How to open a business bank account: Requirements and set up

Cash flow management is crucial for any business. You need to know exactly how much money is coming in and how much is going out. A business bank account can help. But it’s not just a good idea—if you’re registered as a limited liability company (LLC) or corporation, the IRS strongly recommends opening a separate bank account for company finances.. If you’re a sole proprietor, it’s not required but still recommended to help you track your expenses.

Here’s the good news: Opening and maintaining a small business bank account is easy, and it can be an exciting step in your journey as a business owner. Read more about how to open a business bank account, its requirements, different types, what to look for, and their benefits to small business owners.

• Who should open a business bank account?

• How to open a business bank account
• Requirements for a business bank account 
• Business bank account types 
• Features to look for in business checking accounts 
• Benefits of a business bank account
• Can you open a business bank account overseas?
• Business bank account FAQs

Who should open a business bank account?

The Small Business Administration (SBA) recommends opening a business bank account as soon as you start receiving or spending money for your business. Even if you’re a sole proprietor and you’re not legally required to have a business bank account, getting one is a good idea.

For starters, it makes bookkeeping way easier. Imagine receiving client payments, paying for your domain, and even hiring a freelancer from your personal bank account. Things can get messy quickly when you mix all your personal and business transactions together. When tax season rolls around, you’ll have to sift through countless transactions to figure out what’s business-related and what’s personal. With a business bank account, you eliminate unnecessary stress and wasted time. Everything’s neatly organized, so you can easily track expenses, maximize deductions, and file taxes correctly.

Also, a business bank account boosts your credibility. When customers, clients, and vendors see that payments are coming from a professional account, they’re more likely to take you seriously and put trust in your business. And if you want to apply for a loan, many lenders require you to have a business bank account. Even if they don’t require it, you’ll look more professional and trustworthy.

So, the bottom line is that if you’re serious about your business, opening a bank account is a must.

How to open a business bank account in 5 steps

Opening a business bank account is simple and often just takes a few minutes. The process has five steps: 

1. Gather the required documents and information.
2. Decide on the services you need.
3. Review your banking options.
4. Compare your options.
5. Choose a service provider. 

It’s important to be prepared and have all of the information you need. Read on to explore each of these steps in more detail. 

1. Gather the required documents and information

You’ll need a few pieces of documentation to open a business bank account. These can vary slightly depending on your business type, but here are the basics based on your entity:

2. Decide on the services you need

Then, consider what type of services will be the most useful to your business. Ask yourself things like: 

• Will you need to send checks or handle cash? 
• Do you prefer to visit a physical branch location and work with a teller? 
• Do you prefer the convenience of online banking? 

Identifying what you need from your business bank account will help you determine which type of account is the right fit for you.

3. Review your banking options

Next, determine what kind of bank account is the best option for your business. This can include: 

• Traditional checking account
• Online checking account
• Cash management account (CMA)

Narrowing down the type of account you’re looking for will help you find the right service provider.

4. Compare your options

You’ll want to look at customer reviews and shop around to find the best fit for you and your needs. By doing further research, you can avoid signing up for a bank that has unsatisfactory customer service or unexpected fees.

5. Choose a service provider

It’s important to choose the right bank for your business. Start by reaching out to the financial institutions or lenders you know and like. If you have a personal account in good standing, they might be inclined to offer you a better deal on a business account. 

Credit unions, financial service providers, and online banking providers tend to offer the same services and protections as traditional banks, so don’t rule them out. As you shop around, keep a few things in mind:

• Special offers: Many banks offer enticing introductory offers, cash bonuses, and rewards for new accounts.
• Convenience: Look for financial institutions with physical locations in your area, plenty of ATMs, and mobile banking options. If you choose an online-only option, make sure you can contact help when you need it.
• Protection: You should feel confident that your business funds are in good hands. Look for banks that offer fund protection and insurance.

For example, established banks such as Bank of America and Chase are FDIC-insured up to $250,000. QuickBooks Checking, an online bank, is FDIC-insured up to $5M.¹

Finally, make sure your new account integrates seamlessly with your accounting software to streamline your bookkeeping and organize your expenses.

For further information, read on to learn about the requirements, different types of business bank accounts, and their benefits. 

