How to Open a Business Bank Account

Wondering how to open a business bank account or why you might need one?
Although it’s possible to run a small business using your personal bank account, there are benefits to having a dedicated account for your business.
Keeping your business finances separate from your personal money will make it easier to manage cash flow and track business expenses. Another reason for opening a business checking account is that it will make you seem more professional to your customers in case they want to write you a check or you need to write them one. Lastly, having a business bank account can help you qualify for business financing, which you may need at some point.
With this guide, you will get answers to the most asked questions about how to open a business bank account, such as:
How do I choose a bank?
What do I need to open a business bank account?
Which kinds of business accounts do I need?
How do I open a business bank account and make the first deposit?
How do I choose a bank?
Once you have decided to open a business account, it’s time to settle on a bank. Banking will be a major part of your everyday life as a business owner, so choosing a financial institution should not be taken lightly. Here are some factors to consider when looking for a bank that will best meet your needs:
Monthly costs and other fees
Most business checking accounts will charge monthly fees which may factor into your decision. To avoid those fees, consider choosing a bank that offers free checking accounts if you meet specific criteria. When you go with a free account, the trade-off could be fewer features and a strict minimum balance requirement. Monthly checking fees typically range between $0 and $30 a month but keep in mind that these fees are often waived when a minimum balance is met.
In addition to a flat monthly fee, there are often other fees to consider when comparing banks. Here are some common fees to watch out for:
Transaction fees
Cash deposit fees
Out of network ATM fees
Cash incentives
Not only is it possible to avoid monthly fees, but some banks will actually pay you to open an account with them. Banks are competitive these days, so some offer a cash incentive for choosing their bank. If you don’t already have your heart set on a particular financial institution, consider cashing in on one of these attractive promotions.
Location
Sometimes choosing a bank has nothing to do with fees or incentives. For many of us, the most important factor in selecting a bank is convenience — especially when it comes to location. If you choose a bank that is close to where you live or places you frequent, you will avoid having to pay the annoying out-of-network ATM fees. Another convenience factor may be that you already have your personal accounts at a certain bank. In that case, you could eliminate additional errands by keeping all your funds in the same place.
Banking style
Location may not matter if you tend to do everything electronically. Online checking accounts are becoming increasingly popular due to a shift away from dealing in cash. You may also decide to open a savings account, but that’s easy to do when done at the same time as starting up a checking account.
Online business accounts vs. traditional business accounts
Another decision you’ll be faced with is choosing between a traditional account and an online one. Your business needs and banking style will determine whether an online account will work.
One of the potential pitfalls of banking online is the inconvenience surrounding cash deposits. With an online account, you can deposit checks by scanning them with your phone, but there’s no practical way to deposit cash. If all your customer’s payments are collected online, cash deposits probably won’t be necessary anyway.
The great thing about online accounts is that they typically charge little to no fees, making them an attractive option for many small business owners. That said, you know better than anyone how your business completes transactions and whether an online account or traditional account would be more practical.
What do I need to open a business bank account?
If you are considering opening a business bank account, your primary concern might be the paperwork involved.
Be forewarned: There will be some documentation required to open the account, but you likely already have everything you need from when you first set up your business. As you might expect, the required information will depend on the type of business you own, and which bank you end up using. For example, on Bank of America’s website, the documentation requirements vary based on whether your business is a sole proprietorship, corporation, or general partnership. Here’s a list of what is often necessary to open a business checking account at most banks:
Social security number (SSN) or employer identification number (EIN)
Photo I.D.
Business license with your name and business name or business name filing document
Partnership agreement (if your business has multiple owners)
Organization documents filed with your state
Monthly credit card revenue history (if you are opening a merchant account)
Social security number vs. EIN
Regardless of the type of business you have, you’ll need to provide a business tax I.D. number. If you are the sole proprietor of your business, you can use your social security number for that purpose. However, if there is more than one owner, the bank will require an employer identification number (EIN). You can get an EIN from the I.R.S.
Obtaining an EIN from the I.R.S. website is surprisingly easy if you have a social security number and your company is in the United States. In that case, you can apply for the EIN online and receive the number and confirmation letter in as little as 30 minutes.