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This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional. Square, Inc. is a financial services company, not a bank. Banking services are provided by the Square banking affiliate, Square Financial Services, Inc. or Sutton Bank; Members FDIC.
Once your business starts to make money, it’s important to put it in the right place. Opening a business bank account allows you to separate your business finances from your personal finances, helping you better monitor and manage your business’s cash flow while helping limiting your personal liability.
Although it’s a relatively simple process, opening a business bank account tends to require more specific documentation than opening a personal account. Ready to learn how to open a business bank account? Here’s what you need, how to choose the right bank, and how to set your business up for success.
Business bank account benefits
Having a business bank account helps you keep your personal and company finances separate, which simplifies bookkeeping and tax filing. Opening a business bank account also allows you to accept payments under your business name and builds credibility with clients. You can use a business bank account to better manage cash flow, open a business debit card or credit card, and access lines of credit to finance major purchases or address emergencies. Business bank accounts also often come with higher transaction limits.
Here’s our step-by-step guide on how to open a business bank account:
1. Determine your business bank account needs
There are four common types of business bank accounts, and you may need more than one:
- A business checking account, which enables you to receive payments under your business name and spend funds using business debit cards, checks, or wire transfers. This is the account you’d use to manage payroll and handle other operational expenses.
- A business savings account, which allows you to store funds safely while earning interest.
- A business credit card account, which enables you and other authorized users to make purchases on credit and pay them off later.
- A merchant services account, which allows you to accept credit and debit card transactions from customers in a safe manner, with purchase protection for customers and security for their personal information.
2. Compare business bank accounts
When you’re getting ready to open a business bank account, it’s important to compare the options and shop around to find the best rates and benefits tailored to your company’s needs. Look beyond basic features, and consider how fees, interest rates, and perks align with your business’s transaction volume and cash flow.
For example, some banks offer lower fees but charge heavily for extra services, while others provide high-interest earnings or cashback incentives. Introductory offers, like waived fees or bonus cash, can be appealing but may come with long-term conditions. Always weigh the long-term value over short-term perks to ensure you access the most cost-effective and flexible solution when opening a business bank account.
Here are the top things to consider when evaluating business bank account options:
- Transaction fees, which may include monthly charges, transfer costs, and ATM fees
- Interest rates on account balances (especially for savings accounts)
- Introductory offers, which might include sign-up bonuses or temporary fee waivers
- Minimum balance requirements needed to avoid penalties
- Online/mobile banking features and their accessibility, integrations, and ease of use
- Customer support to ensure you’re working with a bank that will be prompt and responsive to your business needs
- Additional perks like cashback, discounts on business services, free invoicing, or lending benefits
Then there are the things we don’t often consider, but still have an impact on how you manage your money:
- Access to money, or how soon you’ll be able to interact with your money after a sale, especially when weekends or holidays are in play. There are no banking hours you need to work around and you get 24/7 access to your funds with Square Debit Card.
- Permissions, and whether your account can have multiple users or the ability to delegate with multiple debit cards.
- Integration with other tools, such as your POS, to make reinvesting in your business or managing payroll quick and seamless.
- Staying organized with multiple checking and savings folders within a single account, allowing you to save towards equipment upgrades or a rainy day without it impacting your other funds.
- Accessibility to branches, ATMs, or partner retailers. Using Square Checking you can deposit funds in 44,000 retail locations nationally — that’s more than the total number of Chase bank branches.
- Smart budgeting tools, such as SMART recommendations or automatic money allocation.
3. Prepare your required information and documents
The details and documentation you’ll need to open a business bank account can vary depending on what type of business you operate and what kind of account you seek. There are several documents and pieces of information business owners need to gather before opening a business bank account.
If you operate a limited liability company (LLC) or corporation, banks may ask you to provide the following in your application:
- Your company’s address, phone, email, and other contact information, as well as your industry and business type
- Your federal Employer Identification Number (EIN), which is a nine-digit number assigned to your company by the IRS. If you don’t yet have an EIN, you can apply for one here. If you are a Square Banking customer, you do not need an EIN for a Square Checking account.
- A copy of your articles of incorporation
- A certified copy of your “doing business as” (DBA) certificate. Your DBA is the name your business is referred to both legally and by consumers
- Proof of your business license if you operate a restaurant or other licensed business operation
- A copy of your ownership agreements — i.e., your business partnership agreement or any other organization documents that detail company ownership
- Personal information such as your name, phone, address, Social Security number, birthdate, and ownership stake in the business
- Proof-of-identity documents such as your driver’s license or passport.
If your business has multiple owners, you will likely need to provide personal information and government-issued photo identification for every owner with 25% or more ownership in the business. If you are a sole proprietor, you may need to provide some of the above documents and information as well, depending on which bank you use for your business needs.
4. Understand the costs associated with opening a business bank account
As you look into potential business banking options, you’ll want to pay close attention to the associated costs. You may find a bank offers “free” checking and introductory offers, for example, but there are often costs involved — and they vary depending on account types, so carefully consider the following:
- Transaction fees, wire transfer fees, monthly fees, ATM fees, early termination fees for business checking and savings accounts as well as interest rates for lines of credit.
- Interest rate/APR, annual fees, balance transfer fees, cashback fees, late payment fees, or other penalties as well as potential reward programs for credit cards.
For merchant services accounts, make sure you are familiar with the following terms:
- Discount rate: A percentage charged for each transaction processed
- Transaction fees: Fees charged for every credit card transaction
- AVS fees: Small fees charged every time you access your card network provider’s address verification system (AVS), which helps to prevent fraud
- ACH (Automated Clearing House) daily batch fees: Fees charged each time ACH transactions are settled (or “batched out”) for the day. ACH payments are a way to transfer money from one bank account to another without using paper checks, credit card networks, wire transfers, or cash
- Monthly minimum fees: Fees charged if your business doesn’t meet a minimum number of required transactions
Keep an eye out for account minimum balance requirements for both business savings and checking accounts. Many banks require a minimum dollar amount in accounts in order to waive monthly fees. Also, be aware of overdraft fees. If you spend more money than you have available in your account, you could be paying a substantial fee for overdrafting. Square Checking accounts do not have minimum balance requirements or overdraft fees.
5. Apply for an account
The last step for opening a business bank account is starting an application. Most banks offer the option to apply for an account either in person or online. Once you submit your application, you should expect an answer on whether you’ve been approved within one to five business days. If you apply for an account with an online-only digital bank, you may see a faster approval time than with a traditional branch-based bank.
For more on the benefits of opening a business bank account, get advice from the U.S. Small Business Administration here. If you’re interested in opening a free Square Checking account, you can open an account online or through your Square Point of Sale app or Dashboard.
Square, Inc. is a financial services company, not a bank. Banking services are provided by Square’s banking affiliate, Square Financial Services, Inc. or Sutton Bank; Members FDIC.
FAQs: How to Open a Business Bank Account
What do you need to open a business bank account
In order to open a business bank account, you’ll likely need the following information:
- Company information
- Federal Employer Identification Number (EIN)
- A certified copy of a “doing business as” (DBA) certificate
- Business license
- Ownership agreements
- Personal information
Do I need a business bank account for an LLC?
You are not legally required to open a business bank account for an LLC, though it’s wise to do so. Keeping business and personal finances separated can protect both your business and your personal assets in the case of an audit.
