How to Open a Business Bank Account

When you become a small business owner, it’s necessary to open a business bank account before you start accepting and spending money.

According to the U.S. Small Business Association (SBA), a business bank account helps your company stay legally compliant and protected.[1] With a professional account, you can ensure that your business and personal finances remain separate, which protects you, your customers, and your employees.

However, opening a business bank account isn’t as simple as opening a personal checking account. Here is everything you need to know.

Key Takeaways

• Business bank accounts offer important benefits to a small business, including liability protection, customer purchase protection, and improved company image.

• Opening a business bank account requires providing personal information and specific business documents, depending on your entity type.

• Consider account features, fees, and perks when looking for the ideal business bank account.

Why Open a Business Bank Account?

Opening a business bank account for an LLC or corporation is essential for the professional operation of your business. While a business bank account works similarly to a personal bank account, there are significant differences. 

The following benefits of a business bank account can be invaluable to businesses at any stage.

• Liability protection: If your company is found liable during a legal dispute, a business bank account limits your personal exposure by separating your business finances from your personal assets.

• Purchase protection: Business bank accounts offering merchant services provide customer purchase protection to protect personal information.

• Business credit: Some business bank accounts offer merchant lines of credit or business credit cards. These resources can help build a credit history for your business and lead to future financial growth opportunities, such as access to capital.

• Accounting processes: Keeping all your business transactions in one merchant account makes bookkeeping processes, such as invoicing and expense tracking, easier during each statement cycle.

• Tax preparation: Many business checking accounts seamlessly integrate with business accounting software, allowing you to quickly categorize expenses, compute deductions, and create reports like cash flow and income statements.

• Company image: Operating with a business bank account shows customers and vendors that you are a legitimate company. 

Types of Business Bank Accounts

There are three main types of business bank accounts. You may require one or more of the following, depending on your needs. Each has unique features and benefits, varying depending on the financial institution.

Business Checking Account

A business checking account has similarities to a personal checking account. You can write checks, make deposits and withdrawals, do wire and ACH transfers, and use a debit card associated with the account. With a business checking account, you can also manage payroll and pay operational expenses, such as vendors.

Business checking account pros:

• Receive checks featuring your company name

• Integrate your account with major accounting software programs

• Earn monthly interest on your balance

• Access introductory or promotional benefits for new accounts

Business checking account cons:

Depending on the financial institution, one or more of the following fees may apply:

• Monthly maintenance fee

• Minimum balance fee

• Wire or ACH transfer fee

• Transaction fee for large deposits or for a high volume of transactions

• Early account termination fee

Business Savings Account

As their name suggests, business savings accounts provide a vehicle for saving money and earning interest. 

Most companies should open a savings account, as they offer higher interest rates than checking accounts. Additionally, having a savings account lets you separate monthly expenses from savings for better budgeting.

Business savings account pros:

• Earn interest depending on the current rate and the balance in your account

• Save money for major purchases

• Link business checking accounts to prevent possible overdraft fees

• Access an ideal location for emergency savings

Business savings account cons:

• May need a minimum balance to earn interest

• Interest rates are subject to change

• Withdrawal transaction limits may apply

• Monthly maintenance fees may apply

Merchant Services Account

Merchant services accounts allow your company to accept and process electronic payment card transactions. Such an account is necessary if you plan on accepting debit and credit card payments, and especially if you plan on selling online.

A merchant services account is linked to your business checking account. The funds you take in are verified by the financial provider before being deposited into your account.

Merchant services account pros:

• Accept most forms of electronic payment

• Verify customers’ ability to pay before purchase

• Protect sensitive customer information

Merchant services account cons:

• Transaction fees apply, which are generally between 1.5% to 3.5% but may be higher

• Setup, maintenance, chargeback, and statement fees often apply

• Payment processing delays generally range from one to three days but may be longer, depending on the payment processor

• Strong business credit may be required for account approval

What to Look for in a Small Business Bank Account

There’s much to consider when choosing the ideal small business bank account. Many business owners opt for the bank where they can get the most perks. However, when doing your research, keep the following in mind:

• FDIC insured: Check to see if the bank is FDIC insured, meaning the FDIC will protect your bank accounts against losses of up to $250,000 for principal and interest. 

• Monthly maintenance fee: Does the business checking account or merchant services account have a monthly service fee? If so, will the recurring charge fit your company budget?

• Transaction fees: Review the fees associated with the account, such as overdraft or ATM fees. While some fees are to be expected, multiple fees will only eat into company profits. 

• Transaction limits: Some business savings accounts are subject to a limit on the number of withdrawals per month; however, this may not work for your cash flow.

• Sign-on bonuses: Look for business bank accounts or business credit cards with sign-up bonuses. Note that there are usually requirements associated, such as maintaining a certain minimum balance for a specific time.

• Cash back: Some banks offer cash-back perks for business credit cards and other accounts.

• Bundled services: Depending on the bank, you might get a discount if you sign up for more than one type of account.

• Interest: Compare interest rates across different business checking accounts, but don’t forget to balance the potential savings against any fees.

• Online and mobile banking: Check that on-the-go banking features are available when researching account options.

• Physical branches: If visiting a brick-and-mortar bank is essential for your business activities, verify whether the bank offers in-person banking options.

3 Requirements to Open a Business Bank Account

Opening a business bank account can be simple if you know what to do and have the documents you need. Requirements vary by bank, but you will generally need most, if not all, of the following information and documents.

1. Personal Information

Opening a business bank account requires proof of identification. You will need a government-issued photo ID, such as a driver’s license, identification card, or passport. Some banks require two forms of ID.

