Forming an LLC or corporation with the state is only half the job. Two administrative steps that get treated as afterthoughts – getting an EIN and opening a real business bank account – are also where a large share of liability-shield failures actually start.
Getting the EIN
An Employer Identification Number is free directly from the IRS through its online EIN application, available Monday through Friday during business hours, and the number is issued instantly for entities with a US-based responsible party. The IRS limits each responsible party to one EIN per day across all entities, online or otherwise – a real, easy-to-miss trap for anyone forming more than one entity in a single sitting, since a second application the same day will simply be rejected rather than queued.
Who Counts as the “Responsible Party”
The responsible party is the individual who ultimately owns or controls the entity and its funds, not necessarily whoever fills out the form – the IRS requires this to be a real person with a Social Security Number or ITIN (not another business entity) for most domestic applications. Foreign owners without a US SSN or ITIN can still obtain an EIN, but the process is slower and typically requires working directly with the IRS’s international unit rather than the instant online tool.
Opening the Actual Bank Account
Banks require the EIN confirmation letter (Form CP 575), the entity’s formation documents (articles of organization or incorporation), and often the operating agreement or bylaws before opening a business account – and a growing number of banks now also require a certificate of good standing from the state, especially for newer or online-only banks doing extra fraud diligence on new entities.
Commingling Funds Is the Fastest Way to Lose the Shield
Paying personal expenses from the business account, depositing business income into a personal account, or using the business account as a source of interest-free personal loans is called commingling, and it is one of the most frequently cited factors courts use when a creditor asks to “pierce the corporate veil” and go after an owner’s personal assets. Courts look at whether the business was actually run as a separate entity in practice – a real business bank account, actually used exclusively for business, is one of the simplest and cheapest pieces of evidence an owner can build in their own favor before any dispute ever arises.
Formalities That Reinforce the Same Point
Beyond the bank account itself, keeping business records separate, maintaining adequate capitalization for the size of the business, and documenting major decisions in writing all feed into the same “was this really a separate entity” question a court asks when a veil-piercing claim is made – a single clean bank account doesn’t substitute for the rest, but it’s the foundation the other formalities sit on top of.
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Related reading: Piercing the Corporate Veil: When the LLC Liability Shield Actually Fails and How to Choose an LLC Formation Service.
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