Opening a business bank account will help your business keep its finances organized, while also adding a professional touch to your business operations. While it may seem like a daunting task, it’s really as easy as gathering the necessary documents, identifying the features you need, selecting a provider, reviewing the costs and opening the account. Follow our detailed guide below so you know what steps it takes to properly open a new business bank account.
If you are looking for a business checking account that can earn you interest, Bluevine is an excellent choice. You can earn 2.0% Annual Percentage Yield on qualifying balances of $250,000 or less with its basic account. If you upgrade to Bluevine Premium — for a waivable monthly fee of $95 — you can get an APY of 4.25% on balances up to $3 million. Check out the provider for more information or to open an account.
What do I need to open a business bank account?
First things first, you’ll need to make sure that you have all the documents actually required to open a business bank account. Documents needed at account opening include:
- A proof of identity (e.g., passport, driver’s license).
- An Employer Identification Number or Social Security Number if you’re a sole proprietor.
- A business license and/or business registration.
- Any partnership agreements, if applicable.
- Any organization documents, such as your articles of incorporation or articles of organization.
- An operating agreement, if applicable.
Let’s break down 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 at account opening. This includes having your personal identification, EIN or SSN, and any business-related licenses and agreements on hand.
- Proof of identity: Be prepared to show either your passport, government ID or driver’s license for all signers on the account.
- Employer Identification Number or Social Security Number: An EIN helps identify your business for tax reasons. Sole proprietors and single-member LLCs can use their SSN if they don’t have an EIN. If you’re unsure whether your business needs an EIN, check out this checklist from IRS.gov and seek out additional guidance from a licensed tax professional. Note: You will also have to provide the SSN for each beneficial owner of the business.
- Business license and/or business registration: This helps prove that your business has the legal authorization needed to operate and actually do business.
- Partnership agreement: For business partnerships, a partnership agreement helps outline the current structure and terms of your business.
- Organization documents: For corporations and LLCs, be ready to provide the articles of incorporation or articles of organization to prove that your business is legally formed.
- Operating agreement: If your business is an LLC, an operating agreement helps map out the current management structure and operational guidelines of your business.
Step 2: Identify the features and terms you need
Sit down and write out a list of all the key features and terms that would best serve your banking needs. Writing down a list of important features and terms will help you narrow down which banking provider will be best for your startup. Features and terms to be mindful of include:
- Online banking capabilities: Online banking allows for more ease of access. With online banking services, you can view your account balance, transfer funds and pay bills online or from your phone.
- Mobile check deposit: Mobile deposit lets you deposit checks using the phone in your pocket. This saves time and limits in-person trips to the bank.
- Fee structures: Potential add-on costs, such as monthly maintenance fees, transaction fees and ATM fees, can catch you off guard. You should double-check an account’s fee structure to better understand the fees associated with your potential bank account.
- Account interest rates: If you usually keep a high account balance, look for bank accounts that offer competitive interest rates so you can maximize interest earnings.
- Transaction limits: Be mindful of excess 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, choosing a traditional bank with a brick-and-mortar location close to your business is advised, because depositing cash to an online banking platform can be a more complicated process.
- Software integrations: Most bank providers offer built-in integrations with various external software. Finding a banking provider that integrates with other software you use for your business can save you time and help eliminate potential errors associated with creating duplicate entries.
For a deeper understanding of helpful banking terms that it’d be best practice to familiarize yourself with, check out our glossary of banking terms, which helps better explain the current technological ecosystem in banking.
Step 3: Select a banking provider
Different banking providers will often offer different terms and account features. Popular banking providers for startup businesses include Bluevine, Relay, Novo, Chase, US Bank and Bank of America.
Consider both traditional banks and online-only banks (or fintech platforms backed by banks) when it comes to making your final decision. Both options come with their own advantages and disadvantages.
- Traditional banks: Traditional banks usually offer a wide range of banking services. They also benefit from a wide network of branches and ATMs. However, traditional banks tend to have more stringent account fees and minimum balance requirements.
- Online-only banks: Online banks and fintech platforms offer higher interest rates and lower fees due to their reduced operational costs. However, online banks lack physical locations, which may be a drawback for a startup business that would best be served by in-person services.
*Chase, U.S. Bank, and Bank of America are all members of the Federal Deposit Insurance Corp (FDIC).
**Financial technology platforms mentioned above are backed by and FDIC-insured through supporting bank partnerships, Bluevine with Coastal Community Bank, Relay with Evolve Bank & Trust and Thread Bank, and Novo with Middlesex Federal Savings.
For a deeper dive into banking industry insights, visit the banking section on TechRepublic.
Step 4: Review the costs associated with your selected provider
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 keep in mind include:
- Monthly maintenance fees: A fee that covers monthly account maintenance.
- Transaction fees: Add-on 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 like money orders or cashier’s checks.
Step 5: Open your account
Once you have selected a banking provider and gathered the required documents from Step 1, it’s finally 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 required documents and answer any supplemental questions the account representative might have for you. Also, make sure all key employees that you want to grant bank account access to are present at 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’ll want to deposit funds into your new business bank account to properly activate it. You can deposit either cash, checks or an electronic funds transfer into the new bank account. A pro tip is to ensure you have enough funds deposited in your account at opening to cover any upcoming business expenses you’d be anticipating.
Advantages of having a business bank account
There are several key advantages that opening a business bank account will offer your startup:
- Your personal and business finances stay separate: A bank account for your business keeps your personal and business finances separate. This helps ensure clear financial records come tax season.
- You gain more business credibility: A business bank account adds extra credibility to your business. This makes dealing with potential clients, creditors and vendors easier.
- Tracking business expenses and income is easier: Having a dedicated business account simplifies your monthly expense and income tracking. This makes the financial management of your business a lot easier. Brush up on the ins and outs of bank reconciliation for a more in-depth understanding of proper business transaction tracking.
- You gain access to extra services and credit options: Business bank accounts also come with access to additional banking services such as business credit cards and lines of credit. You’ll even have access to merchant services.
Frequently asked questions (FAQs)
Does an LLC need its own bank account?
Yes, an LLC should have its own bank account. Having a separate bank account helps keep your personal and business finances independent. This helps maintain a legal and financial distinction between you and the business.
What are the disadvantages of a business bank account?
Some disadvantages include potentially paying some monthly fees for account maintenance, having transaction limits and needing 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. The requirements for opening an account will still vary by bank, so it’s best to check with the specific provider you end up choosing for your business needs.
This article was reviewed by our banking expert Tricia Jones.