Category: Banking

Whether your corporation is large or small, keeping track of finances is paramount for success. A business bank account allows you to manage company funds in one place while taking advantage of additional features to help your business grow. Read on to learn how to open one in six easy steps.

How to Open a Bank Account in a Corporate Name in 6 Steps

Finding the ideal bank account for your corporation can be a daunting task. This guide will help you open a business bank account in short order.

Step 1: Choose a Bank Account Type

Bank accounts come in all shapes and sizes. Before opening an account for your corporation, you’ll want to weigh the pros and cons of each type. You may end up opening just one account, but in many cases you’ll find yourself selecting a few that complement each other.

Here are the five most commonly used business bank account types and the benefits of each:

Business Checking Account

You’d be hard-pressed to find a business operating without a checking account. This account is the backbone of your financial operations and allows you to move money with ease. A business checking account is perfect for transferring funds, making payments to vendors, and withdrawing cash as needed.

The majority of your corporate finances will reside here, constantly ebbing and flowing as demands arise. Keeping an eye on upcoming expenses is crucial, lest you run the risk of insufficient funds.

These accounts usually have transaction limits, and going above the allotted amount leads to fees. The same holds true for cash deposits, making it paramount to check these restrictions before signing up.

A handful of business checking accounts are interest-bearing, allowing you to earn a few cents for every dollar present within. This is a luxury and not the norm, so don’t turn down a bank if the option doesn’t exist. Rates tend to be on the low side, but Bluevine stands out for its 2.0% APY.

Business Savings Account

When setting aside money to pay shareholders or work towards an upcoming large purchase, a business savings account can be a great place to store those funds. Finances in a business savings account almost always accrue interest, although rates vary significantly from one bank to another.

The FDIC lists the national average for interest rates on savings accounts at 0.35%. Shop around enough and you should be able to find something higher.

You won’t want to touch this money if you don’t have to, so you can maximize income from building interest. It may not be an earth-shattering number, but any amount can add up over time.

The biggest downside of a business savings account comes in the form of limited withdrawals. You can’t pull out money more than six times a month, potentially leaving you with inaccessible funds if you don’t plan accordingly. It’s not usually possible to write checks or use a debit card to take funds out of a business savings account.

Business Money Market Account

Business money market accounts act like beefed-up savings accounts. They often have higher interest rates and the flexibility of writing checks or using your debit card to take funds straight out of the account.

This extra flexibility comes at a cost, sometimes in the literal sense. Business money market accounts tend to have a higher initial deposit or monthly balance requirements to adhere to. Some may have unavoidable fees or still place restrictions on withdrawals.

Business Certificate of Deposit (CD) Account

Business certificate of deposit accounts offer a whole new take on growing funds. You’ll often find the highest interest rates here, but they come with a significant catch.

By using a CD account, you agree to lock away money for a set amount of time, referred to as a term. Depending on the CD you choose, this term can be months or even years.

Your interest rate plays into the amount of money you’re willing to stash away and the length of your term. It’s imperative to ensure you won’t need these funds for any reason until your term ends.

Taking money out of a CD before the end of a term comes with a costly penalty. In most scenarios, terminating your CD early will leave you in a worse position than you were going into the deal.

Merchant Account

Merchant accounts exist to collect credit and debit card payments either in person or online. Without a merchant account, these forms of payment will not be available to your business.

When a customer pays you with plastic, those funds land in your merchant account before trickling down elsewhere. After a set number of days, the money will automatically move to another account of your choosing.

The service or bank you’re using to set up a merchant account likely has both hardware and software for accepting credit or debit card payments. You may face costs for using this equipment, and there are often small transaction fees associated with each customer purchase.

Most of the time, opening a merchant account comes with a multi-year contract and specific terms. Services like Square start you out on a basic plan for free.

Step 2: Find the Best Bank

Once you’ve whittled down which bank accounts your corporation needs, you’ll want to select the best bank. Not all banks offer every account type, so finding one that does is priority one.

Keep the following factors in mind when selecting the ideal bank for your corporation:

Fees

Banks are still businesses that need to keep staff employed and the lights on. They have to make money somehow, which may mean monthly fees or charges for using certain services.

