How To Open a Business Bank Account in 4 Simple Steps

For most small businesses, establishing a business checking account is the first step toward separating your personal finances from your business ones. Other accounts, such as business savings, money market, or specialized merchant accounts, serve different purposes. However, the process of setting up any account—including the required legal documents and identification—is largely the same.

Whether you plan to be a sole proprietor or set up a limited liability company (LLC), separating your personal finances from your business accounts is a non-negotiable step toward professional legitimacy. Learn more about how to open a business bank account, from the documents you’ll need to the features you should compare. 

Importance of having a business checking account

• Maintain liability protection
• Simplify tax preparation and bookkeeping
• Build business credit
• Professionalism
• Streamline operations

Opening a separate business checking account is one of the first actions you should take after you open a business. It may be tempting for small business owners, especially sole proprietors, to use their personal checking account for business transactions. However, establishing separation is vital because it unlocks several key advantages that contribute directly to your company’s success and financial legitimacy. 

A separate business bank account helps you:

Maintain liability protection

For business structures like corporations and LLCs, a separate banking account helps you maintain the corporate veil, or the legal separation between you and your business entity. If you mix personal and business funds, a court could rule that your business is not acting as a separate entity, putting your personal assets at risk in the event of a lawsuit or crushing debt.

Simplify tax preparation and bookkeeping

When tax time rolls around, your business bank account will make your life much easier. It creates an auditable record of your company’s income and business expenses, so you won’t need to manually sort through a year’s worth of personal account statements to find business transactions. This simplifies tax preparation, making it easier to claim all eligible deductions. It also provides a more accurate picture of your company’s cash flow, since you can confirm all incoming and outgoing funds pertain exclusively to the business.

Build business credit

Opening a business bank account is the first step toward establishing a financial identity and credit history for your company. To grow, your new business will likely need access to capital, such as business loans or a business credit card. Financial institutions will want to see an established financial history for your business, not for your personal accounts. 

Be professional

A business account allows you to accept debit card payments and other transfers under your company’s name, reinforcing your brand’s legitimacy. When clients write checks or send electronic payments, they expect to make them out to your business name, not your personal name. 

Streamline operations

A business bank account unlocks access to other services that personal accounts don’t offer. It’s important to note that the availability of these specific services can differ significantly depending on the banking institution you choose. These include merchant services to accept credit card payments, payroll services, cash management tools, and higher monthly transaction limits, all designed to help you manage cash flow and run your operations smoothly.

Considerations when choosing a business bank account

• Account type
• Bank type
• Account fees
• Features and services
• Minimum balance requirements

The type of bank account you need will likely differ according to the kind of business you run. For example, the right bank for a freelance graphic designer may not be the same as one for a retail store. Before you open a business bank account, compare these key factors:

Account type

First, you’ll need to determine which type of account will best suit your financial needs:

• Business checking account. This is the foundational account for day-to-day transactions, paying vendors, receiving client payments, and managing payroll. Businesses open this type of account first to formally separate business and personal finances.

• Business savings account. Used to hold cash reserves or funds set aside for taxes, capital expenditures, or emergencies. Savings accounts can be useful if you have idle cash you want to keep separate from operating funds while earning a small amount of interest.

• Business money market account. A hybrid of checking and savings, often offering higher interest rates and typically requiring a higher minimum balance. Businesses use this type of account when they have a large cash reserve they need to access occasionally, like for major equipment purchases, but want to earn more interest than a standard savings account offers.

• Merchant account. This is a specialized service that allows your business to accept and process credit and debit card payments from customers, whether online or in-person; it usually connects directly to your business checking account.

Bank type

National banks and local credit unions typically have physical branches, which is valuable if your business handles a lot of cash, needs in-person customer service, or requires services like cashier’s checks or notary services. They also offer a wider range of products, including business savings accounts, business certificates of deposit (CDs), and business loans.

Online-only banks often compensate for their lack of physical branches with lower fees and higher interest rates. Their online banking and mobile banking app platforms typically are very robust. If you operate primarily online and don’t handle much cash, an online bank can be a cost-effective and convenient choice.

Account fees

Look for an account with a fee structure that matches your expected activity. These fees could include:

• Monthly service fee. Many accounts have a monthly maintenance fee that runs between $10 and $25, though this amount varies widely by bank and account type. You may be able to have your monthly service fee waived by maintaining a minimum balance, linking a business credit card, or meeting a threshold for monthly transactions. 

• Transaction fees. Some accounts limit the number of free transactions, like deposits, withdrawals, and transfers, per statement cycle. If you have a high-volume business, look for an account with a high limit or no transaction fees at all.

• Cash deposit fees. If you have a cash-heavy business, keep an eye out for cash deposit fees. Many banks charge a fee for cash deposits over a certain monthly limit, often between $5,000 and $10,000. Banks do this because handling large amounts of physical cash requires increased staffing, security, and processing, all of which cost the bank money. The fee is typically a small percentage of the amount exceeding the limit, often ranging from 0.1% to 0.3% of the overage.

• Other account fees. Check for fees related to overdrafts, wire transfers (both domestic and international), and ATM use.

