Opening a business bank account can help you improve your cash flow by separating your business and personal finances. To open an account, you’ll need to follow a six-step process that includes choosing the right type of account, finding the best bank for you, understanding the costs, gathering the required documentation, submitting your application, and depositing funds.
While there are multiple steps to complete, the application process for a business account is usually seamless so that you can open an account in minutes. Most major banks, like Bank of America, let you apply and submit your documentation completely online. Choosing a bank that offers an online application can help you open an account the moment you need it.
1. Choose the Best Type of Business Bank Account
Most business owners start by opening a business checking account. They must decide between an online checking account or accounts with traditional banks. Online accounts are designed for businesses that don’t need cash deposits and typically charge low-to-no fees. Meanwhile, traditional accounts usually offer a wider variety of products and services like cash deposits. Owners may also want to open a business savings account to separate their working capital and savings funds.
Free Business Bank Account
Business bank accounts have an average monthly fee of $10.23. However, free business accounts either don’t charge monthly maintenance fees or make it easy to avoid them by meeting minimum balance requirements. These accounts offer features like electronic deposits, withdrawals, electronic transfers, and the ability to write checks. They’re used best for businesses that don’t handle daily cash transactions.
Some of the best free business checking accounts offer an annual percentage yield (APY), including BlueVine. With BlueVine, there’s no minimum balance requirement to earn its APY, meaning you’ll earn interest from the second you deposit money into your account.
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. The best small business checking accounts typically have introductory offers, flexible network availability, and low fees.
Business owners who want low monthly account fees and a large network of branches and ATMs should look toward major banks like Bank of America. New customers can also earn up to $450 in sign-up bonuses for opening a new small business checking account, credit card, and Bill Pay with qualifying activities.
Online Business Checking Account
An online business checking account is a solid option for businesses that don’t need to visit a physical branch location or handle daily cash transactions as these accounts typically don’t allow for cash deposits. Most online-only accounts are also fee-free or make it easy to avoid monthly account fees by maintaining a monthly minimum balance.
First Internet Bank lets you kill two birds with one stone because it gives you access to a savvy online banking platform while never charging any monthly fees. Open an account like this to keep more money in your business.
Business Savings Accounts
Business savings accounts allow you to keep your money in a safe investment while earning interest each month. Typically, the best accounts let you earn more than 1% APY, helping you maximize your savings for future purchases or emergencies. In the current economy, however, most rates are falling just short of 1%. Some of the most common business savings accounts include traditional business savings accounts, high-yield savings accounts, business certificate of deposit (CD) accounts, and money market accounts.
2. Find the Right Bank to Open a Business Account
The next step when opening a business account is to choose the best bank for your business. The financial institution you select will influence things like 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.
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. If you have a reputation established with a bank, it may be easier to open an account.
- Affordable costs: Consider the costs each bank may charge like fees for monthly servicing, deposits, and ATM use.
- Convenient network: Make sure the location, as well as the number of ATMs and branches, suits your needs.
- Good online/mobile experience: Confirm your bank offers a good online experience, including 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 help separate your business and personal expenses even more.
? Tip: 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. What’s more, choosing a major banking institution can help you open an account with a bank that offers support for future business needs, including credit cards or business lending.
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 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 Checking Account Fees
- Monthly fee ($0 to $18 per month): Flat fee that’s waived if certain criteria are met like maintaining a minimum balance
- Transaction fee (40 to 50 cents per transaction): Fee that’s assessed if the account exceeds the monthly allowance, which typically starts at 100 monthly transactions
- Cash deposit fee (2% to 3% per deposit): Fee that’s charged if the account exceeds the monthly allowance, which often starts at $5,000 in 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
While many accounts charge monthly fees, you can also open a free business checking account. However, a free business checking account doesn’t mean you won’t be assessed any fees. For example, it might still charge you for transactions, wire transfers, and overdrafts.
Business Savings Account Fees
- Monthly fee ($0 to $15 per month): Flat fee that’s waived if you meet certain criteria, including maintaining a minimum balance or linking your savings account to a checking account
- 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 the monthly allowance, which typically starts at $5,000 in cash deposits per month
- Wire transfer fee ($10 to $45 per transaction): Fee assessed on domestic and international incoming and outgoing wire transfers
4. Gather the Required Documents
When opening a business account, you usually need to provide documentation that verifies the name and general nature of your business. You may 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 requirements to open a business bank account vary based on your corporate structure.
We understand that opening a business bank account and making sure you have the right documents can be a challenging situation. For that reason, we created a free downloadable checklist listing required documents by corporate structure for you to use.
Sole Proprietorship Business Bank Account Requirements
- Personal identification: You need your Social Security number 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 need your federal Employer Identification Number (EIN) and a copy of your articles of organization.
- Organization documents: These include your business partnership agreement and any other organization documents that you may have prepared when you formed your partnership.
- Other potential documentation: You may also 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 need to show your federal EIN.
- Articles of incorporation and corporate charter: You 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, such as restaurants, must also provide their license documentation.
Limited Liability Company (LLC) Business Bank Account Requirements
- Business identification: To open a business bank account, you need your federal EIN as well as a copy of your articles of organization.
- Organizational documents: You 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 need your federal EIN to apply for a business bank account.
- Articles of incorporation: Additionally, you also need your certified articles of incorporation. You 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, such as healthcare businesses or restaurants, have to provide their license documentation.
- 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 must provide either personal identification for a sole proprietorship like a driver’s license or Social Security card or EIN for the other business types.
- Organizational documentation: You also 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 can 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 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 to receive face-to-face customer service. Online-only accounts typically offer a customer service phone number or a live chat feature.
Tip: While opening a business bank account in person gives you face-to-face customer service, most banks make it easy to open an account online to avoid in-person contact during the pandemic. If opening an account in person is a safety concern for you, make sure the bank you desire offers an online application.
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 checks, most banks now offer a service where you can deposit them without needing to leave your office. This often is called remote deposit or remote deposit capture. Therefore, it’s a good idea to ask your bank about this so that you can make deposits easily in the future.
Benefits of Opening a Business Bank Account
- Separate your business & personal finances: Having your business and personal bank accounts separate can help manage your business’s cash flow and makes it much easier to track the financial health of your business.
- Earn high interest on your savings: If you decide to open a business savings account, you can earn higher interest rates on your daily account balance compared to a checking account. This can help maximize your business’s cash flow over time.
- 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 seasons.
- Preserving limited liability: Limited liability operations—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.
Opening a Business Bank Account With Other Business Products
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, on your credit card, and coming in from customer payments easily.
However, because your bank offers a business credit card to you 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.
Additional Articles & Resources to Help Your Business
- Best Banks for Small Businesses: If you haven’t done your research already, be sure to review the best banks available. Our list of the top five banks for small businesses will help you put your best foot forward.
- Tips for Separating Business and Personal Finances: Opening a business bank account is one way you can separate your business and personal expenses. To safeguard your personal finances from your business operations, review the nine tips we go over in this article.
- Bank Reconciliation: Once your account is set up, be sure to learn how to reconcile your bank account. Bank reconciliation is essential for your business because it can help you find discrepancies between your books and bank statements.
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 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.