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

Susan GuilloryUpdated April 19, 2023

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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, especially if you don’t always keep your business finances separate from your personal finances.One way to minimize your financial headaches is to open a separate bank account just for your business. Read on for a closer look at how business bank accounts work and tips on how to choose the right account for your business needs.

Reasons to Consider Having a Separate Business Bank Account

Some first-time entrepreneurs will use their personal bank accounts to also manage business expenses. Here’s why that can be a bad idea.When looking at a business bank account vs. a personal account, bear in mind that keeping a personal account can make accounting for your company challenging. If you’re using accounting software that automatically connects to your bank account, you will have to manually remove personal expenses, such as your monthly streaming services and child’s orthodontist bill. That’s time that could probably 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. And should you ever be audited by the IRS, you could spend hours trying to unknot the mess.Having a separate small business bank account also makes managing your company’s 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, 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?

If you have more than one business, it certainly makes sense to have separate business accounts for each one. But for one business, one checking account generally should suffice. You may also decide to open a business savings account to earn interest and have money set aside for emergencies. Just keep in mind that the more accounts you open, the more fees you may have to 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 these accounts generally accrue more interest than checking accounts.
Business credit card These credit cards function similarly to personal credit cards, but are used only for business expenses. They can offer small business owners access to a revolving line of credit, and many of the top business credit cards come with rewards and perks.
Merchant services accounts This is a type of bank account 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?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 monthly fees; others will waive fees if you have other accounts with the bank or if you maintain a certain 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 you open a business account with a bank you already have a relationship with, that may make it easier for you to apply for a small business loan or line of credit later.Also, with a traditional bank, you may be able to meet with a business banker in person if you have questions or need assistance.Recommended: Unsecured Business Line of Credit for Startups

Credit Unions

Credit unions offer many of the same services and benefits as a traditional bank. But because credit unions are not-for-profit institutions, they are often able to offer higher rates on savings accounts and lower rates on loans. Credit unions also tend to excel at customer service.On the downside, credit unions typically impose limitations on who can join. Your business may need to be located in a specific area or you may need to be a member of a certain organization in order to join. Credit unions also tend to be smaller than traditional banks. As a result, they usually offer fewer services, and may only operate one or two locations.

Online Banks

Another option is opening an account with an online bank. These financial institutions don’t have physical branches you can visit, but may offer many other benefits for businesses.Online-only banks usually have lower overhead and will often pass that savings on to their customers in the form of lower interest rates on loans and higher interest rates on savings accounts. Online banks may also offer a variety of financial services for business owners, including business money market accounts, online business loans, payment processing, financial health monitoring, and invoicing services. (Note that traditional banks and credit unions may also offer these types of services to business owners.) 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 and may not be able to make cash deposits. Online banking may be best for businesses that process payments online and rarely have a need to visit a branch.

Step 1: Start 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 monthly account fee if you maintain a minimum daily average balance. These minimums may be high for some small businesses, so be sure to read the fine print to understand what you have to do to maintain fee-free status.

Which Banks Offer the Best Features?

Once you determine which type of bank you’re comfortable with (traditional, credit union, online), you’ll want to start looking at what each institution offers. Many banks and credit unions offer helpful tools and bonus features for business accounts, such as cash flow insights, customizable account alerts, merchant features, and business-related rewards. Which one will work best comes down to what you’re looking for.

What Other Financial Products Can I Get?

If you’re interested in keeping all of your business financial services under one roof, you may want to explore other services a bank offers, such as business credit cards, small business loans, and business lines of credit.

Step 2: Know the Requirements to Open an Account

Once you’ve picked the bank and type of account you want to open, you’ll want to start gathering all the documents you need to apply for a business bank account. The specifics may vary from one bank to another, but here’s a list of what banks generally require.

Organizational documents: If you’re a sole proprietor, 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?

No. 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. If you run a partnership, LLC, or corporation, on the other hand, you’ll need that EIN, so be sure to apply for it before you go to open your business 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 business checking account and receive notice that it was not approved. Why?Banks typically do a little investigating to see if you have a solid financial history. If you have any negative banking history, such as frequently bounced checks or unpaid fees, or a poor credit history, the bank reserves the right to not grant you an account.

Step 3: Set Up an Appointment

If you’re applying for your business account in person, you’ll want to be sure to read through the bank’s website and gather all of the required documents before your appointment. 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.You’ll also want to 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 phone or 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 online. Just as with a traditional bank, you’ll likely need to submit personal identification, such as a driver’s license or Social Security number, provide essential details about your business (like your tax ID number), and upload legal business documentation, which will vary based on your entity type.

Do You Need a Personal Banker?

Opening an account at a credit union or traditional bank will likely give you access to 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 may be able to call, email, or live chat with a banker or customer service representative. The drawback is that you may not have a personal relationship with one individual. 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: Keep 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 too.In addition, this can 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 want to 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.Recommended: Small Business Accounting Basics

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 account to suit your business needs. Fees, account minimums, features, and services vary from one institution to another. As you shop around, keep in mind that your financial needs may change over time.If you're looking to grow your business with a small business loan, Lantern by SoFi can help. With our online lending tool, you can access a range of different business financing options all in one place and receive offers that are matched to your needs and qualifications.Find the right financing solution for your small business on Lantern's Marketplace.

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About the Author

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.

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