A few online banks like Axos and Lili have free business banking accounts without monthly fees to contend with. That said, it’s more common to find institutions with recurring maintenance costs. The best options include ways to waive these charges through transactions or balance minimums.

Fees can also appear with transactions or cash deposits. Banks typically allow a set number for free, but nickel and dime you after passing that limit. You’re usually okay using in-network ATMs for withdrawals, but out-of-network machines almost always come with a charge.

You may be able to access some business services for free, but read the fine print. There may be charges lurking in the shadows you’re not immediately made aware of.

Required Minimums

Depending on the bank, there may be an initial deposit required to open an account. Banks want to make sure you have some skin in the game, so you’ll have to meet this amount before being able to do anything else. Once your account is up and running, a bank may impose a minimum balance to avoid the maintenance fees mentioned earlier.

Bank accounts with higher initial deposits and monthly balance requirements tend to have better perks, but don’t wander into a trap. It’s better to take a conservative approach with your corporation so you don’t end up biting off more than you can chew.

Your balance may also play a role in the interest rate you’ll earn with your checking, savings, or money market account. Additional finances can lead to higher interest rates and more money back to your corporation each month.

Interest Rates

Your corporation’s extra funds can serve well in a savings, money market, or interest-bearing checking account. These accounts generate interest based on the amount contained within.

Most corporations use savings and money market funds for unexpected expenses or large purchases. Growing even a few tenths of a percent each month can make a huge difference in the long run.

Online Banking

Today’s banks understand the importance of an online presence in our fast-paced world. Some institutions don’t even have physical locations, opting to do business solely over the computer.

The best banks let you perform all your business functions from anywhere with an internet connection. Doing so eliminates the need to drive to a branch and wait in a queue.

Mobile banking apps allow you to transfer funds, monitor account balances, and set alerts to prepare you for upcoming expenses. They’ll even let you deposit checks from your phone or point you to the nearest ATM.

Business Services

The bank you choose should have additional business services to help your corporation manage funds. Features may include fraud protection, accounting software, or payroll solutions for your staff. Institutions like Bank of America have a rewards structure just for doing business.

Chase is known for its business services, and U.S. Bank has a number of lending opportunities for any corporation needing extra cash. Novo works well with e-commerce giants such as Shopify and Etsy to facilitate sales.

Step 3: Obtain an EIN

Almost all banks will want to see your employer identification number (EIN) when you go to open an account. Every corporation needs an EIN for tax purposes, whether you have employees or not.

If you don’t have an EIN, jump over to the IRS’s website and apply for one there. It’s free, and you’ll receive your nine-digit number immediately upon completion of the form.

A business formation service may complete the EIN application process for you when setting up your corporation. In this case, locate the number assigned to you when applying for a bank account.

Step 4: Create a Corporate Resolution

All business owners need to meet and draft a corporate resolution. This holds true even if you’re currently a company of one.

Your corporate resolution answers many of the tough questions your company may face during its tenure. Among these decisions should be specifics on opening a corporate bank account.

In the document, you’ll spell out the purpose of your bank account and who can access it. It should also be clear how each business owner voted, and each individual should sign the form.

Not every bank will ask to see your corporate resolution, but you should still have one on hand. Having everything documented can protect your corporation from liability down the road.

Step 5: Gather Your Paperwork

Once you’ve got the perfect bank in mind and paperwork drafted, you’ll want to gather up your documents. In addition to your EIN and corporate resolution, the bank may request the following information:

Name and Address: You’ll need to provide both the name and address of your corporation.

Personal Identification: Banks will look for one to two pieces of identification proving you’re someone who can act on behalf of the corporation. One of these will have to be a photo ID, such as a driver’s license or passport. The other can be a voter registration card, credit card, or a bill.

Articles of Incorporation: Your Articles of Incorporation defines the purpose of your corporation and its duration. The document also captures the name of your registered agent, owner information, and information about the number and type of shares your corporation can issue.

