what are the requirements to open a business bank account

What Are The Requirements To Open A Business Bank Account? [2021]

What Are The Requirements To Open A Business Bank Account? [2021]

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If you’re a freelancer, sole proprietor, are considering opening your own business, or already have a business, then you probably know that keeping track of your finances is going to be a large part of your day to day life. Every new venture needs money to keep it going. Whether you have revenue coming in or not, you need a bank account to handle your income and expenses. So what are the requirements to open a business bank account?

Anything, and everything, you can do to make that process easier is something worth considering. Opening a dedicated business banking account is not only likely a legal requirement for your company, but it also can make your life as a business owner significantly easier. 

What is a business banking account?

Business banking accounts are similar to personal checking and savings accounts, but they are dedicated to a specific company. Having a dedicated business account is a legal requirement for most companies. (The only exclusion is if you are a sole proprietor, however, most still find a dedicated business banking account essential.) Especially if your company operates under a different name than your own. Many banks also have restrictions on using personal accounts for business purposes.

Why is it important to use a business banking account for your business?

Other than legal requirements, there are many other important reasons to have a business account. Here are a few:

1. Your company’s reputation

2. It can help with tax simplification.

3. It can reduce personal liability.

By opening a separate business account for your company, you immediately give your company credibility. It sets a professional tone for all of your transactions. Plus, if, for some reason, there is a problem with your company or you are sued, having a separate banking account allows for increased protection of your personal assets. Keeping your business transactions specifically within a business account allows you to simplify your taxes at the end of each year. It can also protect you from audits. The IRS recommends a business banking account for all companies.

Another possible benefit of opening your business banking account is that it prepares your company for future growth and development. There are benefits that are easier to apply for a business account, like business credit cards and business loans. Business accounts also make it easier to track employee payroll and other expected monthly costs.

Business checking and savings accounts are subject to taxation. For information on business taxation please click the link to the IRS website.

What should I look for in a business banking account?

Each bank has its own limits and fees for business accounts. It’s important to know which is best for you and your business before opening your account. Some accounts have transaction limits, this means that you are allowed to complete a certain number of transactions before there is a fee assigned. After that limit is reached, you will be charged per transaction. $3 per transaction is a pretty common rate. 

If your company makes many purchases or sales per month, this may not be a good choice for you. Another possibility to consider is cash deposit limits, these typically put restrictions on the amount of money that can be deposited or the number of times money can be deposited into an account before there are fees assigned. 

Interest and monthly fees are also essential to understand before you open any banking account. When it comes to interest, you want your money to be earning as much interest as possible. Obviously, for fees, you want the lowest monthly fees possible. Occasionally, banks will waive fees if you open multiple accounts, maintain a certain amount of money in the accounts, use their business credit cards, or use their merchant services.  So be sure to explore what options are available to you, and which works best for your company’s needs.

What do I need to open a business banking account?

• Social Security Number

• Government-issued ID

• Business License

• Organizing documents filed with the state

• Certificate of assumed name/ Doing Business As (DBA) 

What is needed to open an account as a corporation?

• Social Security Number

• EIN (Employee Identification Number)

• Government-issued ID

• Business License

• Articles of Organization or Articles of Incorporation

• Organizing documents filed with the state

• Partnership agreements

• Certificate of assumed name/ Doing Business As (DBA)

Ensuring that you have all of these documents in order when you apply for your business banking accounts is crucial and will save you time as you apply as well.

If you need any legal assistance with the creation of a corporation or any other matter to help you get your business bank account we recommend you use Incfile. Incfile is our #1 rated online business legal service provider. For more information on Incfile please check out the link below.

#1 Rated Online Business Legal Service

Incfile makes incorporating a company as easy as possible, so you can focus on the important things. Beyond free LLC filing, they have a full suite of startup services, which means Incfile not only helps you get started but supports you in your continued success as your one-stop-shop.  So for all of your legal business needs check out Incfile today.

incfile desktop

How long will it take to open an account?

Please click on the FDIC guide on “Learning Bank – Checking & Savings Accounts

Most banks allow you to apply online, usually, this takes less than 30 minutes. If you have all of your paperwork in order, the process is pretty painless. If you prefer to open your account in person, the process usually takes 30 minutes to an hour. It’s a good idea to call and make an appointment to avoid wait times. Most banks are able to process your application and assign you an account within a day or two. Receiving your debit and credit cards can take up to 10 business days. 

If you’re looking to open an account today there is no one we can recommend for business banking than our #1 rated business banking partner Novo. Please find more information and links to Novo below.

Why should I choose Novo?

There are many reasons why Novo is an incredible choice for you and your small business:

• Apply in less than 10 minutes online

• Intuitive and easy to use App

• Refunds all ATM fees

• It is FDIC insured

• No hidden fees or monthly fees

• No minimum balance required

• Free transfers and free incoming wires

• Only $50 to open the account

#1 Rated For Business Banking

Novo is a powerfully simple business banking platform with no hidden fees built for small business owners. Since launching, freelancers, startup founders, and small business owners alike have been opening business accounts in minutes, securely and easily with no minimum balance requirements. Simplify your business finances with Novo.

Novo card and mobile Phone

Please click on the link to the free “Tips For Safe Banking Over the Internet” guide from the FDIC, Federal Reserve and Office of the Controller.

There are a few things to consider. Novo banking is really only for business accounts, not personal ones. It is also run mostly electronically, so if you write a lot of checks or deal often with cash, then it may not be as convenient for you. 

Summary

If you are considering starting, or already own a small business, then opening a business banking account is an essential step to increasing the legitimacy of your company. By utilizing a business account, you can make your company more efficient, help make the end of year taxes easier, and business accounts can also keep your assets safe. 

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Frank Makrides

Frank Makrides

Is a former financial technology industry executive, licensed realtor, real estate investor, an award-winning speaker, has been published, holds multiple patents and is passionate about all things personal finance and entrepreneurship. He is also a proud husband and father of 2 amazing children.

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