Business Banking

How to Open a Business Bank Account

You'll need a separate business bank account to operate a real, profitable business. Learn how to open a business bank account here.

Tim Wu

Head of Growth

Did you know that one out of every three small businesses is started with only $5,000 or less? It doesn't take a fortune to get your small business or startup off the ground.

But what should you do once your profits start streaming in? Is it a wise move to mix your personal finances with your business expenses?

It is important to the success of your business that you open a business bank account, and there are a host of reasons why.

Keep reading and you'll learn all about how to open a business bank account, and how doing so can benefit you and your business.

Benefits of a Business Bank Account

A big reason that most small businesses open a business bank account is to be able to keep their personal finances and business finances separate and organized.

Trying to run your business through your personal finances makes doing your taxes a nightmare and maintain a balance of your expenses.

If your business is an LLC it can create even more issues. If your LLC is run through your personal finances so if your business starts to go into debt your creditors can go after your personal assets.

A business checking account is beneficial in other ways, too. It can give the appearance that your business is professionally run when meeting with clients or potential partners.

A business bank account will provide you with custom checks with your company's name on it, a company card, and it will also simplify the process of filing your taxes.

Types of Business Bank Accounts

Before you open a business bank account it is important to know which type of business bank account best suits your needs. There are three primary types of business bank accounts:

  • Business checking accounts
  • Business savings accounts
  • Merchant services accounts

Business bank accounts work identically to how your personal bank accounts work. You can deposit funds into your checking or savings account. Any cash flow that you want to use on day-to-day expenses goes into checking accounts.

A business checking account is the most important business bank account type for your startup or business. It will allow you to get started and take care of paying for supplies and handle your daily cash flow.

Once your business is up and running to the point that you have more money in your checking account than you need you are ready for a business savings account.

A business savings account is a great way to save extra money that isn't needed. While your money sits in your savings it accrues interest, growing the amount of money that you have.

Depending on if your business or start-up accepts credit cards as a form of payment, you may also need a merchant services account.

A merchant account gives you the money from a purchase that a customer makes on a credit card prior to that customer paying the bill. In order to open a merchant services account you need to establish a business savings account.

If you plan to run your business in a way that accepts credit cards for payment, all three types of business bank accounts are necessary. Having a business savings account gives merchant services a place to deposit your revenue.

What Fees Are There?

Another aspect of opening a business bank account that you need to consider is what fees you'll be charged. Most banks let you open a checking account with them for free, but with caveats.

Usually, you need to keep a minimum balance in your account. Additionally, there may be a limit on the number of transactions you are allowed to make with your account.

Some banks require a $100 minimum opening balance but with no minimum balance required. Some accounts do charge a starting fee but the benefits of those accounts typically outweigh the cost of getting them started.

Before choosing which account is best for you, take into consideration the fees you will face. That way, you will know the full cost of your business bank accounts.

How to Open a Business Bank Account

Whether your business is an LLC, a corporation, or sole proprietorship, you are able to open a business bank account. Depending on what type of business you run you will need certain documents to open your account.

Sole proprietors and entrepreneurs are looked at by banks as similar to normal consumers. In general, all you should need as a sole proprietor is your tax identification and your social security number.

If you do business under a different name you will need to provide a certificate for that name. Additionally, if you want to open a merchant service account you need to provide your monthly credit card revenue.

Corporations, on the other hand, need additional documentation. Typically, corporations need to provide articles of incorporation as well as proof that they are in good standing financially and with the law.

Corporations also need to provide their employer identification number, business license, and their corporate bylaws. Similar to a sole proprietor, if a corporation wants to open a merchant services account they need to provide their monthly credit card revenue.

Because of the documents that are required, opening your business bank account needs to be done in person. The bank will inspect your documents and have you fill out and sign the necessary paperwork.

Once you have chosen the bank that fits you best it is a good idea to call ahead and confirm which documents you will need. That way you can streamline the process and have everything prepared for opening your account.

Open Your Business Bank Account

By now you know how to open a business bank account, as well as the documents that you will need in order to get started.

A business bank account can greatly benefit your business or startup and give you the resources to get it off the ground. It can also make keeping your finances straight and in good standing a breeze while protecting your assets.

Our team is hard at work building Hatch Business Checking, a modern business bank account with no minimum balance requirements, no NSF fees, and exclusive access to cashback rewards and discounts on business software! Sign up for our waitlist now for your business bank account and start growing your business.

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