Business bank account requirements

Opening a bank account of any type requires some personal information, and a business bank account is no different. Here’s what any business entity will need:

1. Your basic contact information, including your company phone number, website, and email address.
2. Your legal business name as it appears on documents filed with your state or the IRS. If you’re a sole proprietor, you may need a fictitious business name certificate or a doing business as (DBA) certificate.
3. Your Employer Identification Number (EIN) (if you’re an LLC or corporation). The bank will use this tax id to ensure your business is legitimate.
4. Your business address. This should be the same address you used to license your business. If you’re a sole proprietor or don’t have a separate business address, you may want to invest in a PO box or alternate address.
5. Your Social Security number, especially if your business is a sole proprietorship.
6. Your driver’s license. Your bank will likely make a copy.
7. Your proof of identification, such as a passport or other form of photo identification.

If your business is registered as an LLC or corporation, the bank may also request copies of the following documents:

• A partnership agreement or operating agreement if your business is a partnership
• Articles of organization if your business is an LLC
• Articles of incorporation if your business is a corporation
• Your business license

Having these documents primed and ready can streamline the application process and get your account opened faster.

Business bank account types

When it comes to opening a business account, you have a few options to consider. The main types of business bank accounts are: 

• Business checking accounts
• Interest-bearing checking accounts
• Business savings accounts 

Ensure you do your research and choose the account that makes the most sense for your business. Let’s take a closer look at the three most common types of business accounts.

Business checking accounts

For most small businesses, a business checking account is a good place to start. Once you’ve started making sales and spending money on business expenses, consider opening a business checking account.

A business checking account allows you to do all the basic financial tasks you need to operate your business, such as:

• Writing and depositing checks.
• Transferring or receiving money electronically.
• Depositing money or performing withdrawals using a business debit card.
• Separating your business and personal checking accounts.

Many banks also offer mobile apps. These apps allow you to view your balance, make transfers, pay bills and set up automatic bill pay, and monitor cash flow from anywhere.

QuickBooks Checking is an online business bank account that is totally free to open, with no monthly fees or minimum balances.² You get instant access to a QuickBooks debit card, so you can start using your money right away. QuickBooks Checking is available without a QuickBooks Online subscription through QuickBooks Money — a money tool that allows you to get paid and manage your business finances in one place.

Business interest checking accounts

Another option to consider is a business interest checking account. Typically, interest-bearing accounts have the standard features of a regular checking account except: 

• They allow you to earn an Annual percentage yield on your balance.
• Some banks offer free small business checking accounts for new and small businesses. If you’re tight on funds, a free account might get your business on its feet. 
• Free accounts may come with tighter restrictions on deposits and transactions. 

Think about what you need your business checking account to do before making any decisions based on price.

Business savings accounts

Once you’ve got your business checking account up and running, a business savings account is a smart second step. Use a savings account in conjunction with your checking account to separate your savings from your working capital. Here are some benefits:

• A business savings account allows you to save a portion of your earned revenue and earn interest on the funds you set aside. 
• Most business owners admit they don’t have enough cash in reserve to survive a long run without revenue or cover an unexpected cost. 
• A savings account can help mitigate financial hardship. In the event of an emergency, you won’t be left empty-handed.

Look for a high-yield savings account with low fees and high interest rates. Some savings accounts require a minimum deposit to open, and some come with monthly balance requirements. Many come with small monthly maintenance fees that your bank may waive if you meet other requirements. Remember: The goal is to save money, not spend it on unnecessary banking fees.

Finally, the FDIC insures most savings accounts, but it’s always a good idea to double-check.

Save extra cash using your QuickBooks Checking account in QuickBooks Money. Organize your finances using budgeting Envelopes³ that earn interest — so you can hit your money goals faster.

Business cash management accounts

When it comes to managing your business finances, banks aren’t your only option. There are plenty of financial institutions and cash management services to choose from.

• Alternative banking: CMAs are an all-in-one alternative to traditional bank accounts. 
• Online only: CMAs are online accounts that provide services similar to checking, savings, and investment accounts. 
• High interest offered: CMAs offer high-interest rates for savings accounts, lower account fees than traditional banks, and business lines of credit.

Business owners looking to simplify their finance management could benefit from a CMA. With a CMA, you can conduct all your business transactions from a single account—you won’t have to use separate accounts for separate functions. But a CMA has its drawbacks. 

Since CMAs are exclusively online, you won’t get face-to-face customer service or the option to visit a physical branch. CMAs might also offer lower interest rates on savings accounts than banks or credit unions.

