How to Open a Business Bank Account in Eight Simple Steps
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When I first starting working for myself, one of the first things I did was to open a business bank account.
I knew I wanted to keep it separate from my personal account. It is one the best things I did, and I honestly recommend every business owner open a separate business account! It makes things so much easier.
In this blog post, I'll go over the reasons WHY you should open a business bank account, the steps to open a business bank account - including the documents you'll need, and things to look for when choosing a business bank.
Plus, I’ll share the tried and tested bank that I’ve used for years and love!
Five Reasons to Open a Business Bank Account
01. Separation of Personal & Business Finances
Keeping two separate bank accounts helps to clearly differentiate between your personal and business expenses, making it easier to track cash flow and manage finances. Plus, if you use the ‘Profit First’ method, you can keep your compensation, expenses, profit and taxes separate from each other, which is literally the handiest thing ever.
02. Simple Accounting & Bookkeeping
Having a separate business bank account makes accounting and bookkeeping WAY easier, which is important come tax season for financial reporting and tax prep.
03. Legal Protection
A business bank account protects your personal assets by maintaining the legal separation required for LLCs and corporations, which is essential for preserving limited liability protections. (Note, if you’re a sole proprietor, this may not be the case. But it’s still important, especially if your business shifts or grow over time.)
04. Access to Business Loans & Credit
You can more easily apply for business loans if necessary. And business credit cards! Both can provide necessary funds for growth and operational expenses. And business credit cards can get you points to use, which is always a plus.
05. General Tax Purposes
Having a separate business bank account makes it easier to identify deductible business expenses and provides clear records for tax reporting, helping to avoid issues during audits.
8 Simple Steps to Set Up a Business Bank Account
1. Choose the Right Bank For you
Research different banks to find one that offers the services and features that best meet your business needs. Consider factors like fees, account types, customer service, locations, and additional services such as loans and credit options. (See below for a more detailed list.)
For me, I knew I wanted an online-only bank account because I’m frequently out of the country and traveling, and I just find it so much easier than dealing with the hassle of an old fashioned in-person bank. Plus I feel more comfortable with the modern online banks than the stuffy corporate options, on a personal level. Your needs may be different, though! So consider what will work best for you.
2. Gather Required Documents
Get together all the necessary docs to open your account. This may vary by bank, but typically include:
Employer Identification Number (EIN) or Social Security Number (for sole proprietors)
Personal Identification: Driver's license, passport, or other government-issued ID
Business Formation Documents: Articles of incorporation, partnership agreement, or LLC operating agreement (note: not necessary for sole proprietors)
Business License: Depending on your business type and location
3. Fill Out the Application
Visit the bank’s branch or website and fill out the application form. Some banks allow you to apply online, while others may require an in-person visit.
4. Make an Initial Deposit
Most banks require an initial deposit to open a business account. Check the minimum deposit requirement, and be prepared to fund your account!
5. Set Up Online Banking
Once your account is open, set up online banking. This will let you to keep an eye on transactions, pay bills, and transfer money electronically. You can also set up ‘reserves’ if your bank offers them, keeping your compensation, profit, expenses and tax savings in separate ‘envelopes’.
6. Order Checks and a Business Debit Card
Request checks (if needed) and a business debit card.
7. Link Your Account to Accounting Software
If you use accounting software like Wave or Quickbooks, link your new business bank account to it. This will help with your bookkeeping and help you keep track of your finances more efficiently.
8. Link Your Account to other connected accounts
If you accept payment anywhere like Stripe or PayPal, or use a CRM like HoneyBook (affiliate link - get 25% off your first year with this link) to collect payment from customers or clients, you’ll want to connect your new bank account in each of those platforms.
New to the online business world and scratching your head at all the terms? You may like this Business Terms Glossary I put together! With over 70 terms for new solopreneurs, get instant access to the glossary so you can say goodbye to the ‘WTF’!
Things to Consider When Choosing a Business Bank Account
1. Fees
Monthly Fees: Check if the bank charges a monthly maintenance fee .
Transaction Fees: Look at fees for deposits, withdrawals, and electronic transfers.
ATM Fees: Consider the costs associated with using ATMs, both in-network and out-of-network.
2. Minimum Balance Requirements
See if there’s a minimum balance requirement - and what happens if the balance falls below that level. Do they charge fees? Transfer money from savings? Can you choose how they address it?
3. Account Types
Check out the different types of business accounts offered, like checking and savings.
4. Bank Features and Services
Online Banking: Does the bank offers online and mobile banking services? Do you need it to?
Integration: Check if the bank integrates with your accounting software (e.g., QuickBooks, Wave).
Additional Services: Look for additional services as needed like payroll, invoicing, and cash management.
5. Customer Service
Consider the availability and access to support (e.g., 24/7 customer service, response time, chat bots vs email vs call, dedicated business banking support).
6. Location and Accessibility
If you’d rather have in-person banking, choose a bank with conveniently located branches and ATMs.
For online banks, check how easy it would be to access to account services and customer support.
7. Business Loans and Credit
Interested in loans or credit? Check what their deal is with things like business loans, lines of credit, and credit cards, to see if they meet your needs.
8. Reviews
Research the bank's reputation (not Taylor’s version 😜 ) and read reviews from other business customers to gauge reliability and customer satisfaction. After all, this is where you’re keeping your money, you want to be sure it’s reputable and trustworthy!
9. Specialized Services
Some banks offer specialized services for specific industries (e.g., tech startups, retail businesses). If it’s important to you, check if these services exist at your chosen bank and if align with your business needs.
10. Security
Make sure the bank has strong security measures in place to protect your financial info.
So, what is the best bank to open a business account?
It Totally depends based on your specific needs, but here are some top options to get you started:
Online Banks
Novo Bank (affiliate link!) - this is my favorite! This is one I recommend if you want an online bank and an ability to use ‘reserves’ or ‘envelopes’. There are no monthly fees, you can integrate with a bunch of popular tools and apps, and you can apply easily online in just 10 minutes. Plus, if you use my affiliate link, and put at least $100 in your account within the first 30 days, you’ll get $40!
Mercury
Bluevine
Traditional Big Ol’ Banks:
Chase Bank
Bank of America
Wells Fargo
Capital One
Here’s a screenshot of what Novo’s dashboard looks like.
You can also see how I have my reserves set up! If you want to start setting up reserves too, I recommend reading Profit First to give you an idea of how/why/etc.
FYI — my percentages are different than what he shares in the book.
So there you have it. I hope you found this helpful!
Ready to now open a business bank account and like the sound of Novo?
Get started below!
