How to Open a Business Bank Account in Three Easy Steps

• When you open a business bank account, you'll need personal information like a copy of your social security number, driver's license, EIN number, and formation documents.
• Utilize a business checking account, and savings account wisely. A business checking account can be used for making payments in your business's name and a savings account can be used to help you save for a piece of equipment.
• Open your account by funding it with a check, cash, or a transfer from your personal bank account.

Opening a business bank account is an important milestone for an entrepreneur.  A business bank account, like obtaining a federal tax identification number for the business, also called an Employee Identification Number (EIN), represents the first tangible steps in establishing the business as an entity separate and distinct from you, the business owner. 

Opening a business bank account is a straightforward process, but it’s essential to be prepared and know what kinds of accounts exist, which works best for you, and the documents you’ll need to apply.  

Step 1: Gather Required Documents

Before weighing the various types of business bank accounts, be sure you have the necessary documents required for a business account.  Below are the most common document requirements for each business type and the requirements that all business accounts must meet.

General Business Bank Account Requirements

Personal identification: Regardless of whether your business is a limited liability corporation (LLC), a partnership, a sole proprietor, or another business entity type, all signers on the business account must provide their Social Security number and government-issued photo identification, such as a driver’s license or passport.

Business identification: A business bank account is an account that will be in the name of the business.  As such, you will be required to provide an EIN for your business, unless your business is a sole proprietor, in which case you will provide just your social security number.

Sole Proprietorship Business Bank Account Requirements

Fictitious business name certificate: A sole proprietorship is a business that is not incorporated and owned by and run by just one person— you, the owner.  Suppose your sole proprietorship operates under a name different from your name, a fictitious or alternate name. In that case, you will provide a doing-business-as certificate called a DBA certificate.  For example, if you prepare taxes as a side hustle, you can sell your services and bill your customers under your own name, or, you can create a name for your company and bill your clients under that name.  

Whatever name you choose for your company is its doing-business-as name.  Once you select a name, you will ensure that the name is available and not already used by another business.  Additionally, you will register your DBA name with your state's Department of Revenue, at the cost of approximately $50-$100.

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Requirements for a Partnership Business Bank Account 

Organization documents: If you form your business as a partnership with one or more partners, you will need to provide your bank with your business partnership agreement and any other documents you prepared when you created your partnership.
 

Requirements for S Corporations and C Corporations 

Articles of incorporation: If you establish a corporation, be it a C corporation, which is taxed separately from its owner, or an S corporation, which is not, you will need to provide your bank with the company’s articles of incorporation.  

Articles of incorporation essentially serve as your company’s birth certificate, establishing it as a business in your state and providing the business's name, address, shareholders, and authorized signers. In addition, each authorized signer will be required to sign a signature card with the bank, which permits the signer to sign bank checks and conduct business on behalf of the company. 

Limited Liability Company Business Bank Account Requirements

Articles of organization: Similar to articles of incorporation for an S Corp or C corp, if you operate a limited liability corporation, you must provide a certified copy of your articles of organization.  Some states refer to this document as a certificate of organization.  You will also need to provide an operating agreement that states the names of members or owners of the LLC. These people are authorized to sign checks and transact business on behalf of the company.

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Business Requirements for a Non-Profit

501(c)3 Letter:  A nonprofit organization requires authorization from the IRS to not pay taxes on income.  This authorization is provided in the form of a 501(c)3 letter. You will need to show this letter, as proof of your organization’s tax-exempt status.

Step 2: Select the Right Bank Account

The two primary types of accounts that small businesses consider are a business checking account, and a business savings account. 

Small Business Checking Account

A small business checking account typically allows the business to make deposits and withdrawals, write checks, make electronic funds transfers, and use a debit card or ATM card to make purchases and cash withdrawals. However, monthly maintenance, per-transaction, overdraft, and paper bank statement fees often apply, so be sure to ask questions and request any applicable waivers or offers as a new client.  

CapWay Pro Tip: Bank accounts should not have hidden fees. At CapWay, the Money Account has no overdraft, monthly, or minimum balance fees. Click here to learn about the benefits of a CapWay Money account. 

Business Savings Accounts

Savings accounts often have less transaction activity than checking accounts, and serve as a safe place for businesses to keep capital on hand while earning interest. If you are saving funds to purchase equipment or business expansion down the road, discuss your goals and loan financing options with your bank relationship officer.

Step 3: Open Your Account

With more and more financial activity happening online, opening your business bank account online and in person is possible.  In both instances, you must provide the required documents for your entity type, like a sole proprietor, LLC, or partnership, and submit these either in person or through your bank’s secure portal. 

In addition, many bank websites offer a chat feature and customer service phone number, so if you have a question or need help navigating the site, these features can facilitate the account opening process. 

Once your account has been created, the bank officer or portal will ask, how you intend to fund the account.  Potential options include transferring funds from a personal checking or savings account or providing cash, a cashier's check, or a bank check if opening the account in person. However, cash transfers from a credit card, a debit card, or electronic transfer options, such as Venmo, CashApp, and Western Union, are typically not permitted to fund an account, so check ahead if you are seeking to use one of these methods.

Once you’ve deposited funds into your business checking account or savings account, the account is ready to use!

The Money Wrap-Up

Creating a business bank account is the first important step in establishing your business as a stand-alone entity, separate from you.  A business bank account can also deepen your relationship with your bank and facilitate a business line of credit or loan for expansion. As with a personal savings or checking account, a financial plan and careful budgeting are key to maximizing a business account's value.

Disclaimer: The above information should not be considered financial advice. Always advise with a licensed professional before making big financial decisions. 

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