Everything You Might Need To Open A Business Bank Account
Find out what kind of documents, licenses, and identification are required when opening a business checking account.
It’s time to open a business bank account. Are you ready? What do you need to make that happen, and what’s the best way to apply for business banking services? Does your small business even qualify for business banking?
Relax. We’ve got you covered! This post will let you know if it’s time to start using a business bank account for your small business or side venture. And if the answer is yes (Hint: The answer is almost always yes!), we’ll help you get prepared by showing you what is needed to open a business bank account and what steps you need to take.
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Checklist: Commonly Required Info & Documents
Opening a business bank account is not complicated, although you’ll need to gather a bit more information than you would need to open a personal account. Here’s a quick checklist of what is needed to open a business bank account:
- Employer Identification Number (EIN)
- Business Formation, Partnership, Or Incorporation Documentation
- Business License
- Government-Issued Identification
What You Need To Open A Business Bank Account
When you’re ready to apply for a business banking account, you may need to put your plans on hold while you work to meet some of the requirements. If you don’t have the following items already, start working now to get everything that is needed to open a business bank account.
Let’s go over the items one by one:
For starters, the bank will need to verify the business owner’s identity, just as when you open a personal account. Your driver’s license or passport will do the trick.
Employer Identification Number
An Employee Identification Number, or EIN, is also known as a business tax ID number. Whatever you call it, it’s a unique nine-digit number that acts for a business much like a Social Security number does for a person. The IRS requires most businesses to use an EIN for tax purposes. The only exception is if your business is a sole proprietorship or, in some cases, an LLC with no employees. In that case, you may be able to use your own Social Security number.
However, you’ll definitely want an EIN if you intend to build a business credit profile, so you can apply eventually for a business loan, credit card, or line of credit. It’s free to apply for an EIN, and easy.
If you haven’t already applied for yours, go to the small business resources on the IRS.gov website to apply now. You’ll receive your free EIN after you complete the form and the IRS validates your information.
How is your business structured? If it’s just you, and no employees, you may be operating as a sole proprietorship. In that case, you probably don’t have any official business documentation, though you may have a business plan.
If you formed or are running your business as a partnership, you and your partner should have a formal written agreement about how you’ll run the business together and divide the profits.
You may have taken your business organization to the next level, and incorporated. That means your business is formally a distinct legal entity, separate from its owners. Your business can enter contracts, loan and borrow money, sue and be sued, own assets, and more. This type of business organization is created under the laws of individual states.
Not all businesses are corporations or partnerships. If yours is, be prepared to show the paperwork, such as articles of incorporation, that explains how your business is structured.
Although it’s very common for entrepreneurs to start up a business on a shoestring without a license, it’s technically illegal to do so. Before you conduct business within a city, county, or state, you are legally required to obtain a business permit or license to do so. The government uses business licenses to monitor taxes and to hold businesses accountable for health and safety regulations.
There are many licensing options, and they vary from state to state and among different types of businesses. And your business may require more than one. Expect to pay a fee when you apply for a license, and when you renew it. The fee you pay will depend on your location, type of business, and business size.
If you’re not sure what type of business license you’ll need, start at your local level. Research your city’s licensing requirements, and check out your county’s requirements, too. It may take a few weeks for your license to be official. So if you’re planning to start a business bank account, apply for your business license right away.
There are a couple of other things you might want to have handy when you go to open a business account:
- DBA: If your business is operating under anything other than its official name, bring proof of that. It’s called a certificate of assumed name or DBA (those letters stand for Doing Business As).
- Proof Of Monthly Revenue: If you’re planning to apply for merchant services that allow you to process debit and credit card payments through your business bank account, be prepared to show proof of your monthly credit card revenue.
Amanda Martinez, small business banking regional sales manager for US Bank in Portland, Oregon, says there are a couple more good-to-have pieces of information you should be prepared to share with your banker.
“Business owners may want to also consider adding who they want to be an authorized signer for their accounts, such as a spouse,” she said. “They should also be ready to talk about the plans for their business, how they want to utilize a banking relationship, and most importantly how a bank can help their business grow.
“Bankers today are eager to get to know what drives business owners to pursue their passion and how we can help them realize their dreams,” she added.
How To Find The Right Bank Account For Your Business
Once you’ve decided the time is right to start a business bank account, your next challenge is deciding where to go to start one. You have many options, such as:
- The bank where you have your personal accounts
- An online bank
- A local credit union
Before you make an appointment or complete an online application, know what your business needs from its bank. It’s a good idea to make sure you’re familiar with the key differences between personal banking and business banking services. Once you know what to look for, start talking to a couple of your top choices.
“Go online or call to schedule an appointment,” US Bank’s Martinez said. “The first conversation can be just that. Share your passion, where you are now, where you want to go next, and how you envision a bank helping you grow your gig or side hustle into a full-fledged business.”
Take your time evaluating your top choices. Compare rates and available services, even ones like a line of credit, for example, that you may not need right now. Your goal should be finding a business partner that can stand with you, helping your business now and as you grow and succeed.