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What do I need to open a business bank account for a startup?

Opening a business bank account is among the first things to do when you’re starting a small business. Once you’re generating sales and spending money on business expenses, it’s time to start the process. Naturally, you’ll have two important questions: How do I choose the right bank, and what do I need to open a business bank account?

For some business types, it’s not just a recommendation to have a separate business bank account; it’s a requirement. If you own a limited liability company (LLC) or a corporation, you need to have a business bank account exclusively for company finances. If personal transactions and business transactions intermingle in one bank account, you could jeopardize your personal liability protection. 

Even if you’re one of the 23 million sole proprietors not required to open a separate business bank account, we strongly suggest that you do. It’ll be easier to keep track of your business expenses and make sure you get small business tax deductions available to you.

Today, opening a business bank account is simple. It’s a low-cost investment that offers a wide range of protections and perks that small business owners can depend on. We’ll go over the process of opening a business account, and detail the documents you’ll need to do so.

What do I need to open a business bank account?

Once you know what to have ready before opening a business bank account, we’ll review the steps you’ll take to apply for one.

1. Organizing documents

Have you registered your new business yet? If so, you’ll have organizational documents from registering with your state, city, or county. The materials you’ll provide will depend on the business structure you chose. The four primary business types are sole proprietorships, partnerships, limited liability companies (LLC), and corporations. 

You’re proving to the bank that you own (or partially own) the business. Here are some examples of the kind of organizing documents a bank may request: 

  • Articles of organization
  • Articles of incorporation
  • Operating agreement 
  • Partnership agreement
  • Letter of determination

A sole proprietor doesn’t have to register their business entity, so they may not have a certificate of formation. If you happen to be a nonprofit or another tax-exempt organization, bring your letter of determination, also known as a 501(c)(3) letter. 

2. Business identification

When you open a separate bank account, you need to identify your business and demonstrate its legitimacy. Much of the below information is included in your organizing documents, but be prepared to provide secondary evidence of the following: 

  • Legal business name as it appears in business registration filings
  • “Doing business as” name (DBA) or fictitious name
  • Your Employer Identification Number (EIN)
  • Proof of location or official address 
  • Contact information

Any business owner can request an EIN from the IRS, and requirements vary by type of business. Essentially, this is your business’s Social Security number. You’ll use it to file taxes, pay employees, and much more. A sole proprietor doesn’t need to get one (although it’s recommended). Instead, you’ll use your personal identification to apply for a business bank account. 

3. Personal identification

If you have an EIN, also known as your federal tax ID number, that is your business’s primary form of identification. As a result, the owners of LLCs and corporations may not be asked to provide their Social Security numbers (SSNs). In any case, be prepared to show proof of identity, such as the following: 

  • Your Social Security number
  • Driver’s license, passport, or another photo ID
  • Utility bills with your legal name or your business name

There’s a chance that all of the business owners may have to be present and provide their individual information. Requirements vary by bank or financial institution.

4. Business licenses and permits

This applies to sole proprietorships, partnerships, companies, and corporations across all industries. Odds are you had to apply for a few federal, state, city, or county licenses to begin operating your business. You may have to provide licenses and permits at both the business and individual level, such as:

  • State tax permits
  • Professional licenses
  • Health department permits

A bank may be able to provide some direction, but it’s best to check local government requirements for your trade. The U.S. Small Business Administration offers a helpful overview of federal licensing requirements and direction on state-level regulations. 

When you start comparing banks, ask representatives about the required paperwork for your specific industry, business structure, number of owners, and so on. 

For instance, don’t simply request a shortlist of required documentation. Ask, “What do I need to open a business bank account for an LLC in ecommerce?” A business owner launching a sports betting app, for instance, may need to submit different documents than the owner of a coffee shop. 

Now that you’ve learned what you need to open a business account, let’s go over why this all matters for your new business.

3 ways a bank account strengthens your business

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A business bank account is a method of storing and safeguarding your business funds. You'll also preserve your personal liabilities. If you mix personal funds and business finances, you could lose personal liability protection. And if your business can’t pay its debts, your personal assets are at stake, regardless of business structure.

But you’ll unlock much more than that with a business bank account. 

