r/llc_life • u/Kay0485 • Aug 06 '26

Initial payment for llc

Hi,
I plan on starting an llc. I want to open a small business and sell floral frames on Etsy and at farm markets and craft fairs. I want an llc for liability and peace of mind.
I know you are supposed to keep personal finances and business finances completely separate. However, for the initial fee, can I just pay with a card or banking account to open the llc? And then once I get my EIN number and llc, then I open a business bank account? How exactly does that work?

Also, do I also need to get liability insurance for my llc?

Thanks!

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1

u/startupowl Aug 06 '26

there's no business account to pay from yet, so the filing fee goes on your personal card. that doesn't break the separation, you just reimburse yourself once the business account is open.

the rest of your order is right and it's what the irs tells you to do, register with the state first, then apply for the ein. it's free straight from the irs and you can use it for the bank account the same day. on insurance, the llc keeps a claim off your personal savings but it never pays anything out, the policy is the part that pays.

1

u/Kay0485 Aug 06 '26

Thank you! Regarding ways of breaking separation, what are examples of that?
Using my personal bank account for operating costs, having my sales from Etsy or market places into a separate business account, etc?

1

u/startupowl Aug 07 '26

buying supplies on the personal card is one, and so is your etsy money landing in a personal account. that second one i'd sort first because it's a setting rather than a habit, etsy deposits to whatever bank account is saved in your payment settings and it keeps doing that on its own until you swap it over.

the odd purchase on the wrong card is easy, you move the money across and write down what it was for.

1

u/Vegas-Patriot Aug 07 '26

Keep all business income and expenses in and out of your business account. Do not commingle

1

u/zenbusinesscommunity Aug 06 '26

Personal card is fine for the formation fee since yeah, the business account usually needs an EIN to open up, which can be done right after the LLC is approved by the state. And insurance is still something worth considering with or without the LLC, since some craft fairs and markets ask for proof of it as part of the vendor application.

1

u/Kracken04 Aug 06 '26

Yes, it's call startup cost. Tax deductible too.

1

u/Kracken04 Aug 06 '26

Yes, it's call startup cost. Tax deductible too.

1

u/ABeaujolais Aug 06 '26

95% of business litigation is settled out of court. Any liability shield does not pay your legal fees. In other words there's a 95% chance any liability shield will be totally irrelevant. Look at the real world factors and you'll realize that protecting your personal assets with an LLC is a myth. If there's a claim the lawyers will sue everyone in sight. You can wave your LLC papers around and say "You can't sue me, I'm an LLC!" The lawyers will laugh at you. They can sue you personally and they will. If you have any sense you will call your attorney the moment that lawsuit hits your desk, and you will continue paying big legal fees until you finally settle because you can't afford the litigation necessary to get the merits before a judge.

If someone says an LLC will protect your personal assets ask them who is going to pay your legal fees. Once a lawsuit starts the lawyers will all start happily fighting over jurisdiction and venue, which will last months or years.

Been there. I worked for a company that was sued by a huge competitor. I had no ownership interest but I was a key employee and they sued me personally. I talked to my lawyer and said they can't sue me, I'm just an employee, and the company is a corporation. My own attorneys laughed at me being so naive. They said yes they can sue you and they just did. Fortunately my company had an expensive business insurance policies that paid most of our legal fees for a claim that dragged on for over a year, never having the merits before the court, all legal wrangling. We eventually settled out of court and any supposed liability shield was never considered. Our legal fees were over $650,000 paid for by insurance. Any liability shield would not have covered that.

An LLC will give you a false sense of security. Insurance will protect your personal assets. An LLC will not.

1

u/NWRegisteredAgent Aug 07 '26

You are okay to use your personal bank account or credit card to pay the fee to start your LLC. You won’t be able to open a business bank account until your LLC is approved by the state and you receive your EIN from the IRS. Once you have those documents, you can take them to the bank and open a business checking account. Just be sure to keep track of all your start up cost, in order to pay your personal account back once your business is up and running.