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    7 Common Requirements to Open a Business Bank Account

    If you are opening a business, you need a business bank account to send and receive funds. Here are the most common requirements to open a business account.

    What Do I Need to Open a Business Bank Account?

    by Kailey Hagen | Published on May 18, 2022

    Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

    Image source: Getty Images

    Business bank accounts help your business appear more professional to the IRS and your customers. Here’s a closer look at why else you may want a business bank account and how to choose the best one.

    Each stage of building a business presents unique challenges. Once you finally have money coming in, you need to decide where you're going to keep it. For most companies from large corporations down to sole proprietorships, a business bank account is essential. But there are a few things you need to know before you can open one.

    Below, we'll explore why you should open a business bank account, what documents you need, and how to decide which account is right for your company.

    Overview: Why should you open a business bank account?

    Having a business bank account can make your life a lot simpler. Here are five reasons why.

    1. Protect your personal funds

    If you use a single account for your personal and business finances, your personal savings could be at risk in a lawsuit. That means if someone sues your business and the court awards them compensation, your personal money could be fair game, even if the way you earned it had nothing to do with your business at all. A separate small business banking account protects your personal savings in these situations.

    2. Avoid tax issues

    Maintaining a separate business bank account makes it easier to track business earnings and expenditures. This can save you a lot of headaches when you go to file your taxes and it can help you avoid problems with the IRS. Separating your personal and business finances indicates to the IRS that you're running a legitimate business and not a hobby business, which is not permitted business tax deductions.

    3. Accept credit cards

    You cannot accept debit or credit card transactions through a personal bank account. If you have customers that habitually pay with cards, you need a business bank account to process them. Otherwise, you must limit your customers to paying with cash or a check, and that could deter some from working with you.

    4. Give others access to company funds

    When you're running a partnership or corporation, you probably won't be the only person who needs to make a business purchase or access the company's funds. You don't want your business associates using your personal bank accounts, so a business bank account for an LLC or corporation is a better arrangement.

    5. Maintain a professional appearance

    Your company will appear more professional if you can write your vendor checks from an LLC bank account rather than from a personal account. Customers may also feel more secure writing checks to a business name than to you as an individual.

    What do I need to open a business bank account?

    These are some of the most common requirements to open a business bank account.

    1. Employer Identification Number (EIN) or Social Security Number (SSN)

    Most banks require business customers to provide their employer identification number (EIN) in order to open a business checking account or savings account, though some may permit sole proprietors to open a small business account with just their Social Security Number.

    If you don't have an EIN, you can obtain one for free by filling out the application on the IRS's website as long as you have a valid Social Security Number and your business is operating in the United States or its territories.

    2. Personal identification

    Just as when you open a personal bank account, your bank will want to see a driver's license, passport, or another form of state-issued identification to prove you are who you say you are.

    3. Business formation documents

    Your bank will need a copy of your formation documents. For limited liability companies (LLCs), this means the articles of organization; for a corporation, it's the articles of incorporation. These documents list some basic information about your company, including its management structure, who is responsible for managing the finances, and how your business will operate.

    4. Ownership agreements

    If you're running a partnership or a corporation, you and the other owners will need to create a partnership or operating agreement. This will outline each owner's rights and responsibilities as well as how the business will operate.

    5. Business license

    Your bank needs proof that your business has the appropriate licenses before it will enable you to open a business bank account. The requirements to obtain a business license vary depending on where you live, so do some research to find out what's required in your area.

    6. Certificate of assumed name

    If the name you use to advertise your business to your customers is different from the company's legal name, you will need a certificate of assumed name, also known as a doing-business-as (DBA) name. Your bank will need a copy of this as well when you open your account.

    Source : www.fool.com

    What Do I Need to Open a Business Bank Account?

    You might be wondering, "What do I need to open a business bank account?" Here are the requirements to open a bank account for every business type.

    What Do I Need to Open a Business Bank Account?

    Brian O'Connor

    Updated on August 18, 2021

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    Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on the page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners.

    What Do I Need to Open a Business Bank Account?