Certificate of Assumed Name: If you’re operating your business under an assumed name, you’ll need to show legal proof you can do so. This certificate can be called a number of different names depending on the state.

Business License: The state administers your business license once you’re an officially registered business. It shows the bank you are a legitimate entity and the state you can operate out of.

Corporate Bylaws: Corporate bylaws are a legally binding set of rules your leadership must follow. It spells out specific details on each leadership position and information about shareholders.

Step 6: Sign Up

With your paperwork in hand and a bank in mind, you’ll have everything you need to open a bank account. If the bank you chose has a branch nearby, you can set up everything in person.

A banker will review your paperwork to ensure everything’s on the level. You should be fine with the documents listed above, but doing some research in advance can save you the headache of having to collect something you forgot.

Some banks can bring your account online right away, while others can take a few days to process your documentation. You may also be subject to a credit check before the bank opens your account.

Signing up for a business bank account online may also be possible. The process varies from bank to bank, and some institutions may not allow this method.

Lili is an online fintech company that takes mere minutes to open an account. Others, like Chase Bank, require more paperwork and longer review times.

Should your bank require an initial deposit, you’ll need to add funds right after signing on the dotted line. 

Benefits of a Corporate Business Bank Account

Corporations must have an account dedicated to business purchases. That said, there are plenty of other great reasons for having a business bank account. Here are some of the best benefits for you and your corporation.

Personal Fund Protection

Corporations offer liability protection for a business owner’s personal funds. In the event of a lawsuit or business debt, no one can come after your private assets.

Without a clear distinction between business and personal funds, that liability protection can go right out the window. Known as “piercing the corporate veil”, the government or debtors can come after your assets as well.

Accept Credit Cards

You’ll need a merchant account to accept credit card purchases both in a physical store and online. Even if you use point-of-sale tools from a service, you’ll still need a business bank account to attach them to.

Allow Others to Access Funds

Setting up a corporate bank account allows you to give access to funds where you see fit. You can pick employees to make purchases on your behalf or dole out credit cards to cover things like travel expenses.

Avoid Tax Problems

When tax time rolls around, having a business bank account significantly simplifies handling payments to the IRS. If you track all your credits and debits in one account, it will make calculating amounts that much easier. The process also helps with write-offs.

Miscalculations or incomplete tax estimates can lead to audits that consume time and money. Any ambiguity about personal and business funds can land you in hot water.

Be Professional

Making payments from a business bank account looks way better than sending a check from a personal one. Aligning your business and financial goals speaks volumes for the professional nature of your corporation.

Improved Organization

All your business finances in one place makes it easy to follow expenses and income. You can locate areas where spending is high and ensure revenues are on point all at a glance. As you partner with other businesses, they may ask to see your financial statements before working with you.

Build Credibility

A business bank account lets your corporation start to build its own credit. Keeping in good standing with the bank and other businesses can lead to long-lasting relationships. Down the line, you can use this credit to request business loans or favors from another company.

Who Can Open a Corporate Account?

The person applying for a corporate account must have an ownership interest in the company. Banks typically require this individual to have at least a 25% stake in the business. Assuming that’s you, you’ll also need the blessing of your entire board of directors.

Your corporate resolution should clearly state that you have permission to open a corporate bank account. Banks may require you to be a US citizen and run a credit check on your finances.

Bottom Line on How to Open a Bank Account in a Corporate Name

Opening a bank account in a corporate name isn’t just a good idea; it’s a required part of creating a corporation. Doing so requires careful consideration of account types and the features banks offer that benefit you the most. With research out of the way, you just need to gather the necessary documents and sign up in person or online.

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.

Managing finances as a sole proprietorship is crucial for running a successful business. A business bank account makes it easy to track company funds while offering additional services to help your venture grow. Read on to learn how to open a sole proprietorship bank account in four simple steps.

>>>Use Lili to open your business bank account in minutes!

How to Open a Sole Proprietorship Bank Account In 4 Steps

There are no shortcuts when it comes to opening a sole proprietorship bank account. The following steps show you everything you need to set one up quickly.

