6 Steps to Opening a Business Bank Account

Opening a business bank account is a six-step process that includes determining the right type of bank account, selecting the right bank, knowing what you have to pay, providing the required documentation, opening an account, and depositing funds. Opening a business account makes it easier to keep your business and personal cash flow separate.

If you’re searching for a good small business checking account, consider Bank of America. It has low fees―waived in some cases―and one of the largest branch and ATM networks nationwide. This makes Bank of America the best checking account for most small business owners. New customers can get a sign-up bonus worth up to $450.

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There are six steps needed when opening a business bank account.

Opening a business bank account is a six-step process

1. Choose the Best Type of Business Bank Account

Most new business owners start by opening a business checking account. They must decide between an online checking account, which is fine for most businesses without the need for cash deposits or accounts with traditional banks, which often come with more fees but also a wider variety of products and services. New business owners may also want to open a business savings account to earn interest on capital that’s not ready to be deployed.

Free Business Bank Account

Free business bank accounts are typically online providers that either don’t charge monthly maintenance fees or make it easy to avoid them by meeting certain criteria, such as minimum balance requirements. They offer features such as electronic deposits, withdrawals, electronic transfers, and the ability to write checks. They’re best used for businesses with no cash deposit needs and new businesses.

Some fee-free bank account providers provide an online-only banking experience. Azlo is one of the newest free bank accounts that doesn’t charge overdraft fees, card replacement fees, or monthly fees. You can apply online in minutes.

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Traditional Small Business Checking Account

A traditional business checking account allows businesses to write checks, transfer or receive money electronically, withdraw or deposit funds using a debit card, and separate your personal and business accounting. For these reasons, one of the first steps you should take when starting a business is making sure you open a checking account. The best business checking accounts typically have introductory offers, flexible network availability, and low fees.

Bank of America is a good option for businesses because it offers low monthly account fees and has one of the widest branch and ATM networks nationwide. New customers can get up to $450 in sign-up bonuses. You can apply online in a matter of minutes.

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Online Business Checking Account

An online business checking account is a solid option for businesses that don’t handle cash during its day-to-day operations, as most don’t allow for cash deposits. Most online-only business checking accounts are also fee-free or make it easy to avoid monthly account fees by maintaining a monthly minimum balance. Choose an online-only account if you don’t need to make cash deposits or visit a physical branch location.

Some of the best online business checking accounts offer an annual percentage yield (APY) above 1%. If you want to earn interest and will have an average daily balance of $10,000 or more, consider First Internet Bank. This online-only bank pays APY based on your daily account balance for its business checking and savings accounts. You can apply online in a matter of minutes.

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Business Savings Accounts

Business savings accounts allow you to keep your money in a safe investment while earning interest each month. Some of the most common business savings accounts include traditional business savings accounts, high-yield savings accounts, business CD accounts, and money market accounts.

The best business savings accounts are:

• Traditional business savings: Traditional business savings accounts offer minimal fees, pay ongoing APYs, and are insured by the Federal Deposit Insurance Corporation (FDIC). You could earn more than 1% in interest.
• High-yield savings: A high-yield savings accounts carry low fees and allow you to build your savings by earning interest each month. The best high-yield savings accounts have interest rates up to 2.25%.
• Business certificate of deposit (CD): CD accounts are another type of long-term business savings accounts that earn higher interest rates than traditional savings accounts. However, you have to keep funds in the account for an extended period of time—as short as one month to ten or more years—to avoid costly early withdrawal fees.
• Money market account (MMA): An interest-bearing account that generally pays interest rates higher than a savings account; you’ll earn a lower interest rate than other investments because MMAs are considered safe investments.

Business owners should have both a business savings and checking account to separate their working capital and savings funds. Additionally, opening a business bank account is key to ensuring you don’t commingle business and personal funds. For example, if you put personal money into your business, you need to account for the money on your business books so that you track the amount your business either owes you or how much ownership you have accurately.

2. Find the Right Bank to Open a Business Account

The next step when opening a business account is to choose the right bank for your business. The financial institution you select will influence such things as the overall costs and fees, the number of available locations, online banking experience, customer service, and other business financial products. An excellent place to start is with a bank where you have a previous banking relationship.

