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Breaking Down How to Open a Business Bank Account in 5 Simple Steps

Banking
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Joey Randazzo
Joey Randazzo
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Published:
Dec 19, 2022
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Breaking Down How to Open a Business Bank Account in 5 Simple Steps

Running a business can be difficult at times. There are so many different things to keep up with, and perhaps the most important of all is your finances. 

Cash in, expenses, payroll, loans — trying to keep track of it all can make your head spin.

Having the right type of bank account(s) for your business will help. 

Deciding where to do your banking and what account categories will serve you best may seem intimidating, but that doesn’t have to be the case. 

We’ll show you how easy it is to open a business bank account and six steps you can follow to do it the right way.

Is It Hard To Open a Business Bank Account? 

Opening a business bank account isn’t hard at all. In fact, it’s surprisingly easy.

It doesn’t take long, and it’s not that complicated, especially if you have prepared everything you need in advance.

Pick your bank and decide what type of account you want to open, then you can go online or to a local branch to get started.

Opening a Business Bank Account: Six Steps You Need To Take

We said opening a business bank account is uncomplicated — and it is — but it’s helpful to plan everything out and follow a series of steps.

If you want to learn how to open a bank account for a business, here are our recommendations.

#1: Determine the Type of Bank Account You Need 

What type of account does your business need? It may depend on your financial situation and how you run things. Most businesses actually need a combination of different account types. 

Whatever type you choose, you want to make sure it has relatively low fees and good benefits. Many factors can go into determining which kind of account would be advantageous for you, including:

  • Introductory offers
  • Transaction fees
  • Checking and savings account interest rates
  • Line of credit interest rates
  • Minimum account balance numbers and fees
  • Early termination fees
  • Transfer, payment, and wiring capabilities
  • Access to online and mobile banking
  • Features like invoicing, bill pay, and business tool integration

If you aren’t sure what type of account you need or which perks will most benefit you, talk to a bank representative for advice. But remember, a banker’s job is to get you to open an account there, so if you have multiple options, be sure to thoroughly compare their offers.

Let’s look at the three most common types of business bank accounts. 

Business Checking Accounts

A business checking account is your best bet for everyday operations. It will serve as your core account and allow you to:

  • Accept deposits 
  • Make payments; and
  • Access your bank’s digital tools (such as a mobile app) and other functions

These days, some banks are starting to do away with the word checking because so few people use paper checks. Whatever they call it, this will generally be your main account.

Business Savings Accounts

A business savings account is best when you’re putting away money for the long term. It allows you to save money for big purchases, renovations, or tax bills.

The biggest advantage of a business savings account is that it pays you interest on your balance.

Merchant Services Accounts

A merchant services account is what you need to accept debit and credit card payments. Since we live in a largely cashless society, the majority of businesses need an account of this type.

Your merchant services account is usually connected to your business checking account. Be sure to compare what fees different banks charge to process debit and credit transactions because those can add up over time.

#2: Pick a Bank

Once you’ve established the necessary type of account, you’ll want to pick a bank that provides you with the most things your company needs. Not all business banks are created equal, so make sure to choose the right one that meets your service needs, your future business goals, and more.

When choosing which bank you want to use to open your business account, you may consider:

  • Customer service — Is it easy to get help? Will you be able to meet someone in person if needed?
  • Fees and minimum balances — Find out exactly how much you’ll pay to have an account there. Some banks may be willing to negotiate on this or will waive fees if you open a business credit card or stay above a set minimum account balance.
  • Perks or rewards — Do any of their account types come with membership or points programs that give you cash back, rewards, etc.?
  • Merchant service costs — What percentage of each debit or credit transaction will the bank keep?
  • Digital tools — Can you make mobile deposits? Integrate your accounting platform? Do you have payment and invoicing capabilities? Be smart about how what your bank offers will save you time and effort in the long run.

Choose the bank that will best serve your business. You also want to make sure the account gives you room to grow. Some business bank accounts have transaction limits, and you’ll have to pay fees if you go over the set numbers. As your business grows, your bank account should allow for that without punishment.

Some banks specialize in serving specific types of businesses or industries. Their expertise and custom offerings may better suit your needs, especially when it comes to lines of credit or business credit cards.

#3: Initiate the Set-Up Process

For some banks and credit unions, you’ll have to physically go into a branch to set up a bank account.

Other options allow you to do everything online. For certain business owners, having a personal relationship with their banker is important. But many busy entrepreneurs are grateful for the time they save with exclusively-online banking.

#4: Gather Any Potential Information the Bank Might Need 

Opening your business bank account will go more smoothly if you have everything you need in advance. Here are some of the things your bank may ask for.

Personal Information

It is legally required that you show banks the following when opening any type of account:

  • A driver’s license, passport, or some other form of government-issued identification
  • Your date of birth
  • Your mailing address
  • Etc.

You have to be able to prove you are who you say you are.

Business Information 

Just as you have to prove who you are, you must also prove that you have a legitimate business. You will have to show documentation, such as a business license, that shows you have properly set up things with the state.

You also must disclose:

#5: Provide the Necessary Documents & Information Based on Your Business Type

Banks will require you to provide different types of documentation for various categories of business. Let’s break down what you will need for each.

Sole Proprietorships

Sole proprietorships are set up a little differently than other business types. That’s because, in this case, technically, you are the business.

For this type of business, you’ll need to show:

  • Your social security number (only accepted for sole proprietorships) or EIN
  • Personal identification
  • A business license with the name of the business and the owner’s name
  • A certificate of assumed name/DBA
  • Monthly credit card revenue (for merchant accounts)

Partnerships 

A partnership is a business shared by at least two owners. For this type of business, the bank will want to see:

  • Your EIN
  • Personal identification
  • A business license
  • A certificate of assumed name/DBA
  • A legal partnership agreement with the name of the business and its partners
  • An organizing document filed with the state (for limited partnerships or limited liability partnerships)
  • Monthly credit card revenue (for merchant accounts)

Limited Liability Companies (LLCs)

LLCs are a popular business model because they protect owners from personal responsibility for debts or liabilities and offer certain tax advantages.

To open a business bank account for an LLC, prepare to show:

  • Your EIN
  • Personal identification
  • A business license
  • A certificate of assumed name/DBA
  • An LLC operating agreement with the name of the business and its partners
  • Articles of organization
  • Monthly credit card revenue (for merchant accounts)

Corporations 

A corporation is a legal entity that is considered separate from its owners. These organizations can be taxed, make a profit, and be held legally liable.

Opening a corporate bank account will require:

  • An EIN
  • Personal identification
  • A business license
  • A certificate of assumed name/DBA
  • Corporate bylaws
  • Articles of incorporation
  • Monthly credit card revenue (for merchant accounts)

#6: Make a Deposit

Most banks will require you to make a minimum deposit when opening your business account. Some may be as low as $5 or as high as thousands of dollars.

In some cases, you won’t have to make any deposit at all.

Be sure to check this information before opening your account. It could have quite an impact on your finances, especially if you’re a small business owner.

Opening a Business Bank Account Doesn’t Have To Be Difficult – Especially When You Come Prepared

If you do the research — or take advantage of the research we’ve done for you — and come prepared, you’ll likely have a fairly easy time opening a business bank account.

Just figure out what type of account and which bank you’d like to use, gather all the necessary documentation, and contact your financial institution of choice. It’s pretty simple overall.

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