Business bank account features to look for

There are a few key features to consider when opening a business bank account. These include:

Low fees

Many bank accounts come with fees to help banks cover their branch locations, customer support, and other services. The key is to look for an account with low fees or that waives them altogether. Here are some common fees to watch out for:

Online banking and mobile app

Most banks are expected to have online banking and mobile apps, but that doesn’t mean they’re all easy to use and equal in quality. Check out each bank’s website and see if their offerings work for you. Also, look at reviews and see what other customers are saying about the bank’s online functionality.

Overdraft protection

Cash flow can be unpredictable when your business is getting off the ground. If your checking account balance falls below zero, you could be hit with overdraft fees and potential disruption to your business. That’s why you should look for an account with overdraft protection. This feature helps prevent declined transactions by getting money from a linked savings account or line of credit so you can operate your business without a hitch. 

Integration with accounting software

Before signing up for a bank account, determine if it can integrate with your current system. For example, if you use QuickBooks accounting software, sending invoices, tracking expenses, and managing cash flow becomes much easier when your bank account syncs automatically. 

Interest-bearing accounts

Savings accounts aren’t just reserved for personal use. Your business can benefit from them, too. Some banks offer interest-bearing accounts where you can earn money just by keeping funds in your account. Just make sure to review the account’s minimum balance requirements since many banks might require a higher balance to earn interest.

Customer support

Sometimes, your business can run into some issues that require some assistance. For example, if you experience a payment processing problem or a suspicious transaction, having 24/7 customer service can be a lifesaver. Look for banks with multiple lines of communication — e.g., phone, live chat, email, or in-person support — so you’re not left in the dark when issues arise.

Fraud protection

Fraud is one of the many risks businesses face, so make sure you choose a bank with strong security measures. Some key fraud-prevention features to look for include data encryption, multi-factor authentication (MFA), FDIC insurance, accounting monitoring, and suspicious activity alerts.

Benefits of a business bank account

A business bank account makes it easy to keep track of business expenses, and it can help you take full advantage of tax deductions and credits available to small business owners or startups. It’s a simple, low-cost investment that comes with a plethora of perks and protections for businesses. Among them, it separates your business and personal bank account, protecting your personal identification.

Let’s take a look at some of the biggest benefits of a business bank account.

Safeguard your funds

A business bank account keeps your personal finances separate from your business funds. This protects your personal liability. If your business can’t pay its debts, for example, your personal assets won’t be at stake.

On the flip side, if you have an unexpected personal financial crisis, it won’t affect your business’s credit score.

Track expenses and income more efficiently

Separating your personal and business accounts allows you to track expenses, monitor spending, and create a more realistic budget for your business. Avoid accidental overspending and write off your business purchases with ease.

Promote better bookkeeping

Accounting is easier when you have a clear spending trail. A separate business bank account keeps your accounts and finances organized, so it’s easy to pull financial reports, prepare taxes, and generate accurate financial statements.

Build credit

When the time is right (especially for a new business), you can open a business credit card attached to your business bank account. A business line of credit is a secure low-interest small business loan.

Includes tools and features

Many banks now offer a variety of tools and features to assist you with your business finances. A few of these include online check cashing, online payments, and interest accrual.

Outweighs the cost with benefits

While some banks still charge a monthly fee to use their bank accounts, you need to weigh all the pros and cons before deciding to opt out. Many times, the ability to protect your personal assets and the features included are easily worth the small fee per month.

Plus, you may be able to avoid paying the fee if you deposit a certain amount each month.

Can you open a business bank account overseas?

Yes, many banks offer the option to open a business bank account overseas, which is helpful if you operate internationally or manage clients around the globe. Here’s how you can make it happen:

1. Research and choose the right bank

Start by researching banks that cater to international business owners. Some major banks — e.g., HSBC and Citi — are known for their global presence and offer international banking services like multi-currency accounts, international wire transfers, and currency exchange options. It’s also a good idea to check if the bank has experience working with businesses in your industry so you can help make your international operations smoother.

2. Gather the necessary documentation

You’ll need to provide several documents to open a business bank account from overseas. These typically include:

• Employer Identification Number (EIN)
• Passport or government-issued ID
• Proof of address (both local and overseas)
• Articles of incorporation or other business registration documents
• Business plan or summary

3. Consider online banks

You may also want to consider online-only banks, like Wise Business or Mercury. Generally, these banks have fewer barriers to opening accounts remotely and may even have lower fees than traditional banks. However, since they’re online, there are no physical branches, so you won’t have the option to visit them in person for assistance. 

