How to open a business bank account

You’ll need a business bank account if you plan to:

• Register your business as a limited liability company (LLC) or corporation
• Set up a merchant account to accept credit and debit cards and other forms of electronic payments

Business bank accounts offer many benefits, including:

• The ability to keep business and personal finances separate. Separate finances makes it easier to organize your records, deduct relevant expenses, and prepare both sets of tax filings every year.

• Improved credibility and legitimacy. Many suppliers, vendors, and corporate partners will only work with legitimate businesses that can provide proof of tax ID number, insurance, and a business bank account, among other things. Having a business bank account demonstrates you’re a serious player who plans on being around long-term.

• Easier access to credit. If you want to take out a business loan or apply for a corporate credit card, you’ll likely need a separate bank account tied directly to your company.

It’s worth noting that all of these benefits apply to nonprofit organizations, too. Whether you are opening as a charity or church, you will benefit from greater legitimacy, improved access to credit, and simplified accounting and tax prep once you open a business bank account.

So, how do you get started? What documents are required to open a business bank account?

1. Choose a reputable banking partner

Prior to opening your account, decide which financial institution you want to work with. There are many factors that go into choosing the right banking partner for your needs. Here are some of the most important ones to keep in mind:

• How are its fees structured? (We’ll cover this below.)

• Does it have the resources to support your needs today, tomorrow, and five years into the future?

• How available is customer support? Credit unions and small local banks thrive on personalized attention. Yet, they aren’t always reachable outside normal business hours.

• Does the bank have local branches? Or are they an online-only institution?

The larger the bank, the more likely it will be able to tick the above boxes; but, be sure to check with your personal bank first. As a returning customer, it may offer you certain concessions to win your business’s business.

2. Decide what type of business bank account you need 

Once you’ve selected your financial institution, consider what type of business bank account you need. Most businesses require at least a checking account to get started. If you have a lot of cash on hand, it may make sense to also open a savings account or a business money market account.

Start lean and only choose those products and services that you truly need. This approach helps to keep costs to a minimum while still providing the infrastructure and support required to succeed. However, you also want to pick an account type that can grow with your business over time.

3. Make sure you understand the fees

Banking isn’t free. There may be introductory offers and special deals at the time you open your account, but keep in mind that this fee structure may come to an end, and you’ll have to consider how these new or additional fees affect your bottom line.

Below are just some of the more common fees you can expect to pay once you open a business bank account:

• Monthly fees to maintain your account

• Minimum balance fees for when your bank account is too low

• Nonsufficient funds or overdraft fees if you spend more than what’s available in your account

• Deposit limit fees for putting cash into the bank at regular intervals

• Wire transfer and ATM fees – some of which you can avoid by staying in-network

• Transaction fees whenever you use a bank-issued credit card for business purchases

• Early termination fees if you open a business bank account and break your contract

Some of these fees may be negotiable, and sometimes avoidable. It pays to shop around for the best possible deal. Remove what you don’t need, negotiate what you can, and try to stay as lean as possible.

4. Get your paperwork in order

Every bank has a unique onboarding process, so it’s best practice to check with your financial institution first to determine what documents are required to open a business bank account. Below are some of the most common credentials financial institutions require:

• Your employer identification number (EIN). If you operate a partnership or sole proprietorship, you’ll need to supply your Social Security number instead.

• Ownership agreements, articles of incorporation, business licenses, and/or doing business as (DBA) paperwork. If you run a nonprofit, you’ll need to bring in a 501(C) to show your tax-exempt status.

• Tax filings, sales reports, and any other financial records that might allow banks to better understand the health of your business. If you’re a startup, you may not have this information at the moment. Check with your bank to see what you can provide alternatively.

5. Open a business bank account

The final step is actually opening a business bank account. The exact process varies from institution to institution. Many banks now offer online applications, which makes getting started fairly straightforward.

Depending on your requirements, however, you may need to visit a branch in-person to open a business bank account that meets your needs.

Do you need a merchant account?

Once you’ve established a business bank account, you can move on to applying for a merchant account. This will allow you to accept credit and debit cards.

If you’re not sure how to set up payment processing, we’re here to help. At Clover, we specialize in PCI-compliant payment processing and POS solutions that allow your customers to buy from you using whatever payment methods they choose – quickly, easily, and more securely.

To learn more, schedule a free consultation with our merchant services team today.

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.