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. But there’s one thing you absolutely shouldn’t skip: opening a business bank account. Small business owners can see a lot of benefits from a business bank account, depending on which bank they use and what their needs are. Read on for tips on opening a business bank account.
What Do You Need to Open a Business Bank Account?
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 your legal business name as it appears on any documents filed with the state or Internal Revenue Service (IRS). This should include your fictitious name or doing business as (DBA), too.
- 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. More on that below.
How to Open a Business Bank Account
Opening a new business bank account is almost as easy as opening a personal bank account, but with some differences, especially when it comes to documentation. Follow these steps:
1. Select Your Bank or Financial Institution
If you have a bank or credit union you use for personal accounts, you may check with them to see if they offer business options. This can be beneficial for helping you keep track of all of your accounts. However, you’ll want to do some research to make sure your business bank account has good benefits and low fees. You’ll want to consider the following, per the Small Business Administration (SBA):
- Discount rate
- Transaction fees
- Address Verification (AVS) fees
- ACH daily batch fees
- Monthly minimum fees
You should also check to make sure you meet the bank’s requirements. We provide a list of suggested banks for business accounts below.
2. Gather Your Documents and Information
Make sure you have all of the personal and business details that we list in this article before you start your application. Be ready to submit them, either via online upload or with physical copies.
3. Apply for Your Business Account
You can either visit the physical bank or apply online, depending on which institution you choose. You’ll likely need to make a deposit into your new account, which you can do with a digital transfer online, or cash or check in person.
4. Start Using Your Business Account
Once you’ve finished applying, your bank will provide you with a debit card, either in-person or by mail, as well as business checks. You can start depositing money you’ve made from your business transactions, set up direct deposit and direct debit or ACH, and link your bookkeeping accounts.
How to Open a Bank Account by Business Type
Depending on what type of business you run or the structure you’ve selected, you may have to go through different steps to open a business bank account. We list out some differences below:
In a sole proprietorship, you are the sole owner and person who runs the business. As such, you are personally responsible for all business debts and liabilities. While you can simply use your personal bank account for a sole proprietorship, it’s still a good idea to get a business bank account for tax purposes and tracking. You’ll simply follow the steps as listed above.
In a partnership, you have two or more people owning and running the business together. Whether you select a limited partnership (LP) or limited liability partnership (LLP), you’ll definitely want a business bank account where you can officially keep your financials separate from your personal accounts. In order to open an account, you’ll need personal information from all partners. You’ll want to open a joint bank account and ensure that you both have equal access.
Limited Liability Company (LLC)
An LLC is similar to a sole proprietorship, although liability is assumed by the company, rather than you personally. This means that you can’t be held liable for more than the investment in your company if something happens, so no one can come for your personal assets. If your LLC is a sole proprietorship, you can use your personal bank account to manage your finances, but, again, it can be easier to handle financial information and taxes if you have a separate account for your business. Opening a business bank account for an LLC is just like opening one for a sole proprietorship; simply follow the steps we’ve outlined.
For many corporations, banks require dual signatures on all checks. When opening a business bank account for a corporation, you’ll need to provide personal information for both the business owner and the controlling manager.
Because an S corporation (or S corp) is designated to certain tax privileges, you may want to open two separate business bank accounts: one for your day-to-day business transactions, and one for handling your tax withholdings. You’ll also want to make sure you have the personal information for all owners and open a joint account so that everyone who needs to access your account has equal access. In addition to the documents listed below, you’ll need:
- Certified Articles of Incorporation and Corporate Charter
- Documents identifying all contract signing authorities (if not covered by Articles of Incorporation)
- 501C letter from the IRS (if you run a non-profit) and all tax exempt information
- A corporate resolution signed by all officers (depending on which bank you select)
Similar to an S corp, a C corporation (or C corp) may require two bank accounts for tax purposes. Again, you’ll want to ensure you have personal details for all owners, and you’ll need to provide the same documentation as an S corp, although you won’t require a corporate resolution.
In order to open a business bank account for a nonprofit, you must prove your nonprofit status. This is accomplished through your IRS tax exempt letter or 501C letter. Some banks may ask for your last meeting’s minutes or election documents. You may need to provide your bylaws, too. Because nonprofits are different from other corporations, it’s essential that you find a bank with nonprofit experience, especially if they have special resources for nonprofits.
What Documents Do You Need to Open a 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.
Opening a Business Bank Account Online vs In Person
Depending on whether you’re opening a new business bank account with an online bank or a brick-and-mortar bank, you may be able to open your new account online. Some physical banks require you to open an account in person, though some offer an online option as well.
In either case, you’ll need all those pieces of information and documents we’ve covered above. If you’re applying online, you’ll need to upload those documents. If you’re in person, provide the original documents so the bank representative can make a photocopy.
If you’re applying online, you’ll need to upload those documents. If you’re in person, provide the original documents so the bank representative can make a photocopy.
Online applications typically take just a few minutes to complete. You’ll be given your new account number and access to log into your account online. Your debit card will be mailed to you within a week or so.
If you apply in person, some banks have the ability to print a debit card for you on the spot, which means you can start using it right away. You may be given some temporary checks to use until the checks you ordered with your business details arrive in the mail.
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, small business 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. Some banks may offer discounted interest rates for existing customers.
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 are 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.
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.
The 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 offers other useful services, such as payroll and merchant services account offerings that your business might benefit from.
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.
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.
Our Favorite Free Online Bank:
Opening a business bank account doesn’t have to be expensive. In fact, Bluevine offers a completely free online account option for small businesses that aren’t fans of the monthly maintenance fee. Even better, your money can earn 1% interest!
On the negative side, Bluevine 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.
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 checking account options available, like Bluevine. 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.
How much money do I need to open a business bank account?
Each bank is different in its deposit requirements, and some banks don’t have any, meaning you could open an account without putting a cent in upfront.
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.