How to Open a Business Bank Account

Banking

Choosing a bank for your business bank account

You might have a bank you already have a relationship with. But it doesn't hurt to shop around for the best fit for your business needs.

But what you need changes from business owner to business owner and what kind of bank account you need to open. Here are some things to consider when choosing a bank:

Bank fees: Although they're a tax deductible expense, these fees add up. You can experience charges for using a debit card for a transaction, making cash deposits, or a monthly maintenance fee just to name a few.
Minimum balance requirements: Some banks require you to maintain a minimum balance in your account. Falling below this balance will mean you are charged pesky fees. This is an important consideration for smaller businesses and startups without a consistent stream of revenue each month. Choosing a bank with no minimum balance requirements and smaller overdraft fees can cut down fees in slower months.
Access to funding: Are you wanting to get a business credit card? Or maybe you're planning on taking out a business loan or line of credit. Your bank can be your lender and so opting for a bank that can be both can make getting access to credit easier. The bank will already have your information and a working relationship with you meaning you can get approved faster.
Access to ATMs: While money can move digitally these days, that doesn't help when you're needing cash and the closest ATM is a town over. Find a bank with ATMs close by and this is a problem of the past.
Savings account quality: A checking account is best for handling your business expenses. But when you have enough capital in your business, a business savings account with the same bank can generate some extra money. If you're thinking of opening up a savings account, compare the interest rates offered across banks.

Further reading: Top 6 Noteworthy Banks for Your Small Business in 2023

What do you need to open a business bank account?

What you need to provide to your bank depends on your business structure. But there are some documents that all businesses will need to provide.

Before you head to the bank (or sign up online, if your bank offers that), you need to gather the following documentation:

Your social security number.
Two pieces of personal identification (e.g. a driver's license or passport).
Your Employer Identification Number (EIN). You can apply for one online. For sole proprietors, the bank may not require this. But registering your account with an EIN helps prevent identity fraud.
If your business name is different from your own (or what it's incorporated as), a "doing business as" (DBA) certificate. You obtain this through a local, county, or state agency. The Small Business Association has more info.
If you are looking to open a business bank account as a non-resident, additional requirements typically apply.

Depending on your business's legal structure, you may also need to bring along the following, additional paperwork.

Further reading: What Do I Need to Open a Business Bank Account (Checklist)

Sole proprietors

Sole proprietorships (or sole props) are not separate entities. The business and the individual are the same in the eyes of the IRS (and banks).

Because of this, it's easier for sole proprietors to open a business bank account. They usually only need to provide the minimum documentation, listed above.

While a sole proprietor can use their personal bank account for business purposes, there's a lot of benefit to separating business and personal finances. Having an account just for business banking let's you stay on top of your cash flow with quick access to all of your revenues and expenses. It will also make tax season easier when you don't have to dig through your personal accounts looking for that one business expense you put on your personal debit card.

Further reading: Do I Need a Business Bank Account?

Limited liability companies (LLCs)

Having a separate bank account is essential to operating as a limited liability company (LLC). You might hear the term "LLC bank account" used to refer to the main operating account of an LLC. It's needed to prove that you and your LLC are separate financial entities and can protect its members from being personally responsible for any debts.

To open an LLC bank account, you need to provide the documents that prove you're an LLC and have the right licenses to operate.

In addition to the minimum documentation to open a bank account, if you run an LLC, you need:

Your Articles of Organization and LLC operating agreement. You would have received both of these when you formed an LLC in your state.
A partnership agreement, if multiple people run your LLC.
Any relevant business licenses—for instance, those needed to operate as a restaurant.

Further reading: The 8 Best Business Bank Accounts for LLCs

C corporations

Similar to LLCs, C corporations are separate entities meaning you must have a separate bank account for business finances. Because of this, you need to prove your business is incorporated with your Articles of Incorporation and Corporate Charter.

In addition to the minimum documentation to open a bank account, if you run a C corp, you need:

Your Certified Articles of Incorporation and Corporate Charter. You should have received copies of these documents when you incorporated your business.
Additional corporate documents identifying your contract signing authorities, if your Articles of Incorporation don't cover this already.
Copies of all relevant tax-exempt information, including your 501C letter from the IRS, if your corporation is a non-profit.

S corporations and partnerships

How to open a business bank account isn't wildly different for S corporations and partnerships. However, both may require a corporate resolution signed by all of the business's officers. You can call the bank you're applying with ahead of time to confirm whether they'll need this extra document.

In addition to the minimum documentation to open a bank account, if you run a S corporation or partnership, you need:

Your Certified Articles of Incorporation and Corporate Charter, if you're an S corporation.
Additional documents identifying your contract signing authorities, if your Articles of Incorporation don't cover this already.
Copies of all relevant tax-exempt information, including your 501C letter from the IRS, if you run a non-profit.
A copy of your partnership agreement.
In some instances, a corporate resolution signed by all officers of your S corporation or partnership (ask a representative of the bank whether you need this).

Can I open a business bank account online?

Online banking means no longer going into a brick and mortar location to manage your money. Instead, everything can be handled online in an app or online account. But can you open a business bank account online?

Yes! From online banks to the big institutions to credit unions, lots of places have adapted to make applying online possible. The process for how to open a business bank account no longer includes the step of "leaving your home."

Setting up an account to accept payments

If you're planning to accept credit card payments for your business, you may need to set up an additional bank account, known as a merchant services account.

The merchant services account works as a relay point between your point of sale (POS) system, where you accept the credit card, and your business checking account, where the funds are deposited.

Most major banks will allow you to open a merchant services account. To set up a merchant services account, you can expect to pay a $50"“$200 startup fee, in addition to transaction fees of $0.05"“$0.50 on every purchase.

You can also open one through a credit card processing company, but there are a lot of factors to consider when doing so.

Also, you may be able to pay lower fees by working with services like Paypal or Square, or an online merchant platform like Shopify.

How Accracy can help

Whether you're using a business bank account or you're still running your business on your personal funds, Accracy can help you stay on top of your cash flow. Your bookkeeping team categorizes every transaction accurately providing you with the up-to-date financial reports you need to stay on top of your business. If you've let your bookkeeping slip or haven't started yet, not a problem! We offer historical bookkeeping to get you caught up. Learn more.