    Social security number or employer identification number (EIN)

    Personal identification, such as a passport or driver’s license

    Business license with the name of the business and the owner’s name(s)

    Certificate of assumed name/DBA

    Partnership agreement with the name of the business and its partners (if a business with multiple owners)

    Organizing documents filed with the state

    Monthly credit card revenue (for merchant accounts)

    The requirements to open a business bank account can vary based on the type of business you have, the type of bank account you want to open, and which bank you use.

    Below are some common things you’ll need to open a business bank account, along with some options from our picks for best bank accounts for small businesses.

    In This Article

    Types of Business Bank Accounts

    What You Need to Open a Business Bank Account

    How Requirements Vary for Different Business Types

    Choosing a Business Bank Account

    Frequently Asked Questions

    The Bottom Line

    Types of Business Bank Account

    There are three main types of business bank accounts:

    Business checking account: Use a business checking account for everyday business transactions.

    Business savings account: Use a business savings account to store surplus cash and build interest.

    Merchant services account: Use a merchant account if your business accepts credit card payments. Merchant account providers front you payment for your sales before the customer pays their credit card company. You need to have a business checking account before you can open a merchant account.

    What You Need to Open a Business Bank Account

    What you need to open a business bank account will vary depending on your type of business entity, the state you live in, and where your business was established. Some banks also ask for more documentation than others. It’s typically simpler to open a business bank account online.

    Here’s what you need to open a business bank account:

    Social Security Number or Employer Identification Number (EIN)

    To prove your business’s identity, you’ll need to provide your EIN, as well as the documents that the IRS sent you when issuing your EIN. Sole proprietors may be able to use their social security number in lieu of an EIN.

    Personal Identification

    Most banks will also ask you for one or two forms of personal identification to prove that you are connected with the business. To open a business bank account, you must be an officer or owner of the company. Valid forms of personal identification include a driver’s license, state-issued identification, or passport.

    Business License

    Issued by your state or local government, a business license shows you are authorized to operate by that jurisdiction. The processes for getting a business license differs by city and state, so it’s best to see what your area requires.

    Certificate of Assumed Name

    Many businesses operate under a trade name that is different from their legal name. For example, ABC Bakery, LLC, might operate as “ABC’s.” If this is true in your case, you’ll need to file a fictitious business name, also known as a doing business as name (DBA), with your state’s secretary of state. The bank will ask for a copy of your DBA filing documents as proof of your business’s trade name.

    Partnership Agreement

    Businesses with multiple owners will need to supply a partnership agreement, bylaws (for corporations) or operating agreement (for LLCs).

    Organizing Documents

    The requirements for organizing documents vary a bit by state, but at their core, they spell out a few crucial components of your company: business name, address, owners, registered agent (the person who handles a company’s paperwork), management structure (who will be in charge of running the company), and the activities it will engage in.

    The main organizational document for a corporation is called the articles of incorporation. For an LLC, it’s called the articles of organization. You should store these founding documents in a safe place and be ready to show them to a bank.

    Monthly Credit Card Revenue

    Businesses applying for merchant services accounts will need to supply estimates of their monthly credit card volume or the processing history and average volume of monthly credit card revenue of their current merchant account.

    Some merchant account providers ask for additional documentation as well, such as financial statements and bank account statements.

    How Requirements Vary for Different Business Types

    Here’s a basic overview of what you’ll need to open a business bank account based on your entity type:

    Sole Proprietorships

    Social security number (okay for sole proprietorships only) or EIN

    Personal identification

    Business license with the name of the business and the owner’s name(s)

    Source : www.fundera.com

    Open a business bank account

    Open a business account when you're ready to start accepting or spending money as your business. A business bank account helps you stay legally compliant and protected. It also provides benefits to your customers and employees.

    Open a business bank account

    Open a business account when you're ready to start accepting or spending money as your business. A business bank account helps you stay legally compliant and protected. It also provides benefits to your customers and employees.

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    Benefits of business bank accounts

    Find an account with low fees and good benefits

    Get documents you need to open a business bank account

    Source : www.sba.gov

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