4. Understand the requirements

Each bank will have different requirements for opening an account overseas. For example, some banks might require an initial deposit, while others may ask for you to maintain a minimum balance. It’s a good idea to reach out to your potential bank to see if they have certain requirements so you can avoid delays or additional fees. 

QuickBooks and your business banking

Effective money management is essential for any small business. QuickBooks has the solution to many of your crucial small business needs, like seamlessly integrating your business bank account with your accounting software when you use QuickBooks Online. 

If you’re an LLC or corporation, the IRS strongly recommends you have a business bank account. If you’re a sole proprietor, you’re not required to have a separate account, but you may want to open one to help you keep business and personal expenses separate and manage your funds more easily.

In general, you should open a business bank account as soon as you start handling business transactions. But before you do, make sure you choose the right account type for your business. Do your research to find the right financial institution, and get all the necessary documentation in order. You’ll be banking like a pro in no time.

If you’re searching for a business bank account, check out QuickBooks Checking. QuickBooks Checking is a business checking account that is totally free to open, with no monthly fees for minimum balances. You can get a QuickBooks Checking account without a QuickBooks subscription when you use QuickBooks Money — a free money tool that allows you to get paid and manage finances in one place. QuickBooks Checking accounts are FDIC insured for up to $250,000 and offer fast deposits at no extra cost, insights into your business’ finances, seamless credit card payment integration, a free debit card, and more.

QuickBooks Checking account: Banking services provided by and the QuickBooks Visa® Debit Card is issued by Green Dot Bank, Member FDIC, pursuant to license from Visa U.S.A. Inc. Green Dot Bank operates under the following registered trade names: GoBank, GO2bank and Bonneville Bank. Registered trade names are used by, and refer to, a single FDIC-insured bank, Green Dot Bank. Deposits under any of these trade names are deposits with Green Dot Bank and are aggregated for deposit insurance coverage up to the allowable limits. Green Dot is a registered trademark of Green Dot Corporation. ©2023 Green Dot Corporation. All rights reserved. QuickBooks products and services, including Instant Deposit, QuickBooks Payments, Cash flow planning / forecasting are not provided by Green Dot Bank.

QuickBooks Money: QuickBooks Money is a standalone Intuit offering that includes QuickBooks Payments and QuickBooks Checking. Intuit accounts are subject to eligibility criteria, credit, and application approval. Banking services provided by and the QuickBooks Visa® Debit Card is issued by Green Dot Bank, Member FDIC, pursuant to license from Visa U.S.A., Inc. Visa is a registered trademark of Visa International Service Association. QuickBooks Checking Deposit Account Agreement applies. Banking services and debit card opening are subject to identity verification and approval by Green Dot Bank. Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/. No subscription cost or monthly fees. Other fees and limits, including transaction-based fees, apply.

Features

1. FDIC Insurance: QuickBooks Money (or "QB checking" depending on brand) account balances are FDIC-insured up to the allowable limits through Green Dot Bank, Member FDIC upon verification of Cardholder's Identity. Coverage limit is subject to aggregation of all of Cardholder's funds held on deposit at Green Dot Bank. Green Dot Bank also operates under the following registered trade names: Go2bank, GoBank and Bonneville Bank. All of these registered trade names are used by, and refer to, a single FDIC-insured bank, Green Dot Bank. Deposits under any of these trade names are deposits with Green Dot Bank and are aggregated for deposit insurance coverage up to the allowable limits. Additionally, with Green Dot Bank's Deposit Sweep Program you are provided up to $5 million in FDIC insurance coverage on your account balances .

Deposit Sweep Program: Account balances above $250,000 will be automatically swept from Green Dot Bank and equally spread across our participating financial institutions, providing you with up to $5 million in FDIC insurance coverage. Customers are responsible for monitoring their total assets at each institution. Learn more and see a list of participating institutions here.

2. No minimum balances or monthly fees: There are no minimum balance requirements to open or maintain this account or obtain the listed APY. Other fees and limits apply. See Deposit Account Agreement for details.

3. Envelopes: You can create up to 9 Envelopes within your primary QuickBooks Checking account. Money in Envelopes must be moved to the available balance in your primary QuickBooks Checking account before it can be used. Envelopes within your primary QuickBooks Checking account will automatically earn interest once created. At the close of each statement cycle, the interest earned on funds in your Envelopes will be credited to each Envelope in proportion to the average daily balance of each Envelope. See Deposit Account Agreement for terms and conditions.