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Opening a Business Bank Account (Online and In-Person)

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Susan Guillory

Susan Guillory

Updated October 5, 2020
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business bank account
Part of running a business smoothly requires you to have a solid handle on your finances. Managing payments and expenses, filing taxes...it can all be complicated if you let it. One way to minimize your financial headaches is to open a separate business bank account.In this article, we’ll not only discuss opening a business bank account, but also help you understand the importance of having one and how you can get the most out of yours.

Reasons to Consider Having a Separate Business Bank Account

Some first-time entrepreneurs use their personal bank accounts to also manage business expenses. Here’s why that can be a bad idea.It makes accounting for your company challenging. If you’re using accounting software that automatically connects to your bank account, and if you have to constantly sift through Netflix charges and your kid’s orthodontist bill, that’s time that could be better spent running your business.Also, come tax time, it can be more difficult to determine which expenses were business-related and which were personal. Your business-related expenses could be a tax deduction, but you or your accountant will likely have a harder time extracting those from your personal checking account statements.Should you ever be audited by the IRS, you could spend hours trying to unknot the mess.Having a separate small business bank account simply helps to make managing your finances easier. You can keep track of regular expenses so you know what areas you’re spending the most on. You can also more easily look at your revenues to forecast future growth.Should you ever apply for a business loan online or at a physical bank, having a business bank account may be a requirement. Opening a business bank account before that time comes, could help streamline the loan application process in the future.

Can I Have More Than One Business Bank Account?

This is a common question, and while it is possible to open more than one business bank account, the question is: why do you want to?If you have more than one business, by all means: have separate business accounts for each if it makes sense for you. But for one business, one checking account should suffice. You may also decide to open a business savings account to earn interest and have money set aside for emergencies. But the more accounts you open, the more in fees you may pay.

Types of Business Accounts

As you consider opening a bank account for your business, it’s important to understand the options available to you. In addition to checking and savings accounts, business owners might consider using a business credit card or merchant services accounts. Here’s some more information on each of these account types: 
  • Business checking account. This type of account is generally used to help business owners manage their day-to-day finances. This is typically the first type of business account a new business owner gets. 
  • Business savings account. This type of account, as the name suggests, is better suited than most business checking accounts to help business owners save money. Savings accounts may have more restrictions than checking accounts, such as limits on the number of withdrawals each month. But, savings accounts generally accrue more interest than checking accounts.
  • Business credit card. These credit cards function similarly to personal credit cards, but are used for business expenses. They can offer small business owners access to a revolving line of credit, and many business credit cards come with rewards and perks. 
  • Merchant services accounts. This is a type of bank account, one that allows business owners to accept debit or credit card payments. 

Online or Off: Which is Right for Your Business?

There are different types of business bank accounts and places you can open them. You can go with a traditional bank, a credit union, or an online bank. With so many options, you likely have questions:Are credit unions better for business accounts? What is the benefit of an online business bank account? Is one type better than another for my business?All excellent questions, but the answers will depend on your needs. Let’s look at each option and its potential benefits and drawbacks.

Traditional Bank

Some businesses open a checking account at the bank they already have a personal relationship with for simplicity. You likely already know the reputation of the bank you use for your personal checking and savings, so wouldn’t it make sense to open a business checking or business savings account with the same bank?Not necessarily. It’s important to look at the benefits and features of a business checking account with your bank, as well as with others, to find the best fit. Some will charge a fee; others will waive the fee if you have other accounts with the bank or if you maintain a minimum balance. One of the benefits of opening a checking account with a traditional bank is that it may be physically convenient, particularly if you need to make regular cash deposits or other transactions in-person. If it’s a bank you have a relationship with, that may make it easier for you to apply for a loan or line of credit later.Also, with a traditional bank, you may be able to access a business banker in-person if you have questions or need assistance.On the other hand, be aware that traditional banks may limit the number of deposits or transactions you can make each month without incurring additional fees, which tend to be higher than with credit unions or online banks.

Credit Unions

Credit unions offer much of the same services and benefits as a traditional bank, though the perks may come outside of the checking account. Because credit unions are not-for-profit, they typically are able to offer lower rates on loans and other financial services than many banks or other lenders, as well as higher interest on savings accounts to members. Many find that customer service excels at smaller credit unions, and sometimes members are eligible for other benefits.Credit unions generally are local entities and operate just a few locations. While some credit unions participate in co-ops or partnerships with other credit unions to provide access to ATMs and some limited services, this could potentially be an issue for businesses.

Online Banks

Another option is opening an account with an online bank. These financial institutions don’t have a physical presence you can visit, but may offer benefits for businesses.Because they usually have lower overhead, they typically are able to pass those savings on to customers, and often offer lower interest rates on loans and higher rates on savings accounts. Online institutions may offer a variety in the types of accounts for business owners, including business money market accounts and small business loans online. Note that, traditional banks and credit unions may also offer these types of options to business owners as well. Online financial institutions may also offer other useful services such as payment processing, financial health monitoring, and invoicing services.The drawbacks tend to affect people who appreciate the traditional features of a bank or credit union: you may not have a personal relationship with a business banker, nor will you have access to bank-branded ATMs, though many online banks waive ATM fees you are charged by other banks. Online banking may be best for businesses that process payments online and rarely have need to visit a branch.