Step 1. Decide on a Business Bank Account Type

Your sole proprietorship may benefit from a few different bank accounts, depending on your business focus. Here are the most common bank accounts to choose from.

Business Checking Account

A business checking account will likely be the most important account you use as a sole proprietor. This account lets your business freely move funds, accept deposits from outside sources, and make necessary payments.

Whenever you need to withdraw money from your bank, the business checking account is probably the first place you’ll go. It’s essential to always keep enough money here so you don’t end up with an overdraft.

Some banks are more liberal than others with how many transactions you can do in a given month. If faced with limited transactions, you’ll want to plan ahead to avoid fees. Capital One is one of the few institutions that allow unlimited digital transfers.

Business checking accounts may offer interest on the cash you’re keeping within. While a nice perk, such a perk is far from the norm. Bluevine is one of the few to step up here, giving up to 2.0% APY on up to $100,000.

Business Savings Account

If you’re able to maintain a healthy balance in your checking, a business savings account may be an option for you. These accounts work well for unexpected expenses or saving up for a large purchase down the road. 

Unless a bank is a real dud, any money kept in a business savings account accrues interest at an advertised rate. You get to do business as usual and have the bank pay you a small amount on the side.

The amount you earn in a savings account often scales depending on how much you have within. Higher amounts generally increase the interest rate, assuming you can afford to set aside that much cash each month.

You’ll need to be careful about taking funds out of your savings account, though. It’s only possible to withdraw money six times per month, potentially leaving you in a pickle if you don’t plan well. Most banks won’t let you write checks or use a debit card to pull money from your savings, either.

Business Money Market Account

Business money market accounts function like savings accounts but come with a handful of additional perks. You can usually find higher interest rates here while being able to write checks or use debit cards to draw out cash as needed.

This flexibility can come with a literal cost, as money market accounts often charge unavoidable fees. If there’s a way to waive fees, it will be through high monthly balance requirements. There’s usually a large initial deposit to open an account in the first place.

Business Certificate of Deposit (CD) Account

Business certificate of deposit accounts are the cream of the crop for earning interest but are very rigid by design.

When you open a CD account, you agree to leave that money alone for a certain period of time. Known as the term of the CD, this interval can range from months to years.

Generally speaking, the longer the duration of the CD, the more interest the account will earn. The amount of money you’re able to put in is also a significant factor.

Before using a CD account, make sure you’re setting aside money you won’t need for any reason. You’ll be penalized heavily for withdrawing funds from a CD and likely lose out on whatever benefit the account offered in the first place.

Merchant Account

Sole proprietorships wishing to accept credit or debit card payments from customers will need a merchant account. These accounts act as a temporary holding location for these funds before finding a permanent home among your other accounts.

The bank or point of sale service you choose for your merchant account may have hardware or software you’ll need to install before accepting payments. Check for associated one-time or recurring equipment fees before signing up. In addition, be prepared to have the service take a small transaction fee each time a customer swipes their card.

Contracts for a merchant account typically run between one and three years in length. You can’t take payments from plastic without one, but some point of sale options are better than others.

Step 2. Find the Ideal Bank

With knowledge of the available account types, you can now start looking for the optimal bank for your sole proprietorship. Keep the following factors in mind when searching so you don’t incur unruly expenses or miss out on a feature your business needs.

Fees

Banks choose to earn their keep in different ways, but these always spell fees for the customer. These fees can be anything from monthly service charges to costs for using certain services.

Don’t be too shocked if the majority of the banks you look at have regular maintenance fees for account upkeep. The best bank accounts have ways to waive these charges by meeting specific requirements. Lili and Axos are among a few online options advertising completely free business banking accounts.

Most business checking accounts place limits on transactions and cash deposits. Exceeding these limits will result in per-transaction fees that can add up very quickly. Being mindful of your money flow can help avoid penalties here.

Charges can appear for out-of-network ATM use or wire transfers going either way. Banks may offer some business services for free while assigning costs to others. Be sure to read all the fine print so you know what you’re getting yourself into.

