what paperwork you'll need to bring in.

Also, I am not your lawyer and this is not legal advice, but the money that you put into your LLC's account is money that belongs to the LLC. Your personal creditors can't, under ordinary circumstances, reach in and take that money. Well, they can, but it's difficult to do and it takes time and lawyers. If you're in a situation where it's worth it for people to try to pierce the veil of a new LLC and take its assets, you're already in a situation where you need a lawyer. Quite possibly a bankruptcy lawyer.
posted by gauche at 3:08 PM on February 27, 2012

In my experience, it basically goes like this: Form your LLC. Get an EIN for the LLC from the IRS. Get your business license from whatever city you live in. Take the business license and your EIN to the bank to open your checking account. Your SSN is not be used at all.

I'm in a different state though, so it might be different where you live.
posted by spilon at 3:09 PM on February 27, 2012 [1 favorite]

one of our business partners was having credit issues when we opened new business accounts at a credit union. as a partnership, not an llc. it meant that they wouldn't offer us any overdraft protection at the time, but it was otherwise not a problem. i'm not sure what would have happened if it was only one person behind the business with credit issues, but i don't imagine it would have a huge impact on opening a credit/savings account.
posted by jimw at 3:18 PM on February 27, 2012 [1 favorite]

I can only infer but what you're pondering but here's a bit more than what you asked for:

Suppliers and credit lines are where you will get into strife with credit checks since most places won't loan to an LLC knowing the "limited liability" part of it and the failure rates of small businesses.

If a bank you're trying to get money out of demands a personal guarantee (which they probably will) they'll do a credit check on you and find out your history very quickly. If you want stock from your suppliers you'll be paying cash in full before they'll even ship the goods from the warehouse.

An LLC is not a way to get around shitty credit to start a venture. If anything it's worse because you just shelled out for an LLC AND you still have the bank cockblocking you because of your shitty credit.
posted by Talez at 3:21 PM on February 27, 2012

You no-doubt can, and should start an LLC right away. How far you can procede depends on what you want to do. If you have a good bit of cash to put in the LLC's account, then there should be few-to-none about opening a business account. But if you want to incur loans, or open a line of credit for the LLC, then expect either a sizable offsetting deposit, and/or to be asked to co-sign as an individual. If applicable, consider forming an LLC with someone else as the primary officer.
IANAL, and don't try to use an LLC to "get away with" anything.
posted by markhu at 3:21 PM on February 27, 2012

New York does not require a credit check to form an LLC, or obtain an EIN. You will, however, need to provide an SS# to retrieve the EIN. There are ways around that, but they're for non-citizens opening business in the United States and probably don't apply to you. Opening a bank account for that LLC is a different matter and depends on the bank.

Also, keep in mind you have to publish an LLC after forming it, which makes it a lot more expensive (from the formation POV) than a standard corp.
posted by griphus at 3:38 PM on February 27, 2012

Actually, if you're in upstate NY and not the five boroughs it's just somewhat more expensive, not a lot more.
posted by griphus at 3:39 PM on February 27, 2012

As a person who worked at a bank, and who has opened an LLC account, my experience is that your credit-worthiness is not an issue for opening an LLC bank account, nor for getting the EIN, nor the business license. Your credit problems will be an issue for many of the other things you might need to start/maintain your business, but not for these administrative tasks.
posted by still lampin' at 4:44 PM on February 27, 2012 [1 favorite]

From personal experience, on these sorts of things, your credit comes up when you want credit for the business, because the business has no credit of its own. The SSN stuff isn't about a credit check, but rather about a way for them to find the real person behind the company. I think your real problem would come up if you were personally in Chexsystems, rather than just if you have credit issues. I know lots of people with awful credit who can still get bank accounts just fine, and I think in those cases, opening a business account is unlikely to be a problem.

Now, a business line of credit? You may be waiting for awhile.
posted by gracedissolved at 6:21 PM on February 27, 2012 [1 favorite]

Deposit accounts shouldn't be an issue for most banks. They might need your SSN as someone with transaction authority on the account so they can positively identify you as part of their Patriot act requirements. I'm not completely certain of that as it's been a while since I worked in retail banking (I was the guy that opened business accounts even!). in any case, your credit won't keep your from opening a checking account.

Credit accounts will be an issue so don't count on being able to get a business credit card or line of credit as you would have to sign as a personal guarantor. You can get around this by having a partner with good credit sign as the guarantor but the bank does need someone to take the "limited" out of the LLC for credit accounts.

Once you have the EIN you should just need your personal ID and your company's Articles of Organization to open the account. Depending on where you want to open the account, you might want to give some thought to how many transactions you'll have in the account on a monthly basis and what kind of balance you'll carry.
posted by VTX at 6:48 AM on February 28, 2012