How to Open a Business Bank Account in 5 Steps: Instructions, Requirements & Fees

When considering how to open a business bank account, the five important steps are determining the right type of bank account, selecting the right bank, knowing what you have to pay, providing the required documentation and depositing funds. Opening a business bank account makes it easier to keep your business and personal cash flow separate.

If you are searching for a good small business checking account, take a look at Bank of America. They have low fees (waived in some cases) and one of the largest branch/ATM networks nationwide. This makes Bank of America the best checking account solution for most small business owners. New customers can get a sign-up bonus worth up to $350.

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The five steps needed to open a business bank account are:

1. Determine the Right Type of Business Bank Account

As a business owner, the most important type of business bank account is a checking account, although you might also find a savings account or certificates of deposit (CD) helpful. In choosing the right type of business bank account, you need to make sure you choose an account that can be used for your intended purpose and to avoid additional fees.

Business Checking Account

As mentioned, a business checking account is the most important type of business bank account. This is because it 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, a business checking account is an important part of the day-to-day cash flow management process. While you typically won’t earn interest with a business checking account, there also aren’t any transaction limits.

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Business Savings Account

Business savings accounts provide a safe place for businesses to store their cash savings and earn a little interest. There are typically transaction limits, and so business savings accounts are best for businesses who want to save money for a rainy day, put funds aside for an upcoming project or manage their cash reserves. Business savings accounts can also be linked to business checking accounts, making them a great overdraft protection tool.

Business CD Account

A business CD is another type of long-term business savings account. The benefit is that CDs earn higher interest rates than traditional savings accounts. However, you have to keep the funds in the account for a long period of time as short as one month to 10 or more years to avoid costly early withdrawal fees. They are good if you have funds that you want to set aside for a longer period of time without accessing them.

Which Type of Business Bank Account Is Right for You?

When setting up a business bank account, the first type you should open is a business checking account. This will help you pay vendors, suppliers and employees as well as accept payments from customers. Secondly, you should open a business savings account to save funds during the short term. Lastly, you should open a business CD for your long-term savings.

“I recommend business owners open a savings account alongside their checking because it reinforces the concept they should not only keep their business cash-flow positive, but they also need to focus on saving. Since investments are locked in for an extended period of time with a CD, business owners should prioritize other types of assets such as saving for retirement with a 401(k), investing in mutual funds or reinvesting back into their business.”

— Keri Gohman, President, Xero America.

2. Choose the Right Bank to Open a Business Bank Account

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

Consider the following factors when choosing a bank to open a business bank account:

• Existing banking relationship: Always start 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 that your bank and bank accounts can integrate with the leading accounting software
• 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. They have low monthly account fees and one of the largest branch and ATM networks nationwide.

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3. Know Exactly What You’re Paying Before Opening a Business Bank Account

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

The typical fees you may be charged when setting up business bank account are:

Business Checking Account Fees

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

• Monthly service fee ($10 – $15 per month): Flat fee that’s waived if certain criteria are met
• Minimum balance fee (~$25 per month): Fee that’s charged if a minimum balance amount isn’t met
• Transaction fee ($0.40 – $0.50 per transaction): Fee that’s assessed if account exceeds ~200 monthly transactions
• Cash deposit fee (~3% per deposit): Fee that’s charged if account exceeds ~$7,500 cash deposits per month
• ATM fee ($2.00 – $3.00 per transaction): Charge for ATM transactions at out-of-network ATMs
• Wire transfer fee ($15 – $45 per transaction): Fee assessed on domestic and international incoming and outgoing wire transfers

While it’s possible to get a free business checking account, it doesn’t mean you won’t be assessed any fees. Your bank might waive your monthly service fee, but you could still be charged transaction fees, wire transfer fees and other fees. For more information, check out our infographic on how much a free business checking account costs.

Business Saving Account Fees

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

• Monthly service fee ($10 – $15 per month): Flat fee that’s waived if certain criteria are met
• Minimum balance fee (~$25 per month): Fee that’s charged if a minimum balance amount isn’t met
• Monthly balance transfer fee ($5 – $20 per transaction): Per transaction charge for balance transfers that exceed 6 per month
• Cash deposit fee (~3% per deposit): Fee that’s charged if account exceeds ~$7,500 cash deposits per month
• Wire transfer fee ($15 – $45 per transaction): Fee assessed on domestic and international incoming and outgoing wire transfers

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 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 the checking account offered by Capital One. There is no monthly fee, minimum balance or transaction limit. The only fees you’re charged are for additional things like wiring money or making large cash deposits, which is the norm with many business accounts. Capital One also has a great savings account for any excess funds you want to set aside.