Required Minimums

As you start your journey with a bank, you may have to put down an initial deposit. Accounts with higher initial deposit requirements tend to offer better perks, so you may have to save up a bit if you want a particular account.

After you’re up and running, the bank may ask you to keep a minimum monthly balance. If you can’t keep enough money in your account, you’ll have to deal with monthly fees you may not be able to afford. Accounts requiring higher balances may seem appealing, but make sure your sole proprietorship can keep up with demands.

Your balance may also play a role in the interest rate you’ll earn in your savings, money market, or checking account. In general, more money unlocks higher rates to supplement income from your customers.

Interest Rates

Every penny matters when running a sole proprietorship. If you’re able to set aside a rainy day fund, you can use a savings or money market account to earn some interest on cash you already have.

Interest rates vary from bank to bank, with some offering as low as 0.01% APY for those just starting out. If you shop around, it’s possible to find a higher introductory rate. The national average sits at 0.35%, but many banks require high balances to reach such a number.

Online Banking

Long gone are the days of stuffy traditional banks with sparse locations and long queues. Today’s institutions embrace the ability to perform most, if not all, of your financial operations online.

Whether via the web or an intuitive mobile app, it only takes a few button presses to send money, request a transfer, or view your account balances. Many banks allow you to deposit checks using your phone’s camera.

Some online banks can get away with lowering fees by eliminating physical locations altogether. Should you need to locate an ATM or a branch, the mobile app can show you the way.

Having this flexibility with your finances enables you to bank on your time, allowing you to focus on your business instead. If a bank doesn’t dabble in online banking, it may not be worth doing business with.

Business Services

Banks use business services to stand out among the competition. Top offerings include fraud protection on your account, payroll solutions, or lending options to lock in that big purchase. The sky’s the limit, so look around for features that work for your sole proprietorship.

Others may hand out sign-on bonuses for becoming a member or a rewards system with perks depending on how often you bank. If you run an e-commerce business, banks like Novo integrate with Shopify and Etsy to facilitate your cash flow.

Ease of Use

Lastly, don’t forget to consider how easy a bank is to work with. Check customer service hours and read reviews to get a feel for how a bank operates. Clunky or outdated web interfaces or apps can wreak havoc when you’re trying to shift funds before a big expense hits.

Step 3: Gather Your Documentation

After selecting a bank, you’ll need to gather your business’s documentation to open your account. No two banks are the same when it comes to paperwork, but bringing the following for a sole proprietorship should suffice:

Business Name and Address: You must show the bank your sole proprietorship’s legal name and the address you do business out of.

Doing Business As Certificate: Sole proprietorships use the owner’s first and last name as the company’s legal business name. If you want to do business under a different name, you must request permission from the local governing body. You’ll receive a “doing business as” certificate allowing you to run your store under another name.

Social Security Number or Employer Identification Number: Sole proprietors can open a bank account using their social security number (SSN) for tax purposes. Alternatively, you can request an employer identification number (EIN) for free from the IRS. Using an EIN helps differentiate business dealings from your personal assets.

Business License: Once your business becomes official, you’ll receive a business license permitting you to operate in a particular area.

Government-Issued Photo ID: You’ll need to prove you are the legitimate owner of your sole proprietorship with a photo ID. This can be a passport, driver’s license, or the like.

Personal Information: Alongside your ID, you’ll need a certificate with your name and date of birth.

Step 4: Apply for an Account

With research complete and documents in hand, it’s time to apply for your account. Most of the time, the process is relatively painless and can sometimes be completed online.

Otherwise, you’ll need to visit a local branch with your documents in tow. A banker will pore over your application and make sure everything checks out. It’s worth contacting the bank before you arrive to ensure they’re not looking for out-of-the-ordinary paperwork.

Most banks will set up your account right on the spot, but others can take a few business days to get everything in order. Although uncommon, some institutions may request a credit report.

If signing up online is an option, you’ll have to submit all your documents through the bank’s secure portal. Fintech companies like Lili cut the processing time down to a few minutes so you can start doing business right away.

You’ll also want to bring a check or have the means to transfer funds into your account if a bank has an initial deposit requirement.