Features and services

To make decisions about features and services, consider your long-term business goals. Financial institutions may offer any of the following services:

• Online and mobile banking. Can you easily pay bills, transfer funds, receive money, and deposit checks via the mobile banking app?

• Integrations. Does the bank’s platform sync with your accounting software, like QuickBooks or Xero? This can save you hours of manual data entry. 

• Merchant services. Does the bank offer solutions to accept and process customer credit card payments? For ecommerce businesses, the speed, reliability, and fees associated with these services are critical for revenue collection and cash flow.

• Credit and cash management. Look for access to essential tools like overdraft protection, payroll services, and a business credit card with an earnings credit rate. As your business grows, having core services like banking, credit, and merchant services with the same institution simplifies relationship management, accelerates access to capital (due to the bank’s comprehensive view of your cash flow), and ensures accurate data flow for reconciliation. 

• Customer support. When you have a problem, how can you get help? Look for accessible and responsive customer support, whether it’s in-person, over the phone, or via chat.

Minimum balance requirements

Some accounts, particularly interest-bearing checking accounts, require you to maintain a high minimum balance to avoid a monthly service fee. Be realistic about your business’s ability to maintain that balance, especially in the early days. A small business checking account designed for new businesses may be a better fit.

How to open a business bank account

1. Gather your documents
2. Apply for an EIN, if needed
3. Complete the application
4. Fund your account

Once you’ve researched and selected the right bank and account, the account opening process is relatively straightforward. The method you use—online, in person, or a blend of both—depends on the bank and the complexity of your business structure.

Many financial institutions now allow you to complete the entire process online, which is often the fastest and most convenient method, particularly for sole proprietors. You’ll fill out the digital application and upload your documents.

However, for more complex structures, like multimember LLCs or corporations, the bank may still require you to visit a branch. Although some banks allow walk-ins, it’s generally recommended to schedule an appointment to ensure a business banker is available to handle the necessary document review and signatures.

It generally follows these four key steps:

1. Gather your documents

Having all your financial documents on hand from the onset makes the process much smoother. The exact documents you need will depend on your business structure and the banking institution, but you should be prepared to provide:

• Personal identification. A government-issued photo ID (like a driver’s license or passport) for all beneficial owners and authorized signers.

• Personal information. The Social Security number, date of birth, and personal address for each owner and signer.

• Business formation documents. This is the official document filed with your state that proves your business is a legal entity. For LLCs, it’s the filed articles of organization, and often the bank will request your operating agreement. For corporations, you’ll provide your filed articles of incorporation and corporate bylaws, and partnerships will provide a partnership agreement. For sole proprietors who don’t have a separate legal entity, you will typically provide a business license instead of formal formation documents. 

• Business name and location. Your official business name and physical address. If you use a trade name, you will also need your DBA (doing business as) certificate, which is a legal document that allows a business to operate under a name other than its legal one.

• Business license. If your state requires a business license for your industry, have it ready.

2. Apply for an EIN, if needed

An employer identification number (EIN) is a federal tax ID number for your business. Most businesses, including all LLCs, corporations, and partnerships, are required to have one for federal tax purposes. 

Sole proprietors without employees can often use their Social Security number, but getting a free EIN from the IRS is recommended because it further separates your personal and business identities and adds a layer of professionalism.

Applying for an EIN is simple, free, and instant. You can do it directly on the IRS website. The online application walks you through the steps, and in most cases, you will receive your EIN immediately upon completion.

3. Complete the application

The application will ask for personal information about all beneficial owners (typically anyone with equity interests equaling 25% or greater) and authorized signers. For sole proprietors, the application is streamlined, focusing primarily on the owner’s personal identity and the business’s industry, rather than complex corporate documentation. You’ll also be asked for details about your business, like the industry and expected revenue.

The bank will use this information to verify your identity and your business’s legitimacy, in line with federal regulations. This may involve checking with a company like Early Warning Services to review your past banking account history.

4. Fund your account

Once your application is approved, you’ll need to make an initial deposit. The minimum required deposit varies; some bank accounts have $0 minimums, while others might require $25, $100, or more. You can typically fund the bank account in several ways:

• Completing an electronic transfer from one of your personal accounts or another business bank account

• Issuing a check

• Depositing cash or a check in person at a branch

After your account is funded, you’re officially up and running. The bank will provide your account and routing numbers, which you can use to set up merchant services or receive money. You’ll be given instructions to set up your mobile banking app and account online access, and your business debit card will typically arrive in the mail within seven to 10 business days.

Tips for managing a business bank account

Opening a business bank account is just the beginning. Here are a few tips for managing a business bank account:

• Reconcile your account statements regularly. At the end of every statement period, review your account to make sure your records align with your bank’s. This helps you catch errors, spot fraudulent charges, and keep a real-time pulse on your business’s finances.

• Link to accounting software. Connect your business checking account to accounting programs that automate your bookkeeping, categorize business expenses, and manage cash flow effectively.

• Understand your fee schedule. Be aware of your account’s limits and fees. Know how many fee-less transactions you get, what your cash deposit limit is, and how to avoid the monthly service fee.

• Set up alerts. Use your bank’s privacy and security policies and tools. Set up alerts for low balances, large transactions, or when enrolled users (like an employee) use a debit card.

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