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4. Gathering the Documentation You Need to Open a Business Bank Account

When opening a business bank 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. Exact documentation will vary based on corporate structure.

Business bank account requirements for documentation based on your business structure are:

Sole Proprietorship Business Bank Account Requirements

You are a sole proprietorship if you own a business, are the sole owner and have not filed paperwork to be another entity type like an LLC or corporation. With sole proprietorships, there is no legal distinction between you — the owner — and your business. This means that you are not only entitled to all the profits but also all the potential losses or debts.

Sole proprietorships have the following business bank account requirements:

• Personal identification: You’ll need your social security number as well as two forms of personal ID in order 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.

Limited Liability Company Business Bank Account Requirements

Your business is a limited liability company (LLC) if you’ve filed articles of organization with the state and are in good standing. You’ll also typically be required to have an LLC operating agreement. Unlike a sole proprietorship, an LLC is a separate entity from the owners, and the owners are protected from some personal liability for business debts and obligations.

LLCs have the following business bank account requirements:

• Business identification: To open a business bank account, you’ll need your federal employee identification number (EIN) as well as a copy of your articles of organization
• LLC operating agreement: In addition, you might also need a signed operating agreement that’s similar a business partnership agreement
• 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 Business Bank Account Requirements

You are a C-corporation if you have filed articles of incorporation with the state and are in good standing. Similar to an LLC, a C-corporation is a separate entity. With a C-corporation, the company is liable for the company’s debts and obligations. The owners, or shareholders, are not personally responsible.

C-corporations have the following 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, you’ll need to show your 501(c) letter from the IRS or other tax-exempt documentation

S-Corporation Business Bank Account Requirements

You are an S-corporation if you have filed articles of incorporation with the state, are in good standing and have elected S-corporation status. An S-corporation is similar to a C-corporation in that it is a separate entity owned by shareholders and the company — not the shareholders — are responsible for the debts and obligations of the business.

S-corporations have the following business bank account requirements:

• Business identification: When opening a business bank account, you’ll need to show your federal EIN
• Articles of incorporation & 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

5. Deposit Your Funds into Your New Business Bank Account

Once you’re done opening a business bank account, the last step is depositing 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.

Business Bank Account Requirements for Startups

If you’re starting a new business, you might be wondering how to open a business bank account for your startup. Keep in mind the requirements are exactly the same as for an established business. You’ll need to choose an account type and the bank that are right for you, know what you’re paying, provide the required documentation for your business structure and deposit the funds in your new account.

Once your startup business is formed, keep the following documents handy since you’ll need them when setting up your business bank account:

• 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 bank account

Importance of Opening a Business Bank Account

Opening a business bank account is important because it can help separate business and personal funds. However, as few as 25 percent of small business owners use their personal bank account for business purposes. Commingling your business and personal expenses like this can cause a lot of problems.

What’s more, opening a business bank account is good for:

• Making your bookkeeping easier: Opening a business bank 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 definitely 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.

Frequently Asked Questions (FAQs) About How to Open a Business Bank 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 in our forum, and we’ll provide an answer.

Some of the most frequently asked questions about how to open a business bank account are:

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, check out the top 10 small business checking accounts we evaluated, which provide a range of options for small business owners to consider.

What Do I Need to Open a Business Bank Account?

The business bank account requirements vary depending upon how your business is structured like a sole proprietorship, LLC or corporation. In general, you’ll need to provide proof of your personal or business identity like a driver’s license or EIN, the documents used to organize your business like an operating agreement and copies of any business licenses.

Which Bank Provides the Best Free Business Checking Accounts?

When searching for the best free business checking account, you should consider the fee structure 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.

What Are the Requirements to Open a Business Bank Account?

The first step in opening a business bank account is to make sure 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.

The 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. To learn how to reconcile your bank account once it’s set up, check out our article.

If you are looking for a good business checking account, look at Bank of America. They have low monthly account fees and one of the largest branch and ATM networks nationwide. Plus, new customers can get a $350 bonus when you sign up for an account.

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