Why Sole Proprietorships Should Open Business Bank Accounts

There’s no law requiring a sole proprietorship to open a business bank account, but it’s still a good idea. Here are some of the top reasons to have an account solely for your business.

Access to Financing

Your sole proprietorship may someday need a loan or other form of business financing. Lenders typically require you to have a business checking account to verify how much money flows through your venture in a given month. If you can’t prove you have the means to pay back your loan over time, you won’t receive one.

Professionalism

Having a business bank account in your company’s name looks very professional in the eyes of potential customers or business partners. With so much distrust on the internet, shoppers may think twice about sending money to a personal bank account. You can also use business dealings to promote your company instead of just your name.

Simplifying Tax Time

Preparing your business taxes is a challenging process, and not having clear lines between personal and business expenses just complicates things more. It will be much simpler to know what you owe when all your sole proprietorship’s dealings pass through one account. Any grey areas won’t look good on paper and could give the IRS a reason to audit your finances.

Proper Bookkeeping

As a business owner, you need to track all incoming and outgoing funds to know how your company is faring. Not being aware of whether your business is in the red or black is a recipe for disaster. A separate bank account for your business allows you to follow all this data in one place.

Credit Card Payments

With a business bank account, you can accept credit and debit card payments from your customers. Without one, you’ll have to devise other methods to get paid for your products or services.

Bottom Line on Opening a Sole Proprietorship Bank Account

While not a requirement, opening a sole proprietorship bank account is a wise business decision. Handling your business dealings apart from personal finances should help you immensely in the long run. Luckily, starting one is as simple as figuring out which accounts you need and finding the bank with the features you’re looking for. Once you’re ready, collect your business documents and sign up in person or online.

>>>Try Bluevine today for fee-free banking with an incredible interest rate!

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.

Every penny has its place in a small business. The last thing any business owner wants is to be tracking each one down to make ends meet. With a business bank account for your LLC, you can carefully manage funds and access extra services to help your business grow. Read on to learn how to open one in four easy steps.

How to Open a Business Bank Account for an LLC in 4 Steps

Determining the best business bank account for your LLC can be an overwhelming task. This guide has everything you need to open a business bank account in no time.

Step 1. Decide on a Business Bank Account Type

Before anything else, analyze the different types of available accounts and decide what your business needs. While you may settle on one, you’ll likely select a couple to get the biggest bang for your literal buck.

Here are the five most commonly used business bank account types:

Business Checking Account

In just about every circumstance, you’ll want to have a business checking account as the foundation of your financial operations. These accounts allow your business to transfer funds, make payments to vendors, and accept deposits from customers or other businesses.

Most business checking accounts also have ways to deposit and withdraw money from ATMs that are part of a particular network. It’s important to keep the lion’s share of your funds in this account to cover outgoing expenses, lest you experience an overdraft.

The majority of these checking accounts have transaction limits, forcing you to plan out a monthly strategy to avoid penalties. Exceeding a set amount each month typically results in per-transaction fees. Some of the best business checking accounts remove these restrictions. 

While few and far between, there are interest-bearing checking accounts where you can earn interest each month on money within. Rates tend to be low, although Bluevine sets the bar high here.

Business Savings Account

Business savings accounts are often a great place to store funds you don’t plan to use immediately. If you’re saving up for a larger investment, such as a store expansion or equipment purchase, a business savings account is likely the best option.

Here, your money will accrue interest at an advertised rate. If you shop around, you’ll find accounts with higher interest rates than others. The determining factor here is usually a minimum balance requirement to lock in a rate and negate service fees.

The downside of business savings accounts is limited withdrawals. It’s not possible to take out funds more than six times in a month, potentially leaving money inaccessible. In most cases, you can’t write checks or use a debit card to pull cash from this account type. Some banks may limit deposits into the account as well.

Business Money Market Account

Business money market accounts function similarly to business savings accounts. They often feature higher interest rates and may allow you to write checks or use debit cards to pull money directly from the account.

This extra flexibility comes at a cost. Money market accounts usually have higher initial deposits and monthly balance minimums. Some may have unavoidable fees and come with a limited number of transactions.

