A few times during the past year, I received emails or calls from clients telling me their bank was not allowing them to open an account in the name of the new Maryland LLC that I had recently formed for them, because the bank believed that the Articles of Organization that I had prepared and filed with the Maryland State Department of Assessments and Taxation (SDAT) to form the LLC, as viewable on the SDAT website, were “defective” because they contained my name and (e-)signature as the Organizer.

In each of these cases, the bank representative (over-)confidently asserted to my client that, until the bank could see Articles of Amendment on the SDAT website, amending the original Articles of Organization to name my client and not me as the Organizer, my client would lack the legal authority to claim ownership and control of the company, including the authority to open a bank account in the LLC’s name.

And in each of these cases, the bank representative was wrong.

The Organizer of a Maryland LLC is simply the person who filed the Articles of Organization with the SDAT, who is not required to hold any interest whatsoever in the LLC. There is no requirement under the Maryland LLC Act for the Articles of Organization to disclose the LLC’s owners or manager(s), and therefore nobody should be looking to the Articles of Organization to try to confirm this information.

The names of an LLC’s member(s) and manager(s), along with the rights and powers of each, are, however, customarily and properly stated in the LLC’s Operating Agreement, which is an internal, private company document, not a public record that must be filed with the SDAT or any other agency.

In each of the above described cases of the bank representative’s having misguidedly asserted that my client lacked the authority to open an account in the new LLC’s name, my client had in fact provided the bank with a copy of the LLC’s signed Operating Agreement clearly and specifically confirming that they possessed such authority, but the bank representative had disregarded that document and focused instead, wrongly, on the Articles of Organization on the SDAT website.

Ultimately, in each case I was able to speak with the bank representative and eventually get them to understand that the signed Operating Agreement furnished all the verification the bank needed of my client’s authority to open the LLC’s account, and the account was then promptly opened … but it should not have been necessary to expend extra time and effort explaining the differences between Articles of Organization and Operating Agreements to bank staff whose jobs presumably bring them in contact with the owners of new LLCs seeking to open accounts all the time.<a id="footnote2-ref" style="text-decoration: none;"></a>

The best things that I can think of to help avoid recurrences of the scenario described above are for banks who work with Maryland small businesses<a id="footnote1-ref" href="#footnote1" style="text-decoration: none;">^**</a> to improve their staff training on entity formation documents, and for prospective new business owners to be well informed about these issues as well. I think that both of those things happening in parallel would make it less likely that I will be receiving more “The bank won’t let me open an account for the new company – Help!” messages in the future.

If you have questions about entity formation and governance, the attorneys at RKW are here to help you!

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<div id="footnote1" style="color: var(--midnight-blue); text-align: justify; margin-top: 20px; font-family: Arial, Helvetica Neue, Helvetica, sans-serif; font-size: 14px; line-height: 24px;">** Please note that the comments in this article on the role of the Organizer in the formation of a Maryland LLC, and on the need to look to the LLC’s private Operating Agreement rather than its publicly filed Articles of Organization for confirmation of company ownership and management, apply also to the formation of private (not publicly traded) Maryland corporations, except that the person (who, again, does not necessarily hold any interest in the company whatsoever) forming the entity is called the Incorporator instead of the Organizer, the entity formation document filed with the SDAT is called the Articles of Incorporation, and, instead of an Operating Agreement, the internal company governance documents are things like the Corporation’s bylaws, organizing resolutions (or meeting minutes) of the shareholders and directors (if any),and shareholders’ agreement (if any).<a href="#footnote2-ref" aria-label="Return to footnote referring content."> ↵ </a></div>

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