How To Open A Business Bank Account In 2023

Opening a business bank account can save you time and reduce your personal legal liability as a small business owner. And if you’re wondering how to open a business bank account, don’t worry. It’s easy.

Follow our step-by-step guidelines, and you can be sure you’ll choose the best bank account for your business.

Video: How To Open A Business Bank Account In 2023

Opening a business bank account may seem intimidating, but it doesn’t have to be. Check out our video below for a crash course on everything you need to know to open a business bank account!

Do You Need A Business Bank Account?

While it’s possible to use a personal checking account to run your small business, a business bank account is different from a personal account in several important ways. Separating your business and personal funds by opening a business bank account actually protects you financially.

Why? Well, for starters, should your business ever run into any legal trouble, like being sued by a customer or supplier, you’ll definitely want clarity to protect your personal assets.

Or what if you’re audited? You definitely don’t want the IRS to note a history of mingling personal and business finances. In fact, it may be worth your time to talk to a professional accountant to ensure you separate your funds completely and correctly.

In addition to keeping detailed records of your investments in your business, your business income, and your expenses, you may want to start using a separate credit card for as many expenses as possible. Even if you’re not ready to apply for and use a business credit card, you can safely use a personal credit card for business expenses as long as you follow some guidelines, such as using the card only for legitimate business expenses and paying the balance on time.

The 5 Types Of Business Bank Accounts

Before you rush to open a business bank account, be sure you understand the different types of accounts available. Click on each section to learn more, or check out our summary in the table below.

Business Bank Account Types At A Glance

How Much Does A Business Bank Account Cost?

The cost of a business bank account varies. Many of the available options come with no fees whatsoever. Others charge a range of fees, including a monthly account fee, ATM fees, a fee for dropping below a minimum balance, cash deposit fees, transaction fees, and more.

Even if they advertise “no fees” on their online landing page, we suggest you look up a bank’s fee structure and read any footnotes and fine print you find online. Additionally, it’s smart to check out at least a few different banking options and see how their fees for business services compare.

What You Need To Open A Business Bank Account

Opening a business bank account is slightly more complicated than opening a personal account, but not by much. In addition to proof of your address and identity, you’ll need to provide a little information about your business.

The documents required to open a business bank account depend on how your business is structured. For example, more complicated businesses, such as corporations, need more documentation than a sole proprietorship.

The following is a list of common documentation every business owner should be prepared to provide when opening a business bank account:

• Business name and address
• Personal information (date of birth, government-issued identification, and Social Security number) for everyone listed on the application
• Business tax ID number (EIN if available or Social Security number)
• Business License
• Doing Business As (DBA) documentation if the business operates under a different name

Opening A Business Bank Account With Bad Credit

Can you open a business bank account if you have a bad personal credit rating? Yes!

A bad personal credit score should not affect your plans to open a business bank account. Banks do not typically check an applicant’s credit score when opening a business bank account. However, your credit history will probably be checked if you apply for a business loan, business credit card, merchant services, or a business line of credit with your bank.

How To Open A Business Bank Account In 6 Steps

Choosing a business bank is an important decision. Follow these steps to make the right choice!

1) Evaluate Your Business Banking Needs

When it comes to business banking, some perks and functions are not optional, such as the ability to make deposits, pay bills, and receive good customer service. But do you really need support for wire transfers, a point of sale (POS) system, check-writing services, unlimited balance transfers and transactions, and access to a line of credit?

All those things can be valuable business services you want your bank to offer. But if you don’t need those tools at this point in your business development, you shouldn’t pay higher fees to a bank that offers them right now.

2) Consider Your Potential Business Growth

At the same time, don’t box yourself in by choosing a bank that fits you now but will limit your options later. That means looking at how a bank fits your needs not just now but also as you grow.

Transaction limits are one example. If your bank allows a very limited number of deposits and transfers each month, you may end up paying a lot of costly fees for excess transactions later. Savings options are another example. You might not have much cash to stash now, but will you be happy later, when your business and your savings have grown?

There’s no one right answer to that question, and there’s no one best bank for every small business. Being aware of your options is the best way to proceed.

3) Shop Around For The Right Business Bank Account

You might be tempted to choose the bank you already use for your personal accounts. That might be the easiest move, but is it the best?

Business and personal banking are very different, and oftentimes business accounts charge higher fees, including penalties for excessive transactions or balances that dip below minimums.