You must also provide a phone number, email address, physical mailing address, date of birth, and social security number.

2. Business Information

To prove you are running a legitimate business, you will need to provide the bank with several pieces of information about your business.

An employer identification number (EIN) is essentially your business's social security number. This nine-digit number assigned by the IRS is required if your company was formed as a corporation, partnership, or limited liability company (LLC).[2]

You must also provide your business name, address, phone number, business entity type, company formation date, and industry. Depending on your business structure and the bank’s requirements, you may have to provide your ownership structure, number of employees, percent of ownership, and annual gross revenue.

3. Business Documentation

You will need to present business documents when opening an account. These vary by the business entity type.

• LLCs must present their business license, Articles of Organization, LLC Operating Agreement, and banking resolution.

• Corporations must present their business license, Articles of Incorporation, corporate bylaws, and banking resolution.

• Sole proprietorships must present their business license and banking resolution.

If your company name differs from your legal name, you must show the bank a DBA (doing business as) certificate.

If you have a business with multiple owners, you may also need to provide your partnership agreement, including the names of all your partners.

5 Best Business Bank Accounts for LLCs

Not all banks are created equal. Here are five of the best business bank accounts currently available. All the following banking options are FDIC-insured and offer valuable perks, such as low fees, sign-up bonuses, and helpful accounting software integrations.

1. Bank of America Business Advantage Fundamentals Banking

Bank of America offers a robust banking toolset to help you manage your small business. With a Business Advantage Fundamentals^TM Banking account, you gain access to an extensive ATM and branch network, cash flow monitoring, mobile banking, mobile check deposit, and more.

The monthly maintenance fee of $16 is waived if you maintain a $5,000 combined average monthly balance or spend at least $250 in new net purchases using your business debit card. Small business debit card holders can rest easy knowing Bank of America offers a $0 Liability Guarantee, meaning you’re not liable for any unauthorized transactions on your account.

New Business Advantage Banking accounts and eligible small business credit cards can earn a sign-up bonus of $100 to $500 with qualifying activities by depositing and maintaining certain balances within the first 30 days.

2. Chase Business Complete Checking

Chase Business Complete Checking accounts allow you to accept credit card payments from anywhere in the U.S. and receive same day, fee-free deposits. From their online and mobile apps, you can enter and manage card transactions, issue refunds, and more. 

This bank account also features unlimited debit card purchases and no ATM fees. The $15 monthly maintenance fee can be waived by meeting certain criteria each statement period. This includes maintaining a $2,000 minimum daily balance, making $2,000 in purchases on the Chase Ink^® Business Card, getting $2,000 in payments, linking a private Chase checking account, or providing qualifying proof of military status.

Chase Ink Business Unlimited^® card holders can earn unlimited 1.5% cash back on every business purchase.

3. BlueVine Business Checking

Bluevine offers a range of banking services for small business owners. The financial platform features an interest-bearing business checking account with no transaction limits, monthly maintenance fees, or minimum balance requirements.

Business checking accounts can earn 2.0% APY interest on balances up to and including $250,000 by meeting a specific monthly activity goal. The checking account also integrates with QuickBooks^® online to streamline accounting processes. 

Note that Bluevine does not have any physical branches. However, the company has partnered with banks across the U.S. to offer free ATM access.

4. Novo Business Checking

Novo is an online bank offering small business owners who run online businesses a variety of perks. The virtual platform is a good choice for e-commerce as it can integrate with third-party retail sales apps like Shopify and Stripe. 

Novo features no monthly service charges, hidden fees, or minimum balances. The platform offers the ability to accept ACH and check payments and create and send personalized invoices. If you wish to withdraw cash from your account, you can easily do so with your Novo debit card, and all ATM fees are reimbursed. 

There are no physical Novo bank locations.

5. U.S. Bank Silver Business Checking

U.S. Bank is a large nationwide bank that offers a checking solution for the small business owner. Their Silver Business Checking Package is designed for companies with limited monthly transaction activity, offering a variety of services to help save time and money.

The Silver Business Checking Package provides 125 free transactions per statement cycle and $2,500 of free cash deposits or 25 free cash transactions per statement cycle, whichever comes first. You will also receive a 50% discount on your first business check order.

The U.S. Bank checking account offers online and mobile banking with bill pay and remote check deposit. You can add merchant services to your account to accept credit card payments; however, acceptance is subject to credit approval, and other fees may apply.

FAQs

What is a business bank account?

A business bank account is opened under a business name and used solely for business transactions rather than personal finances. 

Should my LLC have its own bank account?

No law requires LLCs to have a separate business bank account; however, it’s essential to prove that your business and personal finances are separate in case of a lawsuit and liability. 

What do I need to open a business bank account?

You must be prepared to share personal and business information and present the required business documentation. If you own an LLC or corporation, you must also have an EIN.

How do I open a bank account with an EIN?

When you open a business bank account for an LLC or corporation, you must present your EIN, which acts as the social security number for your business. You do not need an EIN to open a business bank account as a sole proprietorship.

How much money do you need to open a business bank account?

The amount of money you need to open a business bank varies according to the financial institution. Some business checking accounts require no deposit, but most require at least $25. Business savings accounts usually require a larger deposit.

Can you open a business bank account with no money?

Depending on the financial institution, you can open a bank account with no money. However, some accounts require a deposit.

Can I use a normal bank account for my small business?

For most small businesses, it’s recommended to use a business bank account rather than a personal account to keep your finances separate.

Bibliography

1. Small Business Administration. “Open a Business Bank Account.” Accessed November 2, 2023.

2. Internal Revenue Service. “Do You Need an EIN?” Accessed November 2, 2023.