Step 1: Starting by Comparing Options

What is the best bank for a small business account? The one that best serves your company’s specific needs. As you start exploring options for your business checking account, keep in mind:
  • Whether you need to be able to make cash deposits
  • How many transactions per month you expect to make
  • Existing relationships with any banks
  • Whether you need to visit a branch
  • Your level of comfort banking online
  • The reputation of the bank
  • Any other business banking services you might need
  • Your expected average balance in the account

What Kind of Balance Do I Need to Maintain to Keep a Business Bank Account?

Typically there is no balance required to keep your small business bank account open, though some accounts require a minimum deposit to open the account. Additionally, some banks will waive the account fee if you maintain a minimum daily average balance. These minimums may be high for some small businesses, and incurring the fee may cause you to pay more than you budgeted for, so read the fine print to understand what you have to do to maintain the free status.

Which Banks Offer the Best Features?

Once you determine which type of bank you’re comfortable with (traditional, credit union, online), start looking at what each brand offers. For example, as of this writing: every Bank of America business banking account comes with cash flow insights and customizable account alerts, and qualified customers may be eligible for its Preferred Rewards for Business program. Wells Fargo small business banking account options range from a simple account with up to 50 monthly transactions to an Analyzed Business Checking account with more features for larger companies.Novo, an online bank, offers free checking and reimbursed ATM fees. Another online provider, Axos Bank, offers a wide range of checking and savings accounts, as well as money markets and merchant services. It all comes down to what you’re looking for.

What Other Financial Products Can I Get?

While you’re comparing your options, you might also explore some of the top business credit cards, loans, or lines of credit offered by  a variety of banks and lenders if you’re interested in having several business financial services in one place.

Step 2: Knowing the Requirements to Open an Account

Now that you’ve decided on the bank that offers the best features for your business bank account needs, you’re probably wondering what types of documents are required to open a business bank account. The specifics may vary from one bank to another, but in general, most banks, online and off, have the following business bank account requirements:
  • Organizational documents: If you’re a sole proprietorship, you’ll need to bring your Doing Business As form (also known as a Fictitious Business Name). If you run a corporation or LLC, you’ll be asked for your formation documents.
  • Photo identification
  • Employer identification number (EIN) or Social Security number for sole proprietors
  • Business license
You may also be asked what percentage of the company you own, as well as personal details like your address, phone number, and date of birth.

Do I Have to Be a Corporation or LLC?

You can open a business bank account with any business structure; the documentation you provide for your application will vary depending on what yours is.If you run a sole proprietorship, for example, you will be able to provide your Social Security number rather than an EIN, though if you run a partnership, LLC, or corporation, you’ll need that EIN, so be sure to apply for it before you go to open your bank account.

Why Would a Bank Reject my Application for a Business Bank Account?

It’s rare but it does happen: you apply for your checking account and receive notice that it was not approved. Why?Banks do a little investigating to see if you have a solid financial history. If you have any negative banking history, such as multiple bounced checks or insufficient funds fees, the bank reserves the right to not grant you an account. As another examp, if a bank discovers that you have a bad credit history or any instances of fraud, they could also deny your application.

Step 3: Setting Up an Appointment

Gather all of the required documents before your appointment with a banker, if you are going in person to open your account, and be sure to read through the bank’s website to make sure you’ve got everything it requires. Also bring your questions! Sitting down with a banker can be a great opportunity to understand the features of your account as well as get answers to anything you’re unsure of. What happens if you have one transaction over the limit? Are you automatically charged a fee? What kinds of loans might you qualify for, and will you be eligible for a discount the longer you are a customer?In addition to opening the account, consider ordering checks and debit cards for any authorized users you want to have access to your business checking account. Find out how long it will take before the debit card(s) and checks arrive so you can plan accordingly.Get the contact information of the banker you will be working with and ask the best way to communicate. Some may be able to answer easy questions via email, while others may ask you to make an appointment. 

Applying for Your Account Online

If you’ve opted for an online bank, you can typically complete your application quickly with just an internet connection. 

Do You Need a Personal Banker?

Opening an account at a credit union or traditional bank will likely give you an individual you can contact if you have questions or want to make changes. Sometimes there is a rotating group of bankers, so you may not get the same one each time.With online banking, you would call, email, or chat with a banker or customer service representative. The drawback is that you don’t have that personal relationship with one individual. But the question is: do you need it? Do you foresee your banking needs to be so great that you need a personal relationship with a banker? Online banks typically cut costs that they then pass on to you, and this is one way they do so.

Step 4: Keeping Your Accounts in Order

Once you’ve settled into using your new business bank account, you can connect it to your accounting software to more easily manage income and expenses. This can help make filing taxes easier.This can also help you regularly review your expenses to make sure you’re not overpaying for something you don’t need, like a recurring subscription the company is no longer using. You may also explore other financial tools that could help you grow your business. If you decide to apply for a loan down the road, you could start by talking to your business banker if you have one.

Business Banking That Grows With You

Opening a business bank account doesn’t have to be complicated or time-consuming, but it’s generally worth spending some time determining the best type of bank and the best brand to suit your business needs. But don’t expect those needs to stay the same; over time, your financial situation and activity may change, so it can be good to keep in touch with your banker or research your bank’s offerings regularly so you always have an account that fits your changing requirements.If you're looking to grow your business with a small business loan, Lantern can help you find the right option for you.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. SOLC20022

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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