Updated on Monday, May 17, 2021
To open a bank account for your business, youâ€™ll need to gather some documentation, such as your business formation documents and personal identification. Though the process for opening a business bank account is similar to opening a personal bank account, itâ€™s important to ensure that you have the right paperwork in order to get started as the requirements are somewhat different.
Read on to learn exactly what youâ€™ll need to open a business bank account, as well as for some guidance on the types of account options you have as a business owner.
Opening a business bank account is an important step when starting a business, as it allows you to separate your personal finances from those of your business. Requirements for opening an account can vary depending on your type of business, as well as the bank you open an account with and the type of account you choose.
An Employer Identification Number (EIN) is a nine-digit ID that allows the government to identify and track a business entityâ€™s finances. Any business with employees is required to obtain an EIN from the IRS to operate. A sole proprietorship may not require an EIN, in which case a Social Security number may be sufficient to open a business bank account.
If you donâ€™t already have one, businesses can apply for an EIN online through the IRS.
Licensing requirements vary widely between different states and localities, but businesses generally need some form of license to operate and banks will require those licenses to open an account. If youâ€™re unsure of whether you need a business license to operate your business, check your state governmentâ€™s website or local city hall for more information.
Banks that offer business bank accounts typically will need a copy of your articles of incorporation, partnership agreements or a corporate charter to know how your business is structured. Different types of businesses, like LLCs or corporations, will have different types of business formation documents.
Here are some of the formation documents you might be asked for based on your type of business:
Banks usually request personal identification like a driverâ€™s license, passport or Social Security card to verify your identity when you are opening an account on behalf of a business. Different banks may have different requirements as to which forms of identification are needed.
Some banks may require additional documentation like a Doing Business As (DBA) certificate â€” a document that allows you to operate a business under an assumed name â€” depending on the type of business youâ€™re opening an account for. You may also need to provide any ownership agreements or a Limited Liability Company Resolution to open an account.
There are a few different bank accounts available to businesses, and each can help you with various kinds of business transactions.
Businesses often open multiple types of bank accounts to handle certain aspects of their finances.
A business checking account is best for everyday transactions, and for businesses that conduct cash transactions, access to an ATM is important. Businesses that accept credit and debit card payments may consider opening a merchant account to handle those types of transactions. Meanwhile, business savings accounts are a good option for business owners to stash profits that donâ€™t need to be reinvested back into the business right away.
For business accounts, most banks have different specifications, including minimum account balances, account fees and costs associated with each transaction over a monthly limit. Beyond these factors, branch availability and ATM access are also important considerations when choosing a bank for your business. MagnifyMoney has put together lists of the best business checking accounts and best business savings accounts available based on those criteria that can help you in your search.
Credit unions are another option for businesses that wish to open accounts. While banks are operated as for-profit enterprises and deliver dividends to owners and shareholders, credit unions are operated as nonprofit institutions that are set up as a cooperative and owned by their members. Credit unions usually have a strong local presence and can often have more personalized customer service than bigger banks.
Businesses open bank accounts for multiple reasons. Separating personal finances from business income and expenses makes bookkeeping and taxes easier and limits an ownerâ€™s personal liability. Business bank accounts can also help owners secure business financing more easily.
It depends on the bank. Some business checking accounts have a minimum opening deposit of just $100, while others have a higher requirement. Accounts can also have monthly fees that are only possible to waive if you meet certain minimum balance requirements.
Most businesses will need an EIN to open a business bank account, but there are some exceptions. For instance, a sole proprietor without any employees or a single-member LLC may be able to open a business bank account without an EIN at some banks.
Yes, you can. Some banks and credit unions offer customers the option of opening business accounts online, though not all do. Youâ€™ll need to upload many of the same documents in order to be able to open an account.