The factors to consider when choosing a bank to open a business bank account are:

• Existing banking relationship: Think about starting your search with a previous banking relationship when setting up a business bank account.
• Affordable costs: Consider the affordability of the costs you might be charged, such as monthly servicing fees, deposit fees, and ATM fees.
• Convenient network: Make sure the location, as well as the number of ATMs and branches, suits your needs.
• Good online/mobile experience: Make sure your bank offers a good online experience, which includes online bill pay and mobile deposits.
• Ease of bookkeeping integration: Ensure your bank account and bookkeeping software integrate.
• Support for future needs: If you expect to need more than just bank accounts, make sure your bank offers small business loans, lines of credit, and credit cards; a small business credit card allows you to float business expenses and often offers rewards.

Weighing these factors when choosing a bank will help ensure that it’s a good fit and that your business benefits in the near- and long-term. One solid option is Bank of America. It has low monthly account fees, and new business account holders can qualify for up to $450 in sign-up bonuses. Plus, there are five Bank of America business cards.

3. Check the Business Bank Account’s Costs

While there are some great free business bank account options in terms of monthly service costs, all banks typically charge for some transaction fees. Usually, banks waive fees if certain criteria are met, such as maintaining a minimum balance, using bill pay, or keeping within transaction limits. Business bank account fees are assessed on business checking accounts, business savings accounts, and CDs.

Business Checking Account Fees

When opening a business bank account, the most common checking account fees are:

• Monthly service fee ($10 to $17 per month): Flat fee that’s waived if certain criteria are met.
• Minimum balance fee ($15 to $25 per month): Fee that’s charged if a minimum balance amount isn’t met.
• Transaction fee ($0.40 to $0.50 per transaction): Fee that’s assessed if the account exceeds about 200 monthly transactions.
• Cash deposit fee (2% to 3% per deposit): Fee that’s charged if the account exceeds about $7,500 cash deposits per month.
• ATM fee ($2 to $3 per transaction): Charge for ATM transactions at out-of-network ATMs.
• Wire transfer fee ($15 to $45 per transaction): Fee assessed on domestic and international incoming and outgoing wire transfers.

A free business checking account doesn’t mean you won’t be assessed any fees. For example, it might still charge you transaction fees, wire transfer fees, and overdraft fees. The best free business checking accounts typically waive monthly account fees if you meet specific criteria like monthly minimum deposit requirements.

Business Savings Account Fees

When opening a business bank account, the most common savings account fees are:

• Monthly service fee ($2 to $20 per month): Flat fee that’s waived if certain criteria are met.
• Minimum balance fee ($15 to $25 per month): Fee that’s charged if a minimum balance amount isn’t met.
• Monthly balance transfer fee ($5 to $20 per transaction): Per transaction charge for balance transfers that exceed six per month.
• Cash deposit fee (2% to 3% per deposit): Fee that’s charged if the account exceeds about $7,500 cash deposits per month.
• Wire transfer fee ($10 to $45 per transaction): Fee assessed on domestic and international incoming and outgoing wire transfers.

Although there aren’t specific free business savings accounts, if you meet certain criteria put in place by your bank, your account can be relatively inexpensive. These criteria include cash deposits below $7,500, minimum balance requirements, and transaction limits.

Business Certificate of Deposit Fees

When opening a business bank account, the most common business CD account fees are:

• Early withdrawal fee: Fee that’s based on the percentage of interest earned or the amount withdrawn and charged if cash is withdrawn from the certificate of deposit early.
• Broker fees: Fee that’s based on a percentage of the CD amount and charged as a broker’s commission.

The easiest way to avoid worrying about most fees is to use a free business account, such as Azlo’s free business bank account. There is no monthly fee, automated clearing house (ACH) payments and transfers are free, and it doesn’t charge overdraft or replacement card fees. Azlo is an online-only, fee-free business bank account, and you can apply online in just a few minutes.

4. Gather the Required Account Opening Documentation

When opening a business account, you’ll typically need to provide documentation that verifies the name and general nature of your business. You’ll also need to show documentation that proves your business is registered with the IRS and indicates that you have the legal authority to set up the account. The exact documentation you’ll need to provide will vary based on corporate structure.

Sole Proprietorship Business Bank Account Requirements

• Personal identification: You’ll need your Social Security number (SSN) as well as two forms of personal ID to open a business bank account; valid types of identification include a driver’s license, passport, and Social Security card.
• Fictitious business name certificate: You might also need a “Fictitious Business Name” certificate, known as a “doing business as” certificate (DBA certificate), if your business operates under a different name from your own.

Partnership Business Bank Account Requirements

• Business identification: To open a business bank account, you’ll need your federal employer identification number (EIN) and a copy of your articles of organization.
• Organization documents: This includes your business partnership agreement and any other organization documents that you may have prepared when you formed your partnership.
• Other potential documentation: You also may need to provide a signed declaration of unincorporated business and any required business licenses. Business licenses are common with healthcare businesses or restaurants.

