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Updated on Monday, May 17, 2021
To open a bank account for your business, you’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, it’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 you’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.
- How to open a business bank account
- Types of business bank accounts you can open
- Determining which bank is right for your business
What documents are required to open a business bank account
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.
Employer Identification Number
An Employer Identification Number (EIN) is a nine-digit ID that allows the government to identify and track a business entity’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 don’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 you’re unsure of whether you need a business license to operate your business, check your state government’s website or local city hall for more information.
Business formation documents
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:
- Sole proprietorship: Sole proprietorships don’t require any form of business incorporation documents. As such, banks and credit unions may not require any formation documents for sole proprietorships.
- Partnership: A partnership agreement is usually drawn up between the partnership to record how the partnership operates. Banks typically request a copy during the account opening process.
- Limited liability company (LLC): An LLC can be formed with articles of organization or a certificate of formation. Different states have different laws regarding which formation documents are needed. Bank requirements may differ by state, but submitting either document is typically standard for banks.
- Corporation: Corporations have higher formation expenses, including articles of incorporation. A copy of those articles of incorporation is usually needed when opening an account.
Banks usually request personal identification like a driver’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 — a document that allows you to operate a business under an assumed name — depending on the type of business you’re opening an account for. You may also need to provide any ownership agreements or a Limited Liability Company Resolution to open an account.
Types of business bank accounts you can open
There are a few different bank accounts available to businesses, and each can help you with various kinds of business transactions.
- Business checking account: Business checking accounts can help you manage everyday financial tasks, like setting up payroll for your employees and paying expenses related to your business.
- Business savings account: Holding money in a business savings account will help you accrue interest for your business, although you’re limited on how many transactions are permitted.
- Merchant account: A merchant account is a specialized business bank account that helps businesses process transactions for customers who pay with a credit or debit card.
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 don’t need to be reinvested back into the business right away.
Determining which bank is right for your business
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.
Opening a business bank account FAQs
Businesses open bank accounts for multiple reasons. Separating personal finances from business income and expenses makes bookkeeping and taxes easier and limits an owner’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.