If your business is organized as a sole proprietorship or a single-member LLC, it’s technically possible to open a business bank account without an EIN, also known as a Federal Tax ID, but it’s not advisable. Even if your business structure doesn’t require an EIN to open a bank account, there are vital reasons to get one, such as avoiding complications at tax time. Applying is free and can be done online, by fax, or by mail. Plus, it’s an essential step if you plan to grow your business.
How to Open a Small Business Bank Account Without an EIN
If you are a sole proprietor or single-member LLC, you can open an account at your local bank without an EIN. However, I strongly recommend getting an EIN before opening to ensure your business finances are properly separated from your personal finances.
Step 1: Gather Required Documents
Banks will need certain documents to open a business account, including:
- Social Security number (SSN)
- Fictitious business name certificate or doing-business-as (DBA) certificate
- Business formation documents, such as LLC or partnership agreements
- 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. Look for banks that allow you to open an account without an EIN. Also, consider whether you want a checking or savings account and if you need specific features, such as online banking or merchant services.
Check out the table below for several types of bank accounts you can choose from.
| Account Type | Feature | My Recommended Financial Institutions |
|---|---|---|
| Free Business Bank Account | Fee waivers or fee-free accounts | U.S. Bank, one of our top free business checking accounts |
| Traditional Business Checking | A wide variety of business services | Chase, part of our best small business checking accounts |
| Online Business Checking | Limited fees and unique features provided by financial technology (fintech) companies | Bluevine and Novo, two of our top-recommend online business banks |
| Business Savings | Interest-drawing, allowing reserve funds to grow | Live Oak Bank, one of our leading business savings accounts |
Step 3: Understand the Costs
Compare fees for business accounts, such as monthly maintenance fees, transaction fees, and any additional costs for paper statements or cash deposits. It’s important to understand what type of transactions you’ll have each month and choose a bank and account that fits your expected transaction volume.
Step 4: Open Your Account Online or In Person
Once you’ve selected a bank and an account type, you can open a business bank account. This can be done online or in person, as some banks may require an in-person visit. Ensure your business is located near a branch.
Step 5: Deposit Funds
Some business accounts require a minimum deposit. Be prepared to fund your account when you open it.
Pros & Cons of Opening a Business Bank Account Without an EIN
Pros
- It allows you to keep taxes simple for your sole proprietorship.
- Business loan repayment taken out in your SSN could help strengthen your personal credit.
Cons—And Why You Should Get an EIN
- You might be unable to open an account at your local bank without an EIN. And even if you can get a business checking account, you might not get business loans without one.
- Separating your business and personal finances is harder when both personal and business accounts are opened under your SSN. 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.
- You are opened up to identity theft as your SSN is tied to your business accounts; using an EIN for your business protects your SSN from being exposed on business documents and employee forms.
- You can’t hire employees, as you’ll need an EIN to manage payroll taxes, withhold employee taxes, and contribute to Social Security.
- You can’t incorporate your business or form a partnership, as an EIN is required for both legal and financial purposes.
- Many creditors require an EIN before extending business credit. Also, having an EIN lets you establish a business credit history, which can aid in qualifying for loans and favorable terms and even expedite the process of applying for business financing.
- Because your business is being conducted under your SSN, your credit is on the line. Your personal credit could be damaged if something goes wrong with the business. It’s also why you should never use a personal checking account for business.
- Who Is Required to Have an EIN
Who Is Required to Have an EIN
The IRS requires businesses to obtain an EIN if they:
- Have employees
- Have a corporation or partnership
- Have a business involved in a bankruptcy proceeding
- File certain tax returns (employment, excise, alcohol, tobacco, and firearms)
- Operate a Keogh plan
- Purchase or inherit an existing business that operates as a sole proprietorship
- Withhold taxes on income, other than wages, paid to a nonresident alien
Additionally, certain entities and organizations are required to have an EIN. These include trusts, estates, nonprofits, farmers’ cooperatives, and plan administrators.
How to Obtain an EIN
You can apply for an EIN through the IRS website, which is the easiest and fastest way to get an EIN. Alternatively, you can choose to fax or mail in IRS Form SS-4.
The application process, which takes about 10 minutes, is straightforward: answer a series of questions, and you’ll receive an EIN immediately upon completion. You can start using the new EIN for your business taxes within two weeks.
Frequently Asked Questions (FAQs)
Only sole proprietors and single-member LLCs can open an account without an EIN; they’ll use their SSN instead. However, having a separate EIN for your business is recommended for tax purposes and financial credibility.
The documents required will vary based on your business structure, but typically you’ll need personal identification (SSN or EIN), business licenses, DBA registration (if applicable), and business formation documents.
Yes, you can open a bank account with just a DBA. You do not need to have a registered business (though some states will require you to register your DBA name) to open a bank account under your DBA name and SSN.
An EIN is not always required, but it is highly recommended. It helps separate your personal and business finances and avoids complications at tax time.
Bottom Line
Sole proprietors and single-member LLCs can use an SSN instead of an EIN, but this can lead to tax issues and impact personal credit. Obtaining an EIN is free and takes just a few minutes on the IRS website. If you plan to see your small business grow, get your EIN before opening any business bank accounts.
