How to Open a Business Bank Account

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Every startup business needs a business bank account. (Where else will you put all the profits?) But with different types of accounts and banks to choose from, how do you select and open a business bank account? Read on to find out how to pick the best account for your needs and what you'll need to open one.

What Do You Need to Open a Business Bank Account?

Different banks may require different documents to open a business bank account, so check with any bank you're considering before visiting. In most cases, you'll need the following:

  • A Tax Identification Number (TIN): Sole proprietors can use their Social Security number as a TIN. If you have employees or own a corporation or partnership, you'll need to apply for an Employer Identification Number (EIN). You can apply for an EIN online at the IRS website.
  • Personal information: Bring a government-issued photo ID such as a passport or driver's license, and be prepared to provide personal information such as your name, address and date of birth.
  • Business license: Bring a copy of your business license.
  • Assumed name certificate: If you operate as a DBA ("doing business as") and have filed a fictitious business name with your state's secretary of state, bring your certificate.
  • Business organization documents: Provide the documents you filed to form your legal business entity. Depending on your business, this might be articles of incorporation, articles of organization, operating agreement, corporate bylaws or partnership agreement.
  • Estimated monthly credit card sales: This may be needed to open a merchant services account, which allows you to accept card payments.
  • A deposit: If an initial deposit is needed to open your account, verify the minimum amount required ahead of time.

Types of Business Bank Accounts

There are three types of business bank accounts: checking, savings and merchant services accounts.

  1. Business checking account: A business checking account works like a personal checking account, with a few key differences. For example, business checking accounts typically have higher minimum deposit requirements to avoid fees. They may also have features personal accounts don't, such as free wire transfers, scanners you can use to deposit checks in bulk, or integration with business accounting software.
  2. Business savings account: As your business grows, a business savings account helps you set aside funds you don't need immediately, such as money for taxes, while earning interest.
  3. Merchant services account: This type of account is used to accept credit and debit card payments from customers, either online or in person.
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What to Look for in a Business Bank Account

The business bank account you choose can make a big difference to your finances, so carefully compare your options before making a decision. Consider the following features:

  • Fees: Checking and savings accounts typically charge a monthly fee, which is often waived if you keep a certain amount of money in your account or spend a certain amount on a bank-issued credit card. Other fees may include cash deposit fees, wire transfer fees, transaction fees, transfer fees, insufficient funds or overdraft fees, and fees for using the ATM or for visiting the teller. Clarify all the fees you may have to pay.
  • Minimum balance requirements: Some business bank accounts have high minimum balance requirements. To avoid being charged a service fee, choose an account with a minimum balance you can easily sustain.
  • Interest rates: Business savings accounts and some business checking accounts earn interest on your balance. Depending on your average balance, a higher interest rate can make a difference.
  • Check and cash deposits: If you plan to make lots of check deposits, choose a bank that streamlines the process. Some banks provide scanners you can use to quickly deposit large batches of checks remotely from your business. Ask if there are limits on the number of cash deposits you can make each month without a fee.
  • Limits on withdrawals: Savings accounts generally limit the withdrawals you can make per month before being charged. This can get costly if you frequently need to transfer money from one account to another.
  • Convenient branch and ATM locations: If you need to visit the bank frequently, you'll want one with plenty of convenient locations and a large network of ATMs you can use without a fee.
  • Software integrations: Does the bank's bookkeeping software work with the financial applications you use? A business bank account that integrates with your business's accounting, payroll or tax preparation software greatly simplifies financial management.
  • Online features and services: You probably do most of your personal banking online—why should your business banking be any different? Find out what online and mobile banking features the bank offers.
  • Perks: Some banks offer perks such as access to business specialists or cash bonuses for depositing a certain amount when you open an account. Others offer money management tools, such as Bank of America's free cash flow dashboard, which connects to other business apps, like Expensify, to better manage cash flow.

When choosing a merchant services account, ask about these fees:

  • Discount rate and transaction fee: Banks charge a percentage of each transaction (the discount rate) as well as a flat per-transaction fee for processing card payments.
  • Setup and cancellation fees: There's generally a setup fee to open your account and a cancellation fee if you close the account before your contract ends.
  • Monthly minimum processing fee: If you don't process a certain amount of payment card sales in a month, you may face a fee.
  • PCI compliance fee: This is the cost for compliance with industry payment security standards.
  • Chargeback fees: If a customer gets a refund for a transaction, you may have to pay this fee.
  • Statement fee: Some banks charge statement fees to produce your monthly statement.
  • Address Verification Service (AVS) fees: Fees for verifying that a card user's address matches the address on file with the card.

The Federal Deposit Insurance Corporation (FDIC) insures bank accounts up to $250,000 per account per entity. If you need to keep more than that in any account, you should open accounts at multiple banks to ensure your money is protected.

No matter what type of account you're opening, choose a bank that can accommodate your business as it grows. Evaluate the business financing options the bank offers, such as business credit cards, business lines of credit and business loans. If you ever need to borrow money, you may have an edge at the bank where you already do business.

The Bottom Line

Before making your final decision about a business bank account, think about your banking needs and plans for your business. Choosing a bank that can grow with you will help keep your business in good financial health.

Another way to monitor your business's financial health is by keeping an eye on your business credit. You can get a free business credit report at Experian. Opening a bank account for your business is foundational to building your business credit history and achieving a good business credit score, which can make it easier to access business financing in the future.