  • Monitor spending and budget better: You can track business expenses more efficiently and avoid overspending when you have an account distinct from your personal bank account. You’ll also more accurately determine your startup costs and write off some purchases.
  • Make bookkeeping and accounting easier: Keep accounts organized and create a clear spending trail with a business bank account. It's also easier to generate financial statements, pull reports, and prepare taxes correctly.
  • Get vital lines of credit: Some banks will extend a line of credit. This will help you secure small business loans and perhaps open a corporate credit card down the line.

How to open a business bank account

You’ll need to find an affordable bank account that meets your company’s needs (while also offering a few perks). These tips on how to open a business bank account will help. 

1. Choose a bank account type. 

Think about what you need your bank account to do for you. Are you looking to open a line of credit? Perhaps your focus is on establishing business credit or improving cash flow in the short term. 

Broadly, you can open a business checking account, a business savings account, or both. Each one has unique benefits. There are traditional checking accounts that offer in-person banking services and financial expertise, but be aware that checking accounts often carry service fees. The best banks will spell this out, so you know what to expect and how to avoid extra charges. Here's a breakdown of the most common fees:

  • Monthly fees: Most banks waive this if you meet the minimum balance requirements. It’s also called a maintenance fee.
  • Transaction fees: Accounts usually have a limit on the number of transactions allowed per month. If you go over, you could be charged.
  • Early termination fees: This is charged if you close your account earlier than agreed upon. 
  • ATM fees: If you're handling cash, ask about out-of-network costs for withdrawing funds.
  • Deposit fees: Some banks have limits on how much you can deposit each billing cycle. It’s also called a cash handling fee.

Today, fee-free business bank accounts are popular. They’re typically online only and have no cash deposits, checks, outgoing wires, and so on. Online banking is a convenient option if you won't need to handle cash. 

A business savings account allows you to earn interest on your funds, typically with fewer fees than checking accounts. Use a savings account to separate your savings, like a portion of your retained earnings, from your working capital.

Most business owners look for high-yield accounts with favorable interest rates. Accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC). 

You should know that the accounts we’ve discussed are different from a merchant services account, which is used to accept credit card payments at your business. Checking and savings accounts don’t provide this function.

2. Select a financial institution. 

The main item to remember here is research, research, research. One option is to reach out to banks where you already have a personal account in good standing. They’re more likely to become your business banking partner because you have a history.

As a new business owner, you may want to look for banks that offer account-level guidance. Credit unions also provide business bank accounts.

When searching for the right bank, consider qualities such as: 

  • Affordability
  • Introductory offers, cash bonuses, and other account rewards
  • Number of physical locations (unless you prefer online-only banking) 
  • Mobile banking options
  • Fund protection and insurance
  • Other available financial services 

If you have more questions, check out our detailed guide to banking options for startups. 

By the way, a bank account — that is, an account held by a bank — is not your only option. There are many financial service providers that offer the same services and protections included with bank accounts. We'll cover that later.  

3. Apply online or in person.

Once you’ve compared banks, you’re ready to apply. You can submit an application online or in-person at a branch. Typically, it doesn’t cost money to apply for a business bank account. 

Before you start the process, be sure to review the "What do I need to open a business bank account?" section above. This will help you determine which documents you need to bring or upload online.

If you have a lot of questions—or this is your first time opening a business bank account—you may want to go in person. Approval could take hours or days, depending on the account level and functionality for which you’re applying. 

Once you're approved, make sure that everything is set up correctly, and deposit your funds.

A cash management account: The leading alternative to a business bank account

As a growth-minded business owner, it’s always a good idea to know your options. We mentioned earlier that banks aren’t the only financial institutions offering cash management services

Consider a cash management account (CMA) for your new business. Think of it as an all-in-one account to handle your business finances.

Cash management accounts provide services very similar to checking, savings, and investment accounts. They’re online accounts that offer virtual support and necessary business tools. The lower operational costs of online banking deliver more significant savings and earnings on your end, such as:

  • Higher interest rates: CMAs tend to offer higher interest rates and industry-leading yields. 
  • Low or no fees: Many CMAs have none of the traditional bank account fees. For example, the Brex Cash account has no transaction fees for ACH payments and wire transfers. 
  • Credit lines: CMAs also offer lines of credit that attach to your investment securities.

The bottom line on opening a business bank account

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Effective money management is fundamental for growing businesses. Whether you choose a traditional business banking account or a cash management account, you're taking an essential step toward longevity. You’ll simplify your expense tracking and budget more accurately. And your funds will earn interest while you focus on the opportunities that move your business forward.

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