Opening a business bank account will help your company keep its finances organized while also adding a professional touch to your business operations. While it may seem like a daunting task, it's actually as easy as gathering the necessary documents, identifying the features you need, selecting a vendor, reviewing costs, and opening the account. Follow our detailed guide below to learn what steps are needed to successfully open a new business bank account.
If you're looking for a business checking account that earns interest, Bluevine is a great choice. You can earn a 2.0% APY on qualified balances of $250,000 or less with its basic account. If you upgrade to Bluevine Premium (for a waived $95 monthly fee), you can earn a 4.25% APY on balances up to $3 million. See the provider for more information or to open an account.
What do I need to open a business bank account?
First things first, you will need to make sure you have all the necessary documents to open a business bank account. Documents required for account opening include:
- Proof of identity (e.g. passport, driver's license).
- An employer identification number or social security number if you are a sole proprietor.
- A business license and/or business registration.
- Any partnership agreement, if applicable.
- Any documents of the organization, such as its bylaws or articles of organization.
- An operating agreement, if applicable.
Let's look at the above requirements in a little more detail for Step 1.
Step 1: Gather the necessary documents
You should be prepared to provide proof of identity and business legitimacy when opening the account. This includes having your personal ID, EIN or SSN, and any business-related licenses and agreements on hand.
- Proof of identity: Be prepared to show your passport, government ID, or driver's license to all signers on the account.
- Employer Identification Number or Social Security Number: An EIN helps identify your business for tax purposes. Sole proprietors and single-member LLCs can use their SSN if they don't have an EIN. If you're not sure whether your business needs an EIN, check out this IRS.gov checklist and seek additional guidance from a licensed tax professional. Note: You'll also need to provide the SSN of each beneficial owner of the business.
- Business License and/or Business Registration: This helps prove that your company has the necessary legal authorization to operate and actually do business.
- Association Agreement: For business partnerships, a partnership agreement helps outline the current structure and terms of your business.
- Organization documents: For corporations and LLCs, be prepared to provide articles of incorporation or articles of organization to prove that your business is legally incorporated.
- Operating Agreement: If your business is an LLC, an operating agreement helps outline the current management structure and operating guidelines for your business.
Step 2: Identify the features and terms you need
Sit down and write a list of all the key features and terms that best fit your banking needs. Writing down a list of important features and terms will help you decide which banking provider will be best for your startup. Features and terms to consider include:
- Online Banking Capabilities: Online banking allows for easier access. With online banking, you can view your account balance, transfer funds, and pay bills online or from your phone.
- Mobile Check Deposit: Mobile deposit allows you to deposit checks using the phone in your pocket. This saves time and limits in-person trips to the bank.
- Tariff structures: Potential additional costs, such as monthly maintenance fees, transaction fees, and ATM fees, can take you by surprise. You should check an account's fee structure to better understand the fees associated with your potential bank account.
- Account interest rates: If you routinely maintain a high account balance, look for bank accounts that offer competitive interest rates so you can maximize your interest earnings.
- Transaction Limits: Be aware of excessive transaction costs, especially if you expect your business to process a large number of regular transactions.
- Geographic availability: If you need to deposit cash frequently, it is recommended to choose a traditional bank with a physical branch close to your business, because depositing cash on an online banking platform can be a more complicated process.
- Software Integrations: Most banking providers offer built-in integrations with various external programs. Finding a banking provider that integrates with other programs you use in your business can save you time and help eliminate potential errors associated with creating duplicate entries.
For a deeper understanding of useful banking terms that you may want to familiarize yourself with, check out our banking terms glossary, which helps better explain the current technology ecosystem in banking.
Step 3: Select a banking provider
Different banking providers often offer different account terms and features. Popular banking providers for startups include Bluevine, Relay, Novo, Chase, US Bank, and Bank of America.
When making a final decision, you should consider both traditional banks and online banks (or bank-backed fintech platforms). Both options have their own advantages and disadvantages.
- Traditional banks: Traditional banks typically offer a wide range of banking services. They also benefit from a wide network of branches and ATMs. However, traditional banks tend to have stricter account fees and minimum balance requirements.
- Online-only banks: Online banks and fintech platforms offer higher interest rates and lower fees due to their lower operating costs. However, online banks lack physical branches, which can be a drawback for a startup that would benefit more from in-person services.
*Chase, US Bank and Bank of America are members of the Federal Deposit Insurance Corporation (FDIC).
**The above fintech platforms are backed and insured by the FDIC through supporting banking partnerships: Bluevine with Coastal Community Bank, Relay with Evolve Bank & Trust and Thread Bank, and Novo with Middlesex Federal Savings.
For more in-depth coverage of the banking industry, visit the banking section on TechRepublic.
Step 4: Review the costs associated with the selected supplier
Take some time to analyze the monthly costs associated with the banking provider you choose. Make sure these costs align with your startup’s financial plan. Typical provider costs to consider include:
- Monthly maintenance fees: A fee that covers monthly account maintenance.
- Transaction fees: Additional fees for deposits, withdrawals and transfers.
- Cash deposit fees: A fee associated with depositing cash into your account.
- ATM Fees: Fees associated with ATM withdrawals.
- Other charges: Additional fees such as overdraft fees, wire transfer fees, and extra fees for add-on services such as money orders or cashier's checks.
Step 5: Open your account
Once you have selected a banking provider and gathered the necessary documents from Step 1, it will finally be time to move forward with opening your business bank account. Depending on the banking provider you selected, this step will either be done online or in person at a branch.
Be prepared to provide all necessary documents and answer any additional questions the account representative may have for you. Also, make sure that all key employees you wish to grant access to the bank account are present at the account opening. Those employees will need to bring their own proof of identity for the process.
Step 6: Deposit Funds
Once the account is open, you will need to fund your new business bank account to properly activate it. You can deposit cash, checks, or an electronic funds transfer into the new bank account. A pro tip is to make sure you have enough funds deposited into your account at the time of opening to cover any future business expenses you may anticipate.
Advantages of having a business bank account
Opening a business bank account will offer your startup several key advantages:
- Your personal and business finances are kept separate: A business bank account allows you to separate your personal and business finances. This helps ensure clear financial records when tax season rolls around.
- You will gain more business credibility: A business bank account brings additional credibility to your business, making it easier to deal with potential customers, creditors and suppliers.
- Keeping track of company expenses and income is easier: Having a dedicated business account makes it easier to track monthly expenses and income. This makes managing your business's finances much easier. Brush up on the ins and outs of bank reconciliation to better understand how to properly track business transactions.
- You will gain access to additional services and credit options: Business bank accounts also offer access to additional banking services, such as credit cards and business lines of credit. You'll even have access to merchant services.
Frequently Asked Questions (FAQ)
Does an LLC need its own bank account?
Yes, an LLC must have its own bank account. Having a separate bank account helps keep personal and business finances separate. This helps maintain a legal and financial distinction between you and the company.
What are the disadvantages of a business bank account?
Some disadvantages include the potential for monthly fees to maintain the account, transaction limits, and the need to maintain minimum balance requirements.
Can I open a business bank account with just an EIN?
Yes, you can open a business bank account with just an EIN, but you will still need the other documents mentioned above. Requirements for opening an account will vary by bank, so it's best to check with the specific provider you choose for your business needs.
This article was reviewed by our banking expert Tricia Jones.