That’s not to say your current bank is necessarily a bad choice. It’s actually a good idea to talk to someone there about the business banking services available to you. You can use what you learn as a benchmark when comparing other banks, making sure you choose whichever has the best fees and services for your needs.

4) Explore Online Banking Options

While you might think first of brick-and-mortar options for your business banking needs, you can find a number of reputable online banks too. And many of them offer the same business services you can find at an in-person bank near you. The only difference you may see is that you’ll apply online and do all your banking through your computer instead of at your local branch.

Do your research and compare the services, fees, and more from online banks to the other banks you’ve looked into. You may find that online banks offer a little more, including higher interest rates and more convenient access, with lower fees.

Remember that most online banks are as safe as any physical branch. Just make sure that the online bank you’re interested in advertises its accounts as FDIC-insured. If they don’t, that’s definitely not a good bank to choose.

5) Determine Opening Deposit Requirements

Each bank has its own requirements regarding how much money you’ll need for an initial deposit when you open your business bank account. Some banks allow you to open an account without adding any money at all right away, while others require a set amount. If an amount is required, it’s usually less than $100. Regardless, you’ll want to ask so that you can be prepared.

Also, ask about how you can make that opening deposit. Your business bank may allow you to deposit a check, make a cash deposit, or send money via wire or ACH. Whatever the amount and method, make sure they’ll work for you.

6) Start The Application Process

Whether you want an in-person visit or feel comfortable online, make sure you’ve got all your required documents together before you start the application process. If you don’t have a business license yet, you might need to wait until you have that.

Overall, you’ll probably find that applying for a business bank account is similar to opening a personal account.

Tips For Choosing A Business Bank Account

As important as it is to take advantage of business banking services, rather than using personal accounts to run your small business, it’s better to proceed carefully than to rush into a banking relationship that won’t serve you well in the long run.

Here are some practical strategies you can use to help ensure you make the right choice:

• Talk to other small business owners you know. Ask them what bank they use for their businesses, what they like about where they bank, and what they wish they had known when they started their accounts.
• Read the fine print. If you are looking online for business banking services, you’ll probably see that most prominently advertise “no fee” services. Be sure to look beyond the headlines, including a quick read-through of the fine print and the asterisks posted at the bottom of the page. You’ll learn about hidden fees and whether your accounts would be protected by FDIC insurance.
• Take your top choice for a test drive. Before committing to a bank, consider your experience as a potential customer. If you visited a branch in person, was it easy to get there? Did the staff make you feel welcome and answer all your questions? If you’re looking online, was the website easy to navigate? If there’s a mobile app, is it well-reviewed on the app store, or are most of the comments posted complaining about how hard it is to use the app?
• Make sure the bank you choose offers everything you need. Choosing a business bank account involves many factors and small decisions. So many, in fact, that it can feel overwhelming. Let’s narrow down some key factors to keep you from feeling paralyzed by too many choices. Rank them in order of importance, or simply label them as Necessary, Nice, or Not Important. Then use this list to make sure the bank you choose will meet your needs.

Here are the elements many business bank accounts commonly include:

• FDIC insurance
• Checking account
• Savings options
• High APY
• ATM access
• Bill payment
• Debit card
• Virtual cards
• Mobile check deposit
• Payment apps (such as CashApp, Zelle, and Venmo)
• Digital wallet
• Branch access
• Telephone support
• No monthly fees or fees that can easily be waived by meeting minimum balance requirements
• No or low account balance requirements
• Unlimited free transactions
• Wire transfers
• No-fee ACH transfers
• Foreign transaction fees
• Cash deposits
• Overdraft protection
• Linked credit cards
• Loans and lines of credit
• SBA loans
• Merchant services
• Rewards
• Integrations
• Promotional offers from partners

The Bottom Line On How To Choose A Business Bank Account

Opening a business bank account is not just a smart move; it’s also necessary for any legitimate business. If you haven’t already opened a business bank account, it’s definitely time to take that step.

Because there are so many options, choosing a bank can feel overwhelming. To help you, we’ve highlighted some of the best business bank accounts we’ve encountered during our research on the topic. If you’re working as a freelancer or independent contractor, you may find a great match on our list of the best bank accounts for self-employed workers.

Compare your options, then start your application. This is one business decision you won’t regret making.

FAQs On How To Open A Business Bank Account