S Corporation (S-Corp) Business Bank Account Requirements

• Business identification: When opening a business account, you’ll need to show your federal EIN.
• Articles of incorporation and corporate charter: You’ll need to provide your certified articles of incorporation and possibly your corporate charter.
• Corporate resolution: You might also need to provide a signed corporate resolution by all of your officers as well as a signed signature card by the account signers.
• Business licenses: Businesses that need a license will also need to provide their license documentation, such as may be the case with restaurants.

Limited Liability Company (LLC) Business Bank Account Requirements

• Business identification: To open a business bank account, you’ll need your federal EIN as well as a copy of your articles of organization.
• Organizational documents: You’ll need to provide the organizational documents used to form either your S-corp or partnership.
• Other potential documentation: You also may need to provide a signed declaration of unincorporated business and any required business licenses; business licenses are common with healthcare businesses or restaurants.

C Corporation (C-Corp) Business Bank Account Requirements

• Business identification: Like an LLC, you’ll need your federal EIN to apply for a business bank account.
• Articles of incorporation: Additionally, you’ll also need your certified articles of incorporation; you’ll receive your article of incorporation documents as a part of your incorporation process.
• Corporate charter: If your articles of incorporation don’t provide sufficient information regarding who is authorized to sign, you may also need to provide an additional corporate charter that specifies this information.
• Corporate resolution: You might also need to provide a signed corporate resolution by all of your officers as well as a signed signature card by the account signers.
• Business licenses: Businesses that need a license will need to provide their license documentation like health care businesses or restaurants.
• Additional requirements for nonprofits: If you’re operating as a nonprofit organization, you’ll need to show your 501(c) letter from the IRS or other tax-exempt documentation.

Business Bank Account Requirements for Startups

• Personal or business identification: You’ll need to provide either personal identification for a sole proprietorship like driver’s license or Social Security card or EIN for the other business types.
• Organizational documentation: You’ll need to provide the documentation used to organize your business, such as a fictitious business name certificate, LLC operating agreement, or articles of incorporation.
• Business licenses: If your startup business needs a license, you will also need to provide your license documentation when opening a business account.

5. Open a Business Account Online or In Person

Business owners have the opportunity to open a business bank account in person at a branch location or online. Several banks offer both options. However, online-only accounts require you to apply online because they don’t provide a network of physical branch locations. Whether you choose to apply online or in person, you will need to have the required documents for your specific company structure ready to show or submit on the bank’s website.

Opening a business bank account online could mean quicker approval times because you don’t have to wait in line at a physical branch location. However, some business owners may prefer to visit a branch location to receive face-to-face customer service. Online-only accounts typically offer a customer service phone number or a live chat feature.

6. Deposit Your Funds Into Your Business Account

Once you’re done opening a business account, the last step is to deposit funds. You can do this by writing a check to your business from another account like a personal account, making an electronic funds transfer between bank accounts, which is easy if your accounts are connected to QuickBooks or depositing cash. Once it’s done, your account is ready for use.

If your business accepts many checks, most banks now offer a service where you can deposit them without needing to leave your office. This is often called remote deposit or remote deposit capture. Therefore, it’s a good idea to ask your bank about this so you can make cash deposits in the future easily.

Best Places to Open a Business Account

The best business bank accounts give owners access to reasonable fees, an online banking experience, and introductory bonuses, depending on the bank you choose. Sometimes, the best place to open a business bank account is also with a bank that accepts online applications as it creates a more user-friendly experience. All of the business bank accounts listed below accept online applications, which you can complete in a matter of minutes.

Best Places to Open a Business Checking Account

Best Places to Open a Business Savings Account

Importance of Opening a Business Bank Account

Opening a business bank account is important because it can help separate business and personal funds. Commingling your business and personal expenses like this can cause numerous problems, such as difficulty with expense tracking and potential personal liability.

The situations that opening a business bank account are good for are:

• Making your bookkeeping easier: Opening a business account can help you separate business and personal expenses. It can also help you better keep track of your business cash flow.
• Preserving limited liability: Limited liability corporations—LLCs, C-corps, and S-corps—can protect their owner’s liability better if they use a business bank account since you won’t be commingling business and personal funds.
• Saving money: Tracking business purchases and deposits in a separate bank account can help you manage budgets and better file taxes, including deductions.

Although it may seem easier to use your personal bank account for business, taking the time to get a separate business bank account is worth it. You’ll benefit from the ability to keep track of your budget and cash flow better, which could result in money and time savings. For example, your bookkeeping will be easier, and you’ll be better able to find potential deductions.

