How to Open a Business Bank Account

Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital.

If you’re starting a new business, opening a business bank account is a big step in making things official. Even if you’ve already been in business for a little while, you might have noticed that high fees and low interest rates are quite common, so you may be reconsidering your options.

The nuts and bolts of how to open a business bank account are a little more detailed than for your personal bank account, but it’s not overwhelming. We’ll walk you through what you need to know.

How to Open a Business Bank Account

The right business bank account can help your business leap ahead. Here’s how to do it:

1. Gather your documents: Most banks require the same documents to apply, which we’ll discuss more in-depth below. If you gather and organize these ahead of time in a nice folder, it’ll really help speed up the process.
2. Consider your needs: Not everything needs all of the features that small business banks offer. If you don’t regularly accept credit card payments, for example, you won’t need to worry about opening a merchant services account.
3. Consider your wants: What’s most important to you? For example, are you more concerned about earning a good interest rate on your savings account, or not having to pay any fees? This will help guide your search.
4. Comparison shop for banks: Draw up a list of banks and record the details that are important to you, such as minimum balance requirements, integrations with accounting programs you use, potential business loans or business credit cards you might apply for later, and other factors.
5. Investigate your top choice in more detail: If you can, get a list of all fees and policies for the business account and read through them, taking notes as needed. That way, you have a clearer picture of any potential charges or problems you might run into later.
6. Apply for a business bank account: Depending on the bank, you might be able to apply online, in person, or over the phone. You’ll need to provide the documents you gathered earlier and may need to provide other details as well, depending on the bank.
7. Make an opening deposit and start using the account: If you’re approved for an account, go ahead and transfer your business funds to your new account.
8. Close your old business bank account: If you were using another business bank account previously, make sure you contact the bank to close the account. That way, you won’t inadvertently be charged any other fees or encounter potential fraud schemes.

A business bank account helps shield your personal funds from lawsuits, allows you to accept customer payments without giving out your personal bank account number, speeds up tax time, and more.

What You Need to Open a Business Bank Account

If you’ve opened a personal bank account, you know it’s not too complicated. Opening a business bank account requires a bit more information, but generally, it’s information you should have readily available anyway.

Personal Information

Banks need to make sure you’re a real person and one who is eligible to open an account. They’ll ask for your personal information as well as that of any other business owners. The information you’ll need to provide might include:

• Name
• Date of birth
• Citizenship status
• Social Security Number
• Address and phone number
• Copy of your government-issued ID such as a driver’s license or passport

Business Information and Documents

In addition to verifying that you’re a real person, the bank will want to check that you’re running a legitimate business. Some of the documents it might require depend on what kind of business structure you’re using, such as an LLC or sole proprietorship. These requirements might include:

• Business name and any other registered DBA ("doing business as") names
• Business licenses
• Business registration
• Business formation documents such as articles of organization for LLCs
• Business operating agreements
• Business ownership agreements

Remember that not all businesses will have these documents—but if yours does, you’ll need them to open your business bank account. Sole proprietors, for example, won’t have business formation documents.

Employer Identification Number

An Employee Identification Number (EIN) is like a Social Security Number for your business. You use it when dealing with the IRS or in other business-finance-related matters, like opening a business bank account. The IRS allows you to easily apply for a free EIN online.

If you’re running your business as a sole proprietor, you generally don’t need an EIN. But it’s a good idea to have one so you’re not handing out your personal Social Security Number when dealing with business matters.

Bank Minimum Deposit

Some banks require a minimum deposit to open a new business bank account. Check if this is a requirement in advance and if so, make sure you have funds available to transfer and get things started. Keep in mind that the minimum opening deposit may or may not be the same thing as the minimum monthly balance to waive any maintenance fees. Depending on the bank and the type of business account, businesses might receive access to a warm card. This card allows employees to make deposits on behalf of the company.

Types of Business Bank Accounts

Most businesses will need a few different types of business bank accounts.

Business Checking Account

Just like your personal checking account, your business checking account is the mover and shaker for your business. It’s what you’ll use to make most of your purchases, and it’s where you’ll generally receive your payments. If you have a business credit card, it’s also what you’ll use to pay off your charges.

