Month: November 2022

A separate bank account can help you simplify your business finances. It helps you consolidate your business’s funds, making every transaction easily accountable, and has many other benefits. Learn all about how to open a business bank account in this comprehensive guide. 

Easily open your business bank account online with BlueVine. Start your application.

Key Takeaways on How to Open a Business Bank Account

• A business bank account holds company funds and allows transactions related to the business
• You’ll need personal and company identification, licensing, and tax documents to open a business account
• There are different types of business bank accounts, each providing different services and benefits to companies
• You can easily open a business bank account with BlueVine, the best bank for startups. Apply online, it only takes a few minutes.

How To Open a Business Account – Step-by-step Guide

Here are five steps to opening a business account:

1. Choose a business bank account type
2. Choose the best business bank
3. Gather required documents
4. Open your business bank account
5. Deposit funds

Step 1 – Choose a Business Bank Account Type

When opening a business bank account, the first step is choosing the type of account you need. Each business model has certain needs that can only be met by a particular account. For instance, the best business bank accounts for LLCs might not be as favorable for a sole proprietorship.

It’s crucial to factor in your business’s specific needs when choosing an account. Are you looking for a place to stash away your business profits for the long term? A savings or certificate of deposit account are excellent options. Are you interested in an account where you can deposit daily earnings and make frequent withdrawals? A business checking account is more suitable.

Settling on the ideal account for your business protects you from paying unnecessary monthly fees or penalties during transactions.

Step 2 – Choose the Right Business Bank

After choosing an account, look for a bank with the best offer. Most credit unions and banks offer multiple types of business accounts. However, the features and monthly service fee associated with each account vary from one financial institution to the other.

For instance, some banks have minimum balance limits while others don’t. Also, banks offering online business checking accounts usually have no monthly maintenance fee, unlike traditional banks. Therefore, it’s essential to compare different institutions to ensure you get the best deal.

Other factors to consider when comparing banks include available transaction methods, mobile banking app services, bill pay, and whether they can offer credit in the future.

It’s also wise to opt for a bank providing various small business resources. If you want to open multiple business bank accounts, it’s recommendable to use the same bank to access personalized services. Dont’ forget also that when choosing the right business banks, it helps if you first read their reviews. We have reviews that might help you choosing the right bank for your business like Axos Review, Lili Review, and Capital One Review.

Step 3 – Gather Required Documents

Once you’ve identified which bank account you will open, it’ll be easy to determine what kind of documents you’ll need to open a busines bank account. Banks provide related details on their websites, so check the business bank account requirements before proceeding to the next step.

Generally, you’ll need identification documents and documents verifying your business’s legitimacy and identity. If you have a limited liability company, ensure to provide the LLC operating agreement document. For partnerships, ownership agreements are necessary.

Step 4 – Open Your Business Bank Account

You’ll need to visit a branch location or use an online portal, if provided, to open an account. The process will involve submitting information and documents required for a business account. If you meet the requirements, you’ll have your new business bank account opened within minutes. You can even open your business account online with BlueVine.

Easily open your business bank account online with BlueVine. Start your application.

Step 5 – Deposit Funds

Depositing funds into your account is the last step of the process. You can do this through cash deposits, wire transfers from a personal checking account, or writing a check to your business. Once you’re through with this, your new account will activate and be ready for transactions.

What Is a Business Bank Account?

A business bank account is a transaction account that enables you to make transactions and receive money in your company’s name.

With a business bank account, you can receive payments from clients, pay your employees, save profits, and withdraw cash for day-to-day business expenses.

Banks and credit unions design business accounts to cater to businesses’ specific needs. They achieve this by including features such as invoicing and payroll.

Types of Business Bank Accounts

There are several types of business bank accounts, each suitable for particular businesses and needs, including:

• Business checking accounts
• Business savings accounts
• Merchant accounts
• Business certificate of deposit accounts

Business Checking Account

A small business checking account is designed for day-to-day cash deposits and withdrawals. Business checking accounts typically have monthly account fees. When you open a business checking account for your company, you’ll have access to a myriad of deposit and withdrawal options, including:

• Wire transfers
• Electronic transfers
• Mobile check deposit
• ATM transactions
• Checks
• Debit card transactions

The various withdrawal and deposit methods make it easy to access funds for daily small business expenses and safely transfer earnings to your account. Some of the best business checking accounts integrate with tools such as accounting software to simplify bookkeeping.

Business Savings Account

If you have company funds that you don’t intend to use for recurring business expenses, it’s best to put them in a savings account. Business savings accounts are designed to hold funds that earn competitive interest over time.

