How To Open a Business Bank Account & What You Need

Gabrielle Sinacola | Jan 26, 2024

How To Open a Business Bank Account & What You Need

The most important aspect of running a successful business is the ability to buy and sell products or services — and you can’t do that without a business bank account.

A business bank account, which is intended to function differently from a personal bank account, keeps all of your financial affairs in order. Most small businesses will only need one business bank account to serve their financial needs. Here’s how to open a business bank account.

Why Do Business Owners Need a Business Bank Account?

Co-mingling personal and business finances isn’t a wise business decision, as it can be difficult to keep track of incoming and outgoing bills when you use a mixed-purpose account.

A separate business bank account will make it easy to streamline your business transactions and track business expenses. Your personal income and expenses are a private matter, and your business accountant doesn’t want the responsibility of sorting transactions of a personal nature from transactions related to your business. Misidentified transactions can lead to accounting errors, and it’s of the utmost importance that your business accounting is handled as accurately as possible.

Taylor Fike, Partner at Fike Advisors and Expert Contributor for Mosey, highlights that “While most errors are small and insignificant, the larger your company grows, the more impact errors will have. Business transaction errors can cost thousands or hundreds of thousands in fines, taxes, and penalties. Keeping good records is integral to running a successful business.”

How Can a Business Bank Account Benefit Your Business?

A business bank account benefits your business by making financial management simple. Banking tools and services designed to work for small businesses are optimized to work with business bank accounts. Using them with the correct account type can improve their accuracy and efficiency.

Financial institutions often offer special services, interest rates, and enhanced customer support for business accounts. You may be eligible for special financing on business loans through the institution where your business bank account is located, and it may be easier to secure a business credit card through the same institution.

Since business accounts are run by specialty advisors, you’re also likely to receive priority support if any issues arise with your banking account. Specialty support can prevent disruptions in your ability to conduct business.

You’ll also be afforded a greater daily maximum for purchases and withdrawals, which is vital for business transactions. Some financial institutions place a cap on how much someone can spend on a personal checking account each day. It’s not unusual for a business to make a single purchase order that significantly exceeds the daily maximum for a personal checking account.

What Are the Different Types of Business Bank Accounts?

There are three main types of business bank accounts. You’ll likely need, at the very least, a business checking account. A business savings account can be just as advantageous for businesses that need a safe place to store revenue. Some payment processing services will require your business to utilize a merchant services account, especially if you accept online payments.

Business Checking Account

A business checking account will allow you to order paper checks under the name of your business to pay vendors and professionals directly through your business. Most importantly, your business checking account will allow you to obtain a “company card” in the form of a business debit card for purchasing or ordering supplies.

Your business checking account will optimize the way you manage your cash flow and prevent personal funds from becoming intertwined with business funds.

Business Savings Account

Your business savings account will store your cash reserves, allowing them to accumulate interest for a rainy day. A business savings account is one of the safest ways to keep your money working for you.

A business savings account can help you plan for growth or investments in the growth of your business. Best of all, there is no risk of a bad financial investment when you use a savings account to protect your reserves.

There may be perks to opening a business savings account at the same time you open a business checking account. Don’t be afraid to ask the representative at your financial institution for special offers like waived account fees or special interest rates when you open a new business account.

Merchant Services Account

A merchant services account gives a business the ability to accept credit card or debit card payments directly from a customer. You’re able to charge and process payments directly through your merchant services account from your point of sale device or online payment processing system. Your merchant services account will allow you to own and operate your own card-reading device.

What Do You Need To Open a Business Bank Account?

There are strict requirements for opening a business account. These requirements prevent individuals from opening up business accounts for personal use or for conducting business without proper licensing or tax identification. If you’ve already established your business, you should have everything you need to open a business bank account.

Employer Identification Number

Your employer identification number, or EIN, is your federal tax ID number. The IRS uses your EIN to track tax compliance. You can obtain an EIN by applying for one through the IRS website. There is no wait time. As soon as you submit the application with your information, you’ll immediately receive an automatically generated EIN that you can use the same day.

Your EIN should be on most tax-related documents for your business. You should also receive an EIN letter in the mail from the IRS. If you can’t find your EIN, you can call the IRS. They will be able to provide it for you.

Business License

Some states don’t require a general business license. If you have a professional license or a specialty license, you can use either document in its place. If your state doesn’t have business license requirements, your financial institution may not include this step as part of the process of opening a business bank account.

DBA (Doing Business As) or Trade Name

If the name you use to conduct business is different from the name of your company, you need to provide official documentation for your DBA or trade name. This is only the case if you want your checks and transactions to show up as the name that will be familiar to your customers. If you don’t mind your limited liability company name appearing as your business name, you can skip this step.

Formation Documents

Your official formation documents are among the most important documents a financial institution will need to review before allowing you to open a business bank account. These documents show as official proof that your business exists as a registered entity. Your partnership agreement, operating agreement, or articles of incorporation should satisfy this requirement.

If you are a sole proprietor, you may only need to provide your social security number. In a sole proprietorship, your social security number can act as an alternative to an EIN (employer identification number) or a tax ID number.

How Do You Open a Business Bank Account?

Every financial institution may have a slightly different procedure for opening a business bank account, especially if you’ve opted-in to special features or systems to enhance your ability to use your business banking account.

Every bank will ask you to provide the necessary documents to show proof that your business is registered and in good standing before opening an account. Some business bank accounts require you to make an initial deposit, which is usually a very small sum. Your first deposit may be as little as $25 if your financial institution requires you to make one. You may also be required to maintain a minimum balance or meet other balance requirements.

If you elect to open a business savings account at the same time, your minimum deposit requirement is likely to be substantially higher. Many financial institutions require a minimum deposit of somewhere around $1,000 for a business savings account. Your banking expert will inform you if there are requirements for savings account balances.

Add authorized users to your bank account if there’s more than one person (i.e. a co-owner) who needs to be able to access the account. You may request a separate debit card for this individual. Having multiple debit cards gives everyone the same amount of access, control, and responsibility over business finances. Your bank can issue cards and personal identification numbers for every authorized user.

Your bank may walk you through additional offerings, like a business line of credit. You may be able to secure a business credit card with a special interest rate. Ask your provider about things like overdraft protection and clarify monthly fees if you’ve opted into additional services.

You’ll also want to forward information to your accountant if you have a financial professional overseeing your bookkeeping or managing your taxes. Your accountant may need something called online banking “view only access” to allow them to see your business transactions without making changes to your account. Your bank can walk you through the process of granting appropriate access.

Once your business bank account is established, it’s important to link your account to any autopayments you’ve established for your business. Tether your account to points of sale where you accept or make payments on behalf of your business.

Stay Compliant With Mosey

There are many compliance issues surrounding business banking and accounting. It can be one of the most daunting things to keep track of as a small business owner. Let Mosey help.

Mosey is a compliance platform that helps businesses of all sizes stay organized. You can spend more time focusing on your day-to-day operations while Mosey’s compliance automations run in the background. Schedule a demo with Mosey to learn how we can make running your small business simple.

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