If you’re starting a new business this year, you likely have a long to-do list and not enough time to do it all in. But there’s one thing you absolutely shouldn’t skip: opening a business bank account.
Benefits of a Business Bank Account
There are clear advantages to opening a business bank account. For example, managing company cash flow is generally a lot easier when you keep your business and personal finances separate. A bank account for your business gives you the opportunity to accept debit and credit card payments processed through merchant services, and you can easily pay your own bills online if you have an account.
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.
All in all, while it will take a little legwork to get your account set up now, it will, in the long run, help your business run more smoothly.
Types of Business Bank Accounts
Just like in personal banking, you have several types of business bank accounts to choose from. You have, of course, checking and savings accounts, but you also have the option of opening a money market account, which is a kind of a cross between the two, as you can earn more than with the average savings account but still make transactions from that account.
Other types of business bank accounts include CDs, business credit cards, loans, and lines of credit. It can be smart to look for a bank that offers multiple products for businesses in case you need more one day.
What to Look for in a Business Bank Account
While every business may have slightly different preferences in what they want in a business bank account, consider the following features you may care about:
- Monthly fees
- Number of transactions per month before additional fees incurred
- Online or mobile banking option
- In-person branch versus online banking only
It can be helpful to make a list of the features you most want so you can easily compare one bank account to another.
What You Need to Get Started
Ready to open a business bank account for your business? Have the following ready before you start the application process.
1. Business Details
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.
2. 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.
- Additional Proof of Identification — You might need to provide additional personal identification, such as a passport or alternate photo ID.
3. Business Formation Documents
Finally, if you run a partnership, corporation or LLC, 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 structure:
- Partnership Agreement — If your business is legally set up as a partnership, you will need 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.
If you already have a relationship with a bank or credit union for your personal accounts, that may be a great place to start your research. But don’t limit yourself to just there. It’s important to explore what all banks have to offer.
Here are three 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 maintenance 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. Also, Azlo doesn’t offer a business savings account, so if that’s important, keep looking.
Bank of America Won Our “Best Business Checking Account.”
Nav’s winner for the best bank for small businesses, 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 small 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 $16 to $29.95, based upon meeting certain criteria
- 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 business savings account at no extra cost
- Easily connect your account to QuickBooks
Bank of America offers other useful services, such as payroll and merchant services account offerings that your business might benefit from.
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 $45 each), so if you conduct business with transfers, be aware of that.
Finally, if you don’t qualify for a fee waiver, those monthly account fees of $16 to $29.95 can add up over time.
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 Business Complete Banking account does come with a fee ($15 in this case). However, customers can qualify for a fee waiver in a number of ways.
Chase Business Complete Banking account holders may enjoy the following perks:
- 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
- Other business services and accounts like savings accounts, business credit cards, loans, and merchant services
Of course, it’s not fair to talk about the benefits of a Chase business checking account without mentioning potential drawbacks. First, the requirements to waive the fees (which aren’t low to begin with) may be a stretch for some smaller businesses. 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.
You’ve got questions about opening a business bank account? We’ve got answers.
What do I need to open a bank account for an LLC?
If you’re interested in opening a new business banking account for an LLC, you’ll need your EIN number, your Articles of Organization, and details about both your business (address, time in business, industry) and you as the owner (photo ID, Social Security number).
Can I use my personal bank account for my small business?
Technically, yes, you can use your personal 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 or boost your business credit scores 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.
Do I need a business bank account for a sole proprietorship?
Technically, no. You do not have to have a separate 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 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.
Am I limited in how many monthly transactions I can make?
Some business checking accounts do limit transaction volume, so be sure to see if you’ll be charged a fee if you make too many monthly transactions. If you need to deposit cash daily, look for an account that won’t charge you to do so.
What are the minimum balance requirements?
Some banks have a minimum balance requirement for you to keep your account in good standing. Others will waive the monthly fee if you maintain that minimum balance.
Nav’s Verdict: Opening a Business Bank Account
Having one less headache in your business sounds great, right? Taking the time to find the best business bank account for your company’s needs will make your life and running your business easier over time.