While a business checking account allows unlimited withdrawals, you can only make six fee-free withdrawals from your savings account each month. This is because the savings bank account model is not meant for constant withdrawals. Once you exceed six withdrawals, your bank will charge you transaction fees for every additional withdrawal.

Banks make money by loaning your savings to other people at high-interest rates, then paying you a lower interest. When you exceed transaction limits, it affects the bank’s ability to make a profit, which paves the way for fees and penalties.

Merchant Account

Do you intend to accept credit cards and debit card payments from your customers? If so, you’ll need a merchant account.

A merchant services account accepts and processes credit card payments and debit card transactions. To use this type of account, you’ll need to open a checking account first. When customers pay using cards, the funds go to the merchant account before being transferred to your other business bank account.

Merchant services accounts come with their own set of fees separate from the business bank account you’ll be transferring your money to. These include fees for credit card transactions, address verification fees (AVS) and monthly minimum fees. Before opening a merchant account, it’s crucial to determine whether your small business earnings are worth the costs.

Learn about what a merchant cash advance is and how it can benefit you if you accept both credit cards and debit card payments.

Business Certificate of Deposit Account

A business certificate of deposit (CD) account allows you to save money while earning you more interest than a basic savings bank account.

When you deposit money into a CD account, you agree not to make a withdrawal within a specified period. The longer you keep your money untouched in your CD account, the higher the interest you’ll earn.

Withdrawing money from your CD account before maturity leads to steep penalties. If you think you’ll need to access your savings before the set period, it’s best to consider opening a standard savings account instead.

What Do I Need to Open a Business Bank Account

Here are the most common requirements for opening a business bank account.

• Employer identification number (EIN) or social security number (SSN)
• Personal identification
• Business licenses
• Certificate of assumed name
• Organization documents

Employer Identification Number or Social Security Number

The Internal Revenue Service assigns you an Employer Identification Number (EIN) for identification purposes. You’ll apply for an EIN when starting your business.

When opening an account, an Employer Identification Number is required to prove your company’s identity. Some banks allow sole proprietorships to use the owner’s social security number in place of an EIN. Here’s how you can open a business account with EIN only.

Personal Identification

You’ll need to submit documents proving your identity, usually a driver’s license or passport. Banks check identification documents to ascertain your identity and connection to the business you’re representing.

Business Licenses

When you start your small business, you’ll need to apply for business licenses from your local or state government to show that you’re authorized to operate. Banks will need to see your business licenses to prove the existence and legitimacy of your company. A business license also holds vital identification details such as the owner’s name and the business name.

Certificate of Assumed Name or DBA

An assumed name is a term that your business trades as but is different from the legal business name.

For instance, let’s say your business’s legal name is XYZ Spa, but you decide to trade as XYZ’s. In this case, XYZ’s is your assumed business name, and you’ll need to file it with your state. Officially, it’s referred to as a “doing business as” (DBA) name.

If you apply for a DBA, you’ll be required to provide a copy of the filing documents to your bank when opening business bank accounts. Find out more about opening a DBA checking account here.

Organization Documents

Before a bank or credit union allows you to open an account for your business, they’ll need information regarding the following:

• The activities your company participates in
• The managerial structure
• Owners
• Business address
• Registered agents.

When registering your company, various organization documents you’ll file with your state or the local government will include these details. Therefore, you will need to gather all the necessary documents for your bank account registration.

Benefits of Opening a Business Account

Opening a business bank account comes with many benefits, including:

• Easier accounting of business funds
• Builds your business’s credit history
• Provides convenient access to company funds

Easier Accounting of Business Funds

As a sole proprietor, you have the option of using your personal accounts for your business needs. But this presents several challenges.

For starters, you’ll have a more challenging time separating your personal and business finances when doing tax reports. This could prevent you from enjoying business tax deductions that you qualify for.

Secondly, mixing up personal and business finances makes it difficult to track company cash flow, making it hard to determine your business’s financial status.

A business bank account for sole proprietors that only holds funds from your company makes both accounting and tax reporting a breeze.

Builds Your Business’s Credit History

Lenders will check your company’s credit score for certain business loans instead of your personal credit. Opening a business account allows you to build your company’s creditworthiness to improve your chances of credit approval in the future. Also, some lenders will need you to have a business account as a requirement for accessing loans or when applying for a business credit card.

In case you have poor credit but need a loan, having a business checking bank account allows creditors who offer bad credit business loans to create cash flow projections to determine whether to approve your request.