Opening a Business Account With Other Services

Business owners may want to consider combining their business bank account with other services to have a more streamlined and efficient way to run your business finances. For example, combining your business bank account with your business credit card and merchant processing allows you to see the money in your bank account, spending on your credit card, and money coming in from customer payments easily.

However, just because your bank offers a business credit card to you, it doesn’t always mean it’s the best deal. Some of the best credit cards, including cash rewards cards and startup credit cards, may exist at other banks. You can shop around for other small business credit cards that offer better interest rates, introductory offers, and ongoing rewards.

Benefits of Opening a Business Bank Account

The primary benefit of opening a business account is that it’s an excellent way to separate your business and personal finances. Additionally, if you have excess funds that you want to keep liquid but also want to earn interest on, a savings account can be a great solution. Lastly, a business bank account is one of the first steps to set yourself up for a simplified tax season.

Some of the primary benefits of a business bank account are:

• Separate your business & personal finances: Having your business and personal bank accounts separate can help increase your business credit score. If you have an unexpected financial event in your personal life, it won’t affect your business credit score.
• Earn high interest on your savings: If you decide to open a business savings account or CD, you can typically earn higher interest rates on your daily account balance. This can help maximize your business’s cash flow over time. However, note that checking accounts generally don’t earn any interest at all.
• Maintain a clean financial record: A business bank account can help provide a clean financial record at the end of the year because your personal finances won’t be commingled with your business. Some business bank accounts even integrate with the leading accounting software, which can simplify your income tax season.

Opening a business account can serve as a key beneficial step for any new business. You can separate your finances to make for an easy tax season and earn interest on your savings for future projects. There are things you should do to keep in mind while you’re in the process of opening your first business bank account.

Tips for Opening a Business Account

While business bank accounts are necessary, there are some things you need to keep in mind when choosing the type of accounts and how many to open. A couple of tips to consider when opening a business bank account include starting with a checking account, looking into fee-free business bank accounts, and using a business bank account to receive more functionality than a personal account. You may also choose to open a credit card.

Tips for opening a business bank account are:

1. Open a checking account as your first account: Most new business owners open a business checking account as their first business bank account. This is a good way to start on the right foot and separate your personal and business finances.
2. Consider fee-free business bank accounts: If you don’t need to visit a branch near your business for cash deposits, consider using a fee-free business bank account to save your company money on account fees. Azlo is a solid fee-free and online business bank account.
3. Use business bank accounts to receive more functionality: Business bank accounts typically have more functionality compared to a personal bank account. For example, some business bank accounts offer remote deposit capture, known as scanning checks, and ACH origination.
4. Consider opening a business credit card too: Opening a business credit card along with your business bank account can help streamline your day-to-day cash flow. By comparing the best credit cards, you can find the right card for your business.

Business bank accounts can be advantageous to business owners and can help them take control of their company’s finances. It’s the little things like starting with a business checking account and using built-in account features, such as remote deposits, to simplify your banking processes.

Frequently Asked Questions (FAQs) About Opening a Business Account

This article has provided a lot of information about how to open a business bank account. However, some questions are asked more frequently than others, which we’ve tried to address here. If we haven’t answered your question about opening a business bank account, feel free to share it with us the Fit Small Business forum, and we’ll provide an answer.

What bank is best for small business accounts?

When setting up a business bank account, choosing the best bank for small business accounts involves considering the fees, location, and additional services provided, among other items. To make this process easier, consider the best small business checking accounts, which provide a range of options for small business owners to consider.

What are the requirements to open a business bank account?

The first step in opening a business account is to ensure your business is organized legally. This is because the business bank account requirements include providing documentation that your business legally exists. The specific documentation varies by business type but may include organizational documents like articles of incorporation and your EIN.

Which bank provides the best free business checking accounts?

When searching for the best free business checking account, you should consider fee structures and transaction limits. With a free business checking account, you won’t pay a monthly servicing fee, but there will likely be fees for additional services or extra transactions. When setting up a business bank account, these are all costs to consider.

Bottom Line

Opening a business bank account is a good decision for all business owners. However, before you open one, you need to identify the right business bank account type, find the right bank, know what you’re paying, and have your documentation in order. This will set you up for better success. Be sure to learn how to reconcile your bank account once it’s set up.

If you are looking for a good business checking account, consider Bank of America. It has low monthly account fees and one of the largest branch and ATM networks nationwide. Plus, new customers can get a $450 bonus when you sign up for an account.

Visit Bank of America