The Business Account: How to Open One

Why should you open a business account? You must open a business bank account to accept credit card payments for your business or services. What other things can’t you do with a personal banking account? Mostly, you can’t accept credit card payments. You also want to separate your personal and business accounts to ensure all records are clear. Pay careful attention to the terms of a business bank account. They may wish to have a large opening balance and want you to keep it at a high level.

Why Do I Need to Open a Business Bank Account?

The short answer is “to do business,” but that’s elliptical. The first reason is to separate your personal finances from your business finances. For instance, if you did business with your personal checking account, your personal expenses when registered with your business expenses would be confused.

Anybody who looked at your books would need clarification. You want to ensure your business records look as transparent as possible for tax and other purposes.

A business amounts to more than just income and expenses. Within an industry, you must organize your business to produce and bring a product or service to market. The effort may require several things you need to pay for, and selling stuff might be equally complicated. It’s best to have a business account to keep track of it all, and you want it separate from the records of your personal account.

How Do I Open a Bank Account for My Business?

The Small Business Administration offers information about starting a business, and they can advise you about opening a business bank account. Among other things, they suggest you open a business account with enough documents.

Business bank accounts may only cover some of your needs. SBA suggests you open a merchant account to accept credit and debit card payments.

At a bare minimum, depending on the bank, you can open a business bank account with your driver’s license or passport, a business license, and an ownership agreement. You need only your ID and a business license if it’s a sole proprietorship.

Documents Needed

When you first open a business, there may only be a negligible response to your product or service so you won’t accept money immediately. It’s not like opening a business bank account is the first item on your list when starting a business. However, opening a business account is essential when money exchange kicks in.

SBA advises you to provide the bank with your Employer Identification Number(EIN). While this is advisable, banks will also accept your social security number if the business is a sole proprietorship and you’re the sole employee. SBA recommends bringing to the bank you’re opening the account in:

• EIN Number
• Business formation documents
• Ownership agreements
• Business licenses

Business Formation Documents

Business formation documents include a registered business name, trademarks for slogans and logos, Federal and State EIN, Insurance, and employee documents. This is not an exclusive list. Check if you plan to apply for more information. Check out other businesses for examples.

Ownership Agreements

Firstly, Ownership agreements involve the owners, whether the two partners in an LLC or a collection of shareholders in a corporation. Ownership agreements govern the rights of the people forming relationships in the business and the business transitions that occur.

When you open a business account, these ownership agreements* should be presented to the bank. Ownership transactions involve partners, invested family members, employees with stock agreements, and others.

*Digression About Ownership Agreements

Next, when you enter partnerships and LLCs, the agreements between the parties involved should be documented and presented to the bank when you open a business account. With sole proprietorship, you don’t have any agreements with anybody, so ownership agreement documents are unnecessary. If you have a silent partner providing capital to your sole proprietorship, you need to register the business as an LLC.

One of the fundamental reasons to have an ownership agreement is to spell out your liability and protect your personal assets. For some people, this is a solid incentive to form an LLC rather than a sole proprietorship because, legally, there’s no daylight between personal and business responsibilities in a sole proprietorship.

Ultimately, this ownership agreement should be presented to the bank with other documents to open a business account.

Business Licenses

Usually, business Licenses are a matter of city, state, or county administration, and you should contact local government by phone and inquire about licensing requirements for the business you are opening.

After you apply for the necessary licenses, you will have the paper copies sent to you, and you should include them in your documents when opening a bank business account. Check out Legal Zoom for license particulars.

How Much Does it Cost to Open a Business Account?

Ordinarily, you don’t need much money to open an account, but you should ask your banker beforehand. While some banks open an account for free, others open it with a $25 balance. l

Can I Open a Bank Account Only with an Employer Identification Number (EIN)?

In some instances, yes. However, getting your business’s documentation before opening an account is more straightforward. For example, if the name you want to register your company under is already used by someone else, you’ll have to find another name. The original name on your business bank account must be changed. If you don’t register the business’s name, you’ll have to use your personal name for the company.

Can I Open a Business Account with Only My Personal Name?

Many sole proprietor businesses run under the proprietor’s personal name. Rather than register a business name, you write your own name. This is called a DBA or Doing Business Alone certificate.

A DBA document is interchangeable with a registered business name certificate. You file it with the same government organizations you file a business name, usually local, state, or county. They will send you a DBA certificate. You may have to pay a filing fee.

How Long Does it Take a Bank to Open My Business Account?

Finally, If you provide all the documents the bank needs, they will often open them the same day you apply. How much information they need to open an account varies from bank to bank, so it may take longer in some banks.

If you’re in a hurry, experts suggest you open an online business account. Online banks may require only a few pieces of documentation to open a business account. An online bank may be the fastest place to apply for a business account.

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