Opening a business bank account is an important step in the timeline of any new company. Without a business bank account you could have trouble establishing commercial credit. You might also face challenges when you try to qualify for financing or keep the clear accounting records you’ll need when it’s time to file your business tax return.
There are clear advantages to opening a business bank account as well. For example, managing company cash flow is generally a lot easier when you keep your business and personal finances separate. If your business is ready to start spending money or receiving money from customers, the best time to open a business bank account is now.
What You Need to Get Started
Ready to open a business bank account for your business? Below you’ll find three types of information you need to get started.
1) Know your business’ identity.
Whether you visit a local bank branch or open a business checking account online, you’ll need to be prepared with some basic identifying information about your business. This may include:
- The Name of Your Business — You should provide the bank with the legal name of your business, as it appears on any documents filed with the state or Internal Revenue Service (IRS).
- Your Employer Identification Number (EIN) — If your business is an LLC or corporation, your bank will most likely request your EIN number to open a bank account for your company. Most banks require this information to make sure your business is legitimate.
- Your Business Address — Ideally, this should be the same address you used for licensing or official business filings (LLC or incorporation).
- Other Contact Information — A bank may also request other contact information for your business when you set up a new account, such as your company phone number, website, and/or email address.
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2) Be prepared to share personal details.
In addition to sharing information about your business, you’ll also need to let the bank know a few personal details about you, the business owner. These personal details may include:
- Your Social Security Number — If your business is set up as a sole proprietorship, you should be prepared to hand over your personal Social Security number (and perhaps even a copy of your Social Security card) when you open a new business bank account.
- A Copy of Your Driver’s License — Many banks will want to make a copy of your valid driver’s license when you open a new business bank account.
- Additional Proof of Identification — You might need to provide additional proof of identification, such as a passport or alternate photo ID.
3) Have your business formation documents.
Finally, you should be prepared to bring or upload copies of your business formation documents whenever you apply to open a new business bank account. A bank might request copies of any of the following, based on your type of business entity:
- Partnership Agreement — Is your business legally set up as a partnership? If so, be ready to provide a copy of your partnership agreement when you apply to open a business bank account.
- Articles of Organization — For LLCs, you should be prepared to provide your Articles of Organization.
- Articles of Incorporation — If your business is set up as a corporation, the paperwork you’ll need to provide the bank when you apply to open a new account is known as your Articles of Incorporation.
- Business License — Depending upon the industry in which your business operates, a bank might request a copy of your business license(s) as well.
Business Bank Accounts That We Like
Now that you know what type of information you’ll need to provide to open a business bank account, it’s a great time to choose the bank account that’s best for you. Your best bet is to review different options, compare features and pricing, and figure out which option sounds like it will be a good fit.
Here’s a look at 3 business bank accounts that we like to help you get the comparison process started.
Azlo is our favorite free online bank.
Opening a business bank account doesn’t have to be expensive. In fact, Azlo offers a completely free online account option for small businesses that aren’t fans of the monthly service fee.
Azlo’s business checking account boasts the following features that make it an attractive option for freelancers other small business owners alike:
- Zero fees (including maintenance fees, transaction fees, etc.)
- Easy online account management from your computer or device
- No minimum deposit required to open an account
- Easily connect to popular online tools (QuickBooks, PayPal, TransferWise, etc.)
On the negative side, Azlo doesn’t have physical branches. So, you’ll need to do all of your banking online. If you’re a face-to-face kind of person or your business needs the option to make cash deposits, traditional financial institutions might be better suited to your needs.
Bank of America won our “best business checking account.”
Nav’s winner for best bank for small business, Bank of America, offers companies a lot of perks. When you combine the bank’s business checking benefits with its potentially low fees (if you qualify for a waiver), it makes an excellent choice for a business checking account.
Bank of America has two different offerings when it comes to business checking accounts — Business Fundamentals and Business Advantage.
Here are some key features that might make one of Bank of America’s business checking accounts a good choice for your company:
- The potential to avoid monthly fees of $12 to $29.95, based upon where you live and the type of account. (Information on how to qualify for a fee waiver is available here.)
- Easily conduct business in-person, including cash deposits, at thousands of branches nationwide
- Free business debit card and employee debit cards
- Free ATM withdrawals within Bank of America’s extensive network of over 16,000 ATMs
- Open a business savings account at no extra cost
- Easily connect your account to with QuickBooks
There are a few potential downsides to be aware of with Bank of America business checking accounts as well. First, you’ll need to have a minimum opening deposit of $100. With Business Fundamentals accounts, wire transfers also cost extra (between $15 to $40 each). Finally, if you don’t qualify for a fee waiver, those monthly account fees of $12 to $29.95 can add up over time — potentially as high as $359.40 per year.
Chase was our best runner-up business checking account.
Another great option that earns the runner-up spot from Nav for best business checking account is Chase. Like Bank of America, Chase’s Total Business Checking account does come with a fee ($15 in this case). However, customers can qualify for a fee waiver in a number of ways.
Chase Total Business Checking account holders may enjoy the following perks:
- A reduced monthly fee of $12 by signing up for paperless statements
- The potential to avoid the $15 monthly fee in one of two easy ways
- Unlimited electronic deposits
- Free ATM withdrawals at 16,000 ATMs
- More than 5,000 branches available for convenient in-person banking and cash deposits
- Access to both Chase Online Banking and Chase Mobile Banking
Of course, it’s not fair to talk about the benefits of a Chase business checking account without mentioning potential drawbacks. First, if you deposit more than $5,000 in cash per month, you’ll be charged extra fees. Also, despite having more than 5,000 branches available, there are areas where Chase branches aren’t as common. You should check online to see if there’s a Chase branch conveniently located near you if you’re considering the bank as an option.
What do I need to open a bank account for an LLC?
If you’re interested in opening a new business bank account for an LLC, you’ll need the following two pieces of information. First, you will need your EIN number. Second, you’ll need to bring (or upload) a copy of your Articles of Organization.
Can I use my personal bank account for my small business?
Technically, yes, you can use your personal bank account to operate your small business. However, if you choose to do so, you could open yourself up to some unnecessary risks and potential complications.
When you use your personal bank account for business purposes, it’s difficult to separate personal and business expenses. This can be a difficult mess to try to untangle, especially when tax filing season approaches. Combining personal and business finances can sometimes lead to cash flow challenges as well.
Additionally, there may come a day when you want to establish credit for your business or apply for financing. If you run your business transactions through a personal checking account, your financing options can be very limited. According to Nav’s Annual Business Banking Survey, 70% of business owners who did not have a business bank account were turned down for a loan in the previous two years.
Do I need a business bank account for a sole proprietorship?
Technically, no. You do not have to have a separate business bank account if you are a sole proprietor. Yet just because it isn’t required doesn’t mean sole proprietorships wouldn’t be wise to open a dedicated business bank account anyway.
As mentioned above, using your personal bank account for business purposes can be messy and cause problems. Plus, there are free business bank account options available, like Azio. We highly recommend opening a business bank account that’s completely separate from your personal funds.
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