This article is part of a larger series on Business Banking.
If your business is a sole proprietorship or a single-member limited liability company (LLC), you can open a business bank account without an employee identification number (EIN). However, if your business is organized any other way or you plan on hiring employees, you must obtain an EIN from the IRS before filing business taxes.
While you might be able to obtain a business bank account without an EIN, there’s no reason not to get one. Getting an EIN from the IRS is free, and it can be applied for online, by fax, or by mail. Even if you’re a sole proprietor or a single-member LLC, you can get an EIN. If your plan is for your business to grow, you’ll need one eventually.
If you’re looking for a business checking account that can be opened by a single-member LLC or sole proprietor without an EIN, Bluevine is an excellent choice. You can earn 1.5% APY on balances up to $100,000. Visit Bluevine for more information.
What an EIN Is & How To Obtain One
An EIN is a nine-digit number assigned by the IRS to identify your business for filing taxes, opening bank accounts, getting business financing, and performing other business activities.
The easiest and fastest way to apply for an EIN is through the IRS website. You’ll answer a series of questions and receive your EIN online after completing the questionnaire. The process takes about 10 minutes, and you’ll be able to file taxes on that new EIN about two weeks later.
You can also choose to fax or mail in IRS form SS-4 to apply for an EIN.
Pros & Cons of Opening a Business Bank Account Without an EIN
|Allows you to keep taxes simple for your sole proprietorship||Opens yourself up to identity theft as your Social Security number is tied to your business accounts|
|Business loan repayment taken out in your Social Security number could help strengthen your personal credit||Some banks won’t do business with companies without an EIN|
|Separation of business and personal finances is harder when both accounts are opened under your Social Security number|
|Personal credit could be damaged if something goes wrong with the business|
You might not be able to open an account at your local bank without an EIN. Even if you can get a business checking account, you might not get business loans without one.
Also, separating your business and personal finances is harder when both accounts are opened under your Social Security number. This can make tax time very difficult and open you up to audits by the IRS. Another way you could get in trouble with the IRS is to find out that you should have filed for an EIN but never applied for one. There can be tax penalties involved with incorrect filing.
Moreover, because your business is being conducted under your Social Security number, your credit is on the line. Your personal credit could be damaged if something goes wrong with the business.
Having an EIN will give your business credibility with banks and vendors. It’ll help speed up obtaining a business loan and allow you to build your business credit. In addition, you can hire employees, which will help your business grow.
Who Is Required to Have an EIN
The IRS requires businesses to obtain an EIN unless they’re organized as a sole proprietor or a single-member LLC. You must also obtain an EIN to file taxes if any of the following apply to you or your business:
- You have employees
- You operate your business as a corporation or partnership
- You file any of the following tax returns: employment; excise; or alcohol, tobacco. and firearms
- You withhold taxes on income, other than wages, paid to a nonresident alien
- You have a Keogh plan
- You’re subject to a bankruptcy proceeding
- You purchase or inherit an existing business that you operate as a sole proprietorship
In addition, you must obtain an EIN if you’re involved in any of the following organizations:
- Trusts, except certain grantor-owned revocable trusts, individual retirement accounts (IRAs), and Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Nonprofit organizations
- Farmers’ cooperatives
- Plan administrators
How To Open a Small Business Bank Account Without an EIN
If you are a sole proprietor or own a single-member LLC, you may be able to open a business bank account at your local bank. While we recommend obtaining an EIN before opening an account, here’s how to open a small business bank account without an EIN.
Step 1: Gather Required Documents
You’ll need to provide your bank with certain documents to open an account. They may include:
- Social Security number
- Fictitious business name certificate or doing-business-as (DBA) certificate
- Business formation documents
- Organization documents, including your ownership agreements
- Business licenses
- Government-issued photo ID, such as a passport or driver’s license
- Contact information for you
- Business revenue and tax information, if available
Step 2: Select a Business Bank Account Type
There are many choices when it comes to the best banks for small businesses. You’ll need to find a bank that will allow you to apply for an account without an EIN. Once you find one, there are several types of bank accounts you can choose from:
- Free business bank account: Many banks will waive fees or provide fee-free accounts
- Traditional business checking account: Provided by traditional banks like Chase and Bank of America, these are checking accounts that offer a wide variety of business services
- Online business checking account: Many financial technology (fintech) companies provide online business checking accounts, many of which come with limited fees and unique features
- Business savings accounts: Many business banks offer savings accounts that draw interest, allowing your reserve funds to grow
Step 3: Compare Potential Costs
While the most obvious cost with any business bank account is the monthly fee, some accounts charge other fees. Some even limit the amount of free monthly transactions and free cash deposits each month. It’s important to understand what type of transactions you’ll have each month and calculate the actual costs of the bank account.
Step 4: Open Your Account Online or In Person
Once you pick a bank and a bank account, you can open your account. Most institutions will allow you to open accounts entirely online without ever stepping inside a branch. Others require you to visit a branch, so make sure your business is located near there.
Step 5: Deposit Funds
When you open the account, you’ll want to deposit funds into your new account. Some business bank accounts require a minimum deposit when opening the account.
Technically, it’s possible to open a business bank account without an EIN, but it isn’t recommended. Sole proprietors and single-member LLCs can use Social Security numbers instead of EINs to open accounts, but it can open your business up to many problems. Obtaining an EIN is free and can be done in 10 minutes on the IRS website. If you plan to see your small business grow, get your EIN before opening any business bank accounts.