Business Certificate of Deposit (CD) Account

Business certificate of deposit accounts take money savings to a whole new level. CDs often have the highest interest rates but come with a significant catch.

When you place money into a CD, you agree not to touch those funds for a set amount of time, referred to as the term of the CD. Depending on the CD account you choose, this time can range from months to years.

The rate you earn from a CD comes from the amount of your deposit and the term of the CD you’re storing money in. You need to be sure that this is money you won’t have to use under any circumstance for its duration.

Should you need to pull your money out before the CD comes to term, the consequences can be dire. Be prepared to pay steep penalties that could destroy any earnings you hoped to attain.

Merchant Account

If your small business accepts credit or debit card payments either in person or online, you’ll need a merchant account. Merchant accounts serve as a temporary medium for these payments before automatically moving to one of your other accounts. The entire process can take a few days before you see the result in your account.

The bank or company you’re using to set up your merchant account likely has hardware or software you’ll need to use to accept payments. In addition to fees for equipment or setup, there will be transaction fees and maybe monthly charges to contend with.

You’ll usually enter into a contract for a merchant account for one to three years with specific terms. While a merchant account is necessary for accepting card payments, be sure to weigh all these fees before signing on the dotted line. 

Step 2. Find the Ideal Bank

With a good idea of which business bank account types your company needs to operate, it’s time to hunt for the perfect bank. Consider the following factors when searching so you don’t end up paying too much or find yourself without the features you really need.

Fees

Banks have staff to pay and lights to keep on, so they have to make money somehow. For businesses, this often means monthly service fees or charges for using certain services.

It’s pretty common to find banks charging maintenance fees to keep accounts open. The best options provide the means to waive these charges through specific criteria. Some have no way to avoid these fees, so be sure to investigate. Online banks like Axos and Lili have free business banking accounts without any monthly fees at all. 

Fees pop up in other areas as well. In-network ATMs are free to use, but expect to pay for out-of-network machines. Since online banks don’t have physical locations, they often charge for cash deposits through an ATM.

Most banks charge for transactions and cash deposits beyond a listed amount each month. You’ll likely pay a flat rate for wire transfers into and out of your business.

Required Minimums

Banks typically require a minimum balance to waive those monthly service charges mentioned above. Make sure this amount is well within your company’s capability while keeping in mind your regular business expenses.

Balances can also set the stage for the interest rate on your checking or savings account. Generally speaking, the more you have, the higher your rate can be. Some banks do have a flat rate you can’t do anything about.

There may be an initial deposit requirement to create your account in the first place. This amount typically runs higher than any minimum balance needed for maintenance to ensure you won’t go under.

Interest Rates

If you have funds to spare, storing them in a savings account or interest-bearing checking puts some extra money into your company’s pocket each month.

These accounts are known to offer interest rates simply for setting money aside. It’s an even bigger win if this money goes toward a big purchase or upcoming expense and won’t be used for business operations.

With the national average interest rate at 0.23%, anything around this number or higher should taste pretty sweet.

Online Banking

Even before the rise of online banking, many traditional institutions started turning to online banking for the sake of convenience. Not only does an online presence allow a bank to attract members from across the country, it allows businesses to use financial services from anywhere with an internet connection.

Choosing a bank with a top-tier mobile banking app like Capital One or Chase can make life a whole lot easier. No longer do you have to drive to a location and wait in a queue to render services.

The best mobile banking apps allow you to perform transactions, monitor accounts, and set alerts to inform you when money moves around. You can even deposit checks with your phone’s camera and find the nearest in-network ATM with a tap.

Business Services

Business bank accounts come with additional services you can use to help your company grow. Tools for accounting and payroll are often available, and institutions like Bank of America offer rewards for doing business with them. Make a list of what your business needs and pursue the banks with those services.

Some banks specialize in a particular field. For instance, Novo is an excellent option if most of your sales come from online sources. The business banking platform integrates with popular e-commerce sites like Shopify and Etsy, making sales easier than ever. 