Business Savings Account

While it’s not required, having a business savings account is a good idea. It gives you a place to park long-term funds that you’re not using, and even earn a little bit of interest. You can use it to save up for periodic tax payments, for example, or for new business investments. They operate similarly to business money market accounts, and it’s a good idea to investigate both to see which fits your needs better.

Merchant Account

A merchant account, or “merchant services account,” lets you accept credit card payments from customers and protects their data. If you’re running a retail business or otherwise accept credit card payments frequently, look for a merchant services account with low fees, because there can be several.

Alternatively, more business owners are turning to payment processing companies like PayPal or Square to do the same thing, although they’re not technically bank accounts. Check into both options to see which works better for your business needs. If your business doesn’t accept credit card payments, you may not need either.

Best Business Bank Accounts

Factors to Consider When Opening a Business Bank Account

Here are a few things to think about as you’re shopping around:

• Branch access: If you’ll be handling cash frequently, having access to a local branch can be important. If you only accept digital payments or checks, this might not be as much of an issue.
• Fees and minimum balances: Many business bank accounts charge higher fees—and more of them—than for personal accounts. Choosing a bank with lower fees helps you keep more of your money.
• Customer service: Do you prefer a hands-off bank, or do you want to be able to call someone for help at any time? That can be important if your credit card machine breaks down in the middle of a busy sales period, for example.
• Benefits and rewards: Some business banks offer extra perks and features. This may be more common for banks that offer business credit cards, which often offer cash back or travel rewards.
• ATM access: If you’ll be traveling a lot and need cash, how many in-network ATMs does the bank have? If you need to use an out-of-network ATM, what fees does it charge?

If you’re serious about earning money outside of a normal job, whether as a large multi-employee business or even just a solo side hustle for extra cash, opening a business bank account is one of the smartest money moves you can make.

Frequently Asked Questions

Are Business Bank Accounts FDIC Protected?

Yes, business bank accounts are insured by the FDIC up to a limit of $250,000 per bank. Keep in mind that if you’re operating as a sole proprietor, this $250,000 cap applies to your personal accounts at that same bank, too, even if you have separate personal and business accounts.

Do Business Accounts Have a Minimum Balance Requirement?

It depends on the bank. Many banks have a minimum balance requirement for business accounts, and you may have to pay a fee if you don’t maintain this amount. However, it’s also not hard to find business accounts without minimum balance requirements.

Does Opening a Business Bank Account Hurt Your Credit?

No. Banks don’t generally check your credit report when you open a business bank account since you’re not applying for credit, only a deposit account. However, if you apply for a business line of credit or a business credit card, then banks will do a hard credit check and this could temporarily lower your credit score.

Do You Need a Business License To Open a Business Bank Account?

Generally yes, you will need to show your business license to the bank to prove that you’re a real business before you can open a business account at most banks. Depending on the type of business you’re running, you may need different types of licenses from federal, state, or local agencies.

1. IRS. "Does a Small Company That Operates as a Sole Proprietorship Need an Employer Identification Number (EIN)?"
2. Federal Deposit Insurance Corporation. "Basics of Deposit Insurance for Businesses."
3. Experian. "Can I Open a Business Bank Account With Bad Credit?"

Bonus depreciation is a tax break that allows businesses to immediately deduct a large percentage of the purchase price of eligible assets.

The Federal Unemployment Tax Act (FUTA) imposes a payroll tax on businesses that have employees, collecting revenue that funds unemployment benefits.

IRS Schedule K-1 is a document used to describe the incomes, losses, and dividends of a business's partners or an S corporation's shareholders.

A media kit is a package of information a company assembles to provide reporters or other interested parties with basic information about itself.

A multiple employer plan (MEP) is a retirement savings plan that covers two or more employers. It enables small companies to offer big-company benefits.

The Enterprise Investment Scheme (EIS) is a UK program that helps smaller, riskier companies to raise capital by giving their external shareholders federal tax relief.

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