Looking to open a business bank account? 7 things you may need first

Opening a business bank account is a key step in legitimizing your company and creating a clear divide between personal and business finances. As a sole proprietor, I’ve found that keeping my bank accounts separate not only simplifies day-to-day bookkeeping but makes tax season less stressful.

Whether you’re launching a startup or managing a growing enterprise, having the right documents and information on hand can save time and prevent delays in getting your business bank account setup. Knowing what banks typically require before you apply can help you establish a solid financial foundation from day one.

“Setting up a business checking account ultimately helps clearly separate your business and personal funds, provides more protection to your personal assets and makes it easier to keep track of your business expenses throughout the year for tax purposes,” says Tony Pica, senior vice president at Capital One.

What do I need to open a business bank account?

Opening a business bank account isn’t as simple as opening a personal bank account. You’ll need to have proper documentation, which will vary based on the type of your business.

“The documentation required to open a business account may depend on the structure of your business,” Pica says. “For example, a sole proprietor needs their federal tax ID number (TIN) letter and business license or fictitious name certificate, while an LLC or corporation also needs beneficial owner information and certificate of good standing.”

Your documentation requirements may vary based on where your business is located, too.

“Every state has its own set of rules for each structure [of a business], so talk with your trusted advisors, such as a business lawyer or accountant, to ensure you’ve compiled all of the necessary personal and company information,” Pica says. “This is a key step to make the process go as smoothly as possible.”

1. Two forms of identification

You’ll need two forms of identification to open a business bank account. A government-issued ID, like a state driver’s license or passport, and another form, such as a credit card bill or a utility bill with your name listed on it.

2. Your tax ID number

Your business isn’t official until it’s registered to pay its fair share to the government. Make sure you have applied for your federal tax ID number, which is also known as your employee ID number (EIN), with the IRS.

3. Business identification documents

Depending on the nature and structure of your business, you may also need to register it with state and local governments to acquire a business registration certificate and applicable licenses.

If your business is a corporation or an LLC, you’ll likely need a Certificate of Good Standing. This shows that you’ve paid all the necessary fees and checked all the boxes, and it is typically secured through a Secretary of State’s office or a state’s Division of Corporations. The bank may also ask for meeting minutes, by-laws or other articles of incorporation.

4. Assumed name certificate

This item typically applies to sole proprietors and limited partnerships. Let’s say your name is Tim Ryan, but you are planning to operate as “Tim Ryan Painting.” That’s your assumed name, which might also be referred to as DBA (doing business as), a fictitious name or a trade name certificate. You will likely be able to obtain this through your county clerk’s office.

5. Beneficial owner information

Banks are required to know who has an ownership stake of 25 percent or more in your company, which is the magic number that makes you a “beneficial owner.” If you own the business with someone else, you’ll need to determine how much equity each of you has in the company. Your bank will likely have you complete a simple form stating who the beneficial owners are and what their ownership stake is in the company.

6. A deposit Cash

Like personal checking accounts, many business checking accounts require a minimum deposit to open. That amount will vary by bank. At Wells Fargo, for example, you only need $25 to open a business account, while U.S. Bank requires a minimum deposit of $100.

7. A solid understanding of your business plan

You can establish your business’s credibility with a solid business plan. It should include a detailed overview of the nature of your business, expectations of your annual sales, where your suppliers and vendors are located and other information to establish your business’s credibility.

How do you choose the best business bank account for your needs?

Business bank accounts share one key thing in common with personal bank accounts: There are a lot of options. Here’s now to narrow down the many options to choose the best business bank account for your needs.

Decide the type and number of business bank accounts

You’ll first need to decide which type of business bank account you need or whether you need multiple accounts to keep your finances organized. Types of accounts to choose from include:

• Business checking account. Use a business checking account to access capital needed for day-to-day operations. Keep in mind that many business checking accounts limit the number of transactions you can make, particularly those from brick-and-mortar banks.
• Business savings account. Use a business savings account to build a contingency fund for emergencies or so that you can buy new equipment or expand your business later. Business savings accounts may have a higher minimum balance required than a personal savings account would.
• Merchant services account. A merchant services account allows you to take debit and credit card payments from customers. You’ll want to compare the transaction fees (usually charged per transaction) for different merchant service accounts to ensure you’re getting the best deal.

Determine which business banks meet your needs

Once you’ve chosen the type of business bank account you need, you can compare different banks to find the right fit. First, think about what kinds of services you need.

• Will you want to send branded invoices?
• Do you plan to give other leaders of the company the ability to sign checks?
• Are you hoping to connect your account with software like Quickbooks or NetSuite?
• Will you need to visit a physical branch to make deposits, or could your business function easily without in-person interaction with a teller?

Compare banks and account details

There are a number of business bank accounts for new businesses that offer low or no fees for owners in the early stages. Those accounts just include the basics: a place to park your money, a debit card and not much else. To take advantage of an account with expanded features while avoiding fees, though, you may need an accurate forecast of how much money you’ll be earning and spending on a regular basis.

For example, consider Bank of America’s two business checking options: Fundamentals vs. Relationship. The Fundamentals account, designed for everyday business banking, has a $16 monthly fee, waivable if you are a Preferred Rewards member, maintain a $5,000 balance, or make $250 in monthly purchases. For businesses processing many transactions, the Relationship account provides premium features — no wire or stop payment fees, and extra checking and savings accounts. There is a $29.95 monthly fee, unless you have a minimum balance of $15,000 or are a Preferred Rewards member.

Some other big banks such as Capital One have a similar model: lower-priced business bank accounts in exchange for fewer features.

“Before you open a business checking account, do your research,” Pica says. “Shop around and see what kind of offerings are available in the market for small businesses. Consider fees, interest, transaction limits, cash deposit limits, account maintenance requirements and access to digital business banking tools.”

Bottom line

Opening a business bank account can be simple when you have the proper documentation on hand. Most banks will require government-issued identification, proof of business formation and a completed form for each beneficial owner. You may also need to make a minimum opening deposit. Before opening an account, you may want to compare several business bank accounts side by side to understand which ones offer the best features like free transactions and the lowest fees, such as no monthly service fee if you keep a certain amount in it.