Provides Convenient Access to Company Funds

If another person at the company, perhaps a partner, has access to business funds, it’s inconvenient to use your personal bank accounts for business purposes. A business bank account is a safer arrangement.

Also, with a business bank account, you can apply for business debit cards that authorized staff can use for ATM transactions and purchases. This is more convenient than having to make withdrawals at a branch whenever you need cash.

Final Thoughts on How to Open a Business Bank Account

Opening a bank account for your small business is one way to ensure proper cash management. It will also become an essential tool in the future when you need to apply for business loans or business lines of credit. Before opening a business bank account, read some reviews about them and think carefully. We have reviews to other banks and this will surely help you; Novo Review, Bluevine Review, and Bank of America Review. Always keep in mind that look for bank that serves your business’s specific needs.

Best Business Bank Accounts by State

Below you will find an interactive U.S map that can help you locate and compare different banks and financial institutions that offer business accounts in your area.

Opening a business bank account with EIN only through a traditional bank may seem challenging. The banking regulations in the US stipulate that entrepreneurs must present specific documentation, depending on their business structures. Fortunately, opening a business bank account online is much easier, and you can use your social security number or EIN.

Easily open your business bank account with just your EIN with BlueVine. Start your application.

4 Steps to Open a Business Bank Account With EIN Only

Opening a business checking account is straightforward, and should only take a few minutes. Make sure you have the primary documents handy and be ready with the fees that apply unless you intend to open a fee-free business banking account. Here are four steps to complete the process.

Step 1: Get Your Documents in Order

The documents you need to open your business bank account depend highly on the form of your business organization. For a start, you will need your Social Security Number or an equivalent identification such as your business’s EIN (employer identification number).

An EIN is a unique identification number for your business. This nine-digit number is issued by the IRS and works pretty much like your social security number. You will need your EIN to file your annual business taxes, and you can look up your EIN through the IRS website. You should also gather the following documents depending on your type of business organization.

• Sole Proprietorship — DBA certificate
• Partnership — Business partnership agreement and business license if you operate an eatery or healthcare facility
• Corporation — Certified articles of incorporation, corporate bylaws, a signed corporate resolution, business license, and IRS 501(c) letter if you are a non-profit corporation.
• Limited Liability Company (LLC) — Certified articles of organization, operating agreement, and business license

Step 2: Choose a Bank and Bank Account Type

If you want to open a business bank account with EIN only, your best bet is to stick to fintech and online business bank accounts instead of traditional land-based banks. These offer relatively affordable services, making them ideal for businesses that mainly handle all transactions online. Also, they have fewer restrictions and bureaucracies, making the account opening process easier and faster. If you are a new business there are also banks that are fit for startups.

There are different types of business bank accounts designed to match specific needs. The most common include checking accounts, savings accounts, and credit unions for business banking accounts. Also, you can get a credible fee-free business bank account where you don’t have to worry about monthly fees or minimum balance requirements.

If you are interested in opening a fee-free business account, here is a detailed BlueVine Review and Novo Review packed with information about the pros, cons, and alternatives to both fintech companies.

If you’re starting an LLC, find the best bank accounts for LLCs here.

Before choosing the account to open, it is imperative to compare your options in detail. Compare the fees, the financial tools and features, and the range of integrations allowed by different platforms. Also, check out the available bank account options and ensure that your business will have adequate room for growth as you expand and your financial needs increase.

Open your business bank account with EIN only with Bluevine.

Step 3: File an Application to Open Your Account of Choice

Once you have done your research to identify the most suitable bank and bank account for your business, it is time to apply. The majority of banks allow the entire process to take place online conveniently. As long as you have the correct documents, the process should only take a few minutes.

Even companies offering fee-free business bank accounts must adhere to federal regulations. They make the application process dead simple, although you are not guaranteed not to bump into issues that may see your application declined. Take your time to fill in all requirements correctly and reach out to the support team if necessary. This will ensure that you also don’t face IRS issues in the future.

Step 4: Start Managing Your Account

Once your application is approved, you can now start managing your new business bank account. Deposit funds using checks, invoices, wire transfers, or cash where you purchase a money order from a vendor authorized by your bank. The bank will automatically deduct any applicable fees and give you access to various financial tools to help you manage routine banking tasks.

Reasons to Open a Business Bank Account 

Opening a business bank account with an EIN only protects your SSN from unnecessary exposure. The benefits of applying for an EIN and opening a business bank account include but are not limited to the following perks.

Protect Your Personal Assets and Finances

Your EIN is your business identification number. It establishes that your business is an independent entity and even allows you to open a bank account for it, separate from your personal bank account. You can further distance yourself from business debt liability by registering your business as a corporation or LLC.

