A business bank account is a must for any new business owner. Opening one isn’t exactly exciting, but it’s an important part of getting everything set up for your business. You need somewhere for your business’s money to go into and to pay expenses from, and a dedicated business bank account is the most sensible option. It keeps your business finances separate from your personal finances and can help you to get business funding.
To open a business bank account, you will need to meet the requirements set out by the bank. These can vary slightly based on some factors, but there are also several things that all providers will ask for. Keep reading to find out how to get started with your business bank account for your new business.Table of Contents:
- Why Open a Business Bank Account?
- How to Choose a Business Bank Account Provider
- Steps to Open a Business Bank Account
- Other Services from Your Bank to Consider
- Business Bank Account FAQs
Opening a business bank account conveys a number of excellent benefits. Firstly, having a business bank account separates your business finances from your personal finances. This is very practical and makes it easier to keep organized accounts. You don’t have to try and keep track of what belongs to you and what belongs to the business. In addition, there could be legal repercussions if you mix your business and personal money.
If you own a corporation or a limited liability company (LLC), your business is a separate legal entity. This means that you are not personally liable for your business’s debts, for example. But if you mix your personal and business finances, there is a risk that you could lose this protection. This is known as “Piercing the Corporate Veil”. In addition, when it’s time to file your taxes, it will be a lot easier for your accountant to deal with everything if your finances are separate.
Your business bank account is also excellent for helping you to create a more professional image. Customers and clients, suppliers, or others who you deal with will see that you have a business bank account when they see things like checks or cards with your business name on them. You will also start to build credit for your business so that you can later borrow money.
Without having a separate business bank account you can risk “piercing the corporate veil” by co-mingling expenses. If the corporate veil is pierced the owners of an LLC or Corporation can be held personally liable for business debts and legal liabilities.
The first step to opening your business bank account is to find the right provider and choose the best account for your needs. Before settling on a bank, it can be a good idea to consider which type of bank account or accounts you need. Common types of business bank accounts include checking accounts, savings accounts, credit card accounts, and merchant services accounts. You are most likely familiar with the first three and probably use them for your personal finances. A merchant services account is used if your business accepts credit card payments. It will ensure you get paid before the customer pays their credit card bill.
When you want to open a business banking account, your first thought might be to do it with the same bank that you use for your personal banking. But before you do this, make sure you get a full picture of what services are available. You need a bank that will meet your business’s needs, and this might include choosing a provider that caters to your industry or business type.
Your business bank account provider is someone you want to stay with as your business grows. You don’t want to have to change banks in the future just so they can keep up with your growing business.
When looking for a business bank account, consider the following factors:
- Introductory offers
- Monthly fees waived when you maintain a minimum balance
- Interest rates for checking accounts and savings accounts
- Interest rates for lines of credit and credit cards
- Transaction fees
- Early termination fees for ending the bank contract
Once you have chosen the bank for your needs and decided which account will work for your business, you can begin the process of opening the account.Steps to Open a Business Bank Account:
- Prepare and Gather Required Documents
- Submit your Application Online or In Person
- Fund your Business Bank Account
The first thing that you will want to do is gather together any documents that you will need to open the account. The exact information you will be asked to provide can vary by state and by business type, but there are several things the bank is likely to request. You might be asked to show proof of your personal identity, as well as proof that the business has been registered. There are separate requirements for how to open a bank account for an LLC compared to a sole proprietor.
What documents do you need to Open a Business Bank Account?
Before applying make sure you have the following documents and information on hand:
- Employer Identification Number (or SSN if you are a Sole Proprietor)
- Personal identification, such as a passport or driver’s license
- Proof of Formation such as Articles of Organization for LLCs and Articles of Incorporation for a Corporation
- A business license or business name (DBA) certificate
- Partnership agreement for business with multiple owners (also called founders’ agreement, bylaws, or operating agreement)
- If applying for a merchant services account: your monthly credit card revenue
You can choose to open your account in person or online. Keep in mind that not all banks will offer online applications for business bank accounts, but a number of them do. However, it’s important to remember that you will still need to provide all of the necessary documents to open your account.
This might mean scanning them or using your webcam to take a picture of them, or you might have the option to follow up your application with an appointment in person to drop off your documents. Some businesses in specific industries might be required to open their account in person, such as those in the gambling or financial services spaces.
When your business bank account is open, you can deposit your first funds. You might be required to deposit a minimum amount in order to open the account and start using it. This amount could be as low as around $25 or it could be higher. You might also have a minimum daily balance that you will have to keep if you want to avoid paying fees. Some banks offer accounts with no minimum deposit or minimum balance. Just make sure you know whether there is a minimum deposit or balance before you open your account, and make yourself fully aware of any fees that you need to pay.
Your bank will also offer a number of other services that could be useful for your business. It’s worth checking these out before choosing which bank you want to open your business account with. You don’t have to use the same bank for multiple services, but it can be convenient to do so.
Here are a few of the services to consider from your bank:
Financing and Loans
Business financing can help you to grow your business. Borrowing money gives you the funds that you need to grow more quickly, and a bank loan or other bank financing options can be a good way to get funding. Before opening your business bank account, take a look at the loan options that you might be able to benefit from in the future. Will the bank help you to grow? Do they offer good interest rates and terms for their business loans?
Business Credit Cards
Credit cards offer another form of borrowing for your business. It’s a short-term borrowing option that can help you with cash flow throughout the month. It’s a good idea to consider a bank’s credit card options before you choose which bank is right for your business. You should look at interest rates and other important factors for their credit cards to see if they offer good deals.
Credit Card Processing/Merchant Account
A merchant account is used to process credit card payments. You may need one if you’re planning to accept credit cards online, over the phone, or in person. However, an alternative to opening your own account is to use a service such as PayPal or myPOS that will process credit card payments for you. If you do want to open a merchant account, be sure to check what’s offered by your chosen bank.
While your bank can provide merchant account or credit card processing services there are a wide variety of providers. Learn more about how to accept credit card payments with our helpful guide.
Some business bank accounts require minimum deposits to open them, while others do not. If there is a minimum deposit amount, it could be as low as $25 or $50, but some accounts have minimum balance amounts too.
You will need a few documents to open a business bank account, which may include your EIN, personal ID, and business formation paperwork such as Articles of Organization for an LLC, Articles of Incorporation for a Corporation or a DBA Name filing if a Sole Proprietor or Partnership.
You are likely to need an Employer Identification Number to open a business bank account. The only exception is usually if you are a sole proprietor, in which case you can use your social security number to open your account.