Step 3: Gather Your Documentation

After deciding on a bank, you’ll need to round up your business paperwork. Financial institutions may differ on what they’re looking for, but you should be in good shape if you have the following:

Articles of Organization: Your articles of organization reveals your company’s structure and purpose. In some states, this document is known as a Certificate of Formation or a Certificate of Organization.

Employer Identification Number (EIN): As an LLC, requesting an EIN from the IRS is always a good idea. You’ll need one if you have more than one employee or you plan to hire people somewhere down the line. Single-employee LLCs can get by with a social security number, but this muddies the water between personal and business. You can usually get an EIN online quickly through the IRS, but plan for delays just in case.

Operating Agreement: An operating agreement outlines how your company functions financially and who can sign off on your behalf. Banks will want to know who they can do business with from your company and who doesn’t have the power to make decisions.

Photo Identification: Have two forms of identification ready when you go to create your account. One of these will need to be a photo ID (driver’s license or passport), whereas the other can be a bill, voter registration card, or credit card.

Business License: Your business license will come from the state once you’re an officially registered business. It shows the bank you are a legitimate entity and the state you can operate out of.

Step 4: Sign Up

With documents in hand, it’s time to make your business bank account a reality. If the bank you chose has a branch nearby, stopping in can be a quick and painless experience.

A banker will sift through your paperwork and ensure you’ve brought everything you need. While the documents listed above should be enough, researching in advance can save you from making an additional trip if you forget something.

Some banks can create an account for you on the spot, while others may take a few days to process everything. You’ll need to have all the members of your LLC present at this point to avoid any snags.

Alternatively, many financial institutions allow you to sign up for their services online. The process can vary immensely from bank to bank.

Fintechs like Lili boast its signup takes a few minutes from start to finish, with nothing more than a cursory view of your paperwork. Others require careful scanning and submission of documents through an online portal for review.

Check with your preferred bank before you go down this route, as it can just as easily save time as add several headaches when things don’t do exactly right.

Does My LLC Need a Business Bank Account?

By law, LLCs are not required to have a business bank account to operate. Still, every LLC should have one for the many benefits they provide.

Protection

LLCs offer limited liability protection, meaning your personal assets are typically safe in the event a lawsuit targets your business. If you don’t use a business bank account, there may be no way for the court to tell where personal ends and company finances begin.

In effect, you’re risking your personal assets by not having a separate account specifically for your business. Opening your business account with an EIN instead of a social security number helps protect you from cyberattacks that can sell your identity on the dark web.

Transfers

For the most part, it’s quite a challenge to move money around in your business without a business bank account. These accounts allow for all sorts of transfers, from wires to direct deposits and sending money from one account to the other.

Many offer a number of free deposits and withdrawals each month without you having to pay. Without a business bank account, it’s unlikely that you’ll be able to accept credit or debit card transactions at all.

Tracking

There’s no better way to track your business funds than having all your transactions take place from a single location. At a glance, you can see your costs and revenue each month while tallying exactly where those big expenses go.

Knowing your bottlenecks and what affects your bottom line can help you build a better financial structure. It also gives a sense of how your overall business is doing and areas you can improve.

Taxes

With personal funds out of the picture, tax time becomes much more straightforward. A bird’s eye view of all your debits and credits helps you quickly identify what you owe when the IRS comes knocking.

Having thorough documentation also helps you pick out deductions you might otherwise miss. Clarity on your end may also reduce the likelihood of an audit.

Credibility

Setting up an actual business bank account helps you look more favorable in the eyes of potential clients or vendors. Checks and payments coming from a bank account with your business name appeal to the masses. They’re much more likely to jump on board with a company series enough to have a business account of its own.

Many banks will want to build credibility with you before offering tools like business credit cards or lending options. Starting early puts you in a prime position to get approved when you actually need these services.

Bottom Line on How to Open a Business Bank Account for an LLC

Opening a business bank account for your LLC starts with careful consideration of the accounts you’ll need. From there, you’ll want to choose a bank offering features to grow your company with fees and balance requirements you can safely manage. Finally, you just need to gather your formation documents and sign up either in person or online.

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.