Keeping your business affairs separate from your personal finances ensures that creditors cannot legally reach for your personal assets without breaking the law if the company cannot pay its debts. By keeping your company money separate with a business bank account, you also make bookkeeping more straightforward and legally distance yourself from any business liabilities.

Using an EIN instead of sharing your social security number around can help to reduce the risk of identity theft. Even though your EIN can also get stolen, cases of SSN theft are more rampant.

Simplify Tax Preparation and Accounting Tasks

A separate bank account makes tax preparation tasks easier because your business income and expenses run through a single account. You could use tax preparation software to connect to your bank account data and automate various processes to eliminate blunders and maintain a clean tax trail. When your personal and business monies mix, it’s easy to make tax mistakes that can leave you in IRS trouble.

Whether you intend to hire a tax preparer or are comfortable handling your bookkeeping in person, a business bank account can make tax preparation tasks easier and less time-consuming. You can eliminate the trouble of separating your business and personal expenses at that point when you need to put your books in order.

Apart from avoiding the risk of being audited by the IRS and enjoying the perks of using accounting software, you can also take advantage of other programs. There is helpful software that can also simplify business budgeting and invoicing. Unfortunately, you cannot make maximum use of such programs if your personal and business finances are mixed up.

Benefit From Tax Deductions

All expenses incurred when running a hobby are subject to business taxation. However, you can enjoy tax deductions if you show the IRS that your venture is more than just a favorite pastime. The easiest way to make the intended statement is to apply for an EIN and open a business bank account. Also, ensure that you maintain all financial records in a “businesslike” fashion.

Enhance Your Professional Image

A business bank can enhance your professional image, primarily if you transact money with your customers using invoices and wire transfers. Sending or receiving funds from a personal account appears unprofessional. It can make clients feel insecure, and could even give your operations an illegitimate vibe.

In contrast, customers will perceive you as well-established if they receive invoices or wire transfers from an account branded with your business name. The branding shows that your venture is more than a hobby, and you have made an effort to maintain the highest standards of professionalism.

Build Business Credit

A business account allows you to maintain clean records of all cash flow. It is easy to point out money received from customers, company expenses, taxes, etc. Such records can be quite helpful when seeking out business loans. A lender can easily find out whether you qualify for a loan and the ideal repayment plan by going through your banking data.

Any lender will want to see your cash flow statements before approving a loan. Generally, a statement tainted with personal expenses is less likely to work in the best interests of your business.

A business line of credit comes in handy whenever you want to expand your operations, or invest in more assets. A business account makes you appear legitimate and serious even in the eyes of potential creditors. If you have an appealing credit history, this could provide grounds for favorable interest rates.

Qualify For a Business Credit Card

Keeping your business finances separate could also make it easier to qualify for a business credit card. You will again need an EIN to apply for the card. It is also important to note that customers can pay for goods or services using both debit and credit cards if you open a business account. Clients may be limited to using cash or check if you only have a personal bank account.

Open your business bank account with EIN only with Bluevine.

Why Open a Business Bank Account With EIN Only?

Obtaining an EIN opens more banking options for your business. You’ll be able to take full advantage of the features and perks offered by different financial institutions. Whether you wish to seek the services of a credit union or a well-established online or land-based bank, your business will have an easier time qualifying for the available options.

If you do not have an EIN, you have to enter an equivalent alternative, which is your social security number. While the option may seem okay at first, it is likely to cause unnecessary exposure of your SSN to other institutions, including the IRS.

With an EIN, your business assumes an identity separate from your personal I.D. This allows you to keep your personal finances and affairs distant from your company. If your business bumps into legal trouble, you don’t have to worry about your personal assets being seized.

Moreover, opening a business bank account with EIN only makes it easier to build business credit. This can give you an upper hand when seeking loans from credit unions because the institution will only need to worry about how responsible your business is with settling debts. Even if you have a poor personal credit score, this will not tamper with your business affairs.

Open your business bank account with EIN only with Bluevine.

Final Thoughts on How to Open a Business Bank Account With EIN Only

It’s safer to open your business bank account with EIN only. Even with all plans to maintain clean bookkeeping records and diligently pay your taxes, it makes sense to open an account using your business’s ID and keep its financial affairs entirely separate. This makes it easier to maintain a clean audit trail for the IRS, build business credit, and even benefit from loans that can move your venture to the next level.

Open your business bank account with EIN only with Bluevine.

Best Business Bank Accounts by State

Below you will find an interactive U.S map that can help you locate and compare different banks and financial institutions that offer business accounts in your area.