If there is one thing virtually every business has in common, it is a need for a reliable checking account. However, any entrepreneur can tell you that getting a business bank account is not as simple as walking into the local bank and filling out a short form. If you are looking to get a checking account for your new business or want to upgrade to something better, follow this guide to learn how to make the best choice for your business needs.
Determine the services you need
A free business checking account is an important part of your business. It helps you separate your personal and business finances so you can organize your financial life and start building credit in the name of your business. Before opening an account, it is vital to understand how you will use the account and your specific business needs. Some businesses need to make frequent cash deposits. Some only have electronic transfers.
Here are some major features to consider when searching for an account:
- Online and mobile banking
- Online bill pay
- Cash deposit limits
- Ability to send outgoing ACH transfers
- Employee debit cards with limits you can manage
Keep in mind that each business is different, so there are items on this list that may not apply to your company, or items you need that aren’t included here. If you know what you need, it makes choosing your account much easier and more effective.
Decide between physical branches or online only
As a business owner myself, I recently went through the process of signing up for a new business checking account. As my business is 100% online and I never use cash, an online only bank works well for my needs.
Online only banks tend to offer better online banking and more online features, like the ability to transfer funds to external accounts for free and deposit checks from your phone. However, if you ever need to deposit cash, an online only bank does not meet your needs.
If you like to go into the bank to meet with a human in person, an online only bank clearly does not work for you. If you prefer to handle your business finances independently and are comfortable behind the keyboard and don’t have any needs that require a physical branch, online only can be a great option.
Be on the lookout for fees
Just because an account is advertised as a “free” checking account does not mean it is actually free. Similarly, some accounts that are not advertised as free may be free if you meet certain minimum balance requirements. When narrowing down your top contenders, make sure to review fee disclosures to know what is free and what requires a fee.
Some common activities that incur fees from free checking accounts include paper statements, cash deposits over a certain dollar amount per month, and going over a set monthly transaction limit. Overdrafts and using another bank’s ATM also typically incur a fee regardless of the account you choose.
Options for free business checking
Your business has many options for free checking accounts. Some large, nationwide banks offer free checking accounts as do many local options. Here are a few ideas to get your search started:
- Capital One 360 – Capital One 360 used to be focused solely on consumers, but the bank recent entered the business banking market with its free Spark Business accounts. The bank is primarily online only with just a small retail branch footprint on the East Coast and in a few southern states. This bank offers an excellent online banking experience.
- Small Business Bank (Gardner Bank) – Small Business Bank’s “No Bull” free checking account does what the name implies. It is a free checking account with few strings attached. Small Business Bank is a trade name of Gardner Bank. Gardner Bank is a small, community bank headquartered just outside of Kansas City. While the account is free with online banking, the online banking experience is clunky and can be frustrating to work with. However, reaching a live human for support on the phone is much easier than some of the giant banks around the country.
- Your local credit union – Credit unions are a great option for small businesses, particularly if you need a physical branch nearby. Not all credit unions offer business accounts, but if a local credit union near you does offer a business option, it can be a great choice. Credit unions are nonprofit organizations, so you know the credit union has your best interests at heart and is not just trying to chase a quick buck.
- Chase – The largest bank in the country offers a free business checking account with some strings attached. To avoid the $15 monthly service charge, accounts must maintain a $1,500 minimum balance for the entire month. That said, Chase offers virtually every service you may need as a banking customer and you can find Chase branches in most parts of the country.
Organize your business documents
You can’t just stroll into the bank, show your driver’s license, and open a new business checking account. Opening a new business account requires several documents proving you are a legitimate business.
The first document you need is a registration from your state. This is called “articles of incorporation” or something similar. If you are a registered business with your state, you should have received this file when you completed your filing. If you used a lawyer to create your business, they should have provided you a copy of this document.
The next document you need is a page from the IRS showing your employer ID number, or EIN. If you don’t have a copy of the printout from the IRS showing your EIN, you are probably still able to open an account if you can provide that number along with your articles of incorporation.
You will also need a copy of your ID (two to be safe) and something that shows you are legally allowed to open an account for the business. If you are the founder, your name should already be in the articles of incorporation. If not, you may need a document from the company showing you can act on its behalf.
Complete your application
Now you know what you want in an account and have the documents together, it’s time to open your account! If you are looking to sign up with an online only bank, you can fill out the application online and will have to upload, email, or fax in your documents and a copy of your ID. Yes, you read that right. Banks are one of the only places that still uses fax machines.
If you want to go with a brick and mortar bank, it may be useful to setup an appointment ahead of time with a business banker. If you don’t, plan on a short wait in the lobby with free bank coffee and Dum Dums. The process of opening a new business bank account with one signer can take up to an hour, so leave plenty of time for paperwork, form entry, signature cards, and anything else required to get your account up and running.
That’s it! Now back to work keeping your business profitable. While your bank account is an important piece of the puzzle, no business is a small effort. But with the right bank account, you have one less worry to manage.
This article was originally written on April 13, 2017 and updated on February 8, 2023.