When deciding how to set up a business bank account, you must first choose the right bank and prepare the necessary documents. Also determine if you actually need a business bank account. For some small businesses, a basic bank account is sufficient. However, a business bank account might be necessary if you run a limited liability company (LLC) or an official business, especially if you want to take tax deductions connected with your company. Having a business bank account can also help you manage your expenses and cash flow.

Types of Business Bank Accounts

When choosing a bank, look for banks or credit unions with bonuses or special offers for opening an account. Also make sure you're choosing the right type of business bank account because accounts and fees vary according to what you are going to use the account for. The types of business bank accounts include:

  • Savings accounts.
  • Business checking accounts.
  • Certificates of deposits.

When it comes to the types of business bank accounts, a checking account is mainly a deposit account. It provides you with checks and a debit card that you can use to pay for your business expenses. You can usually deposit money in it using an ATM or a mobile app as well as direct deposit. You cannot earn an interest from a business checking account. However, it won't have any transaction limits.

A business savings account, on the other hand, can help a small business save and earn money, as it provides interest on extra capital. It usually has a transaction limit and is mainly used to set aside money for emergencies or future projects. You can also link it to a checking account.

If you want to earn higher interest than you would with a business savings account, consider having a business certificate of deposit (CD). Such certificates usually range from one month to upward of 10 years. It is most useful if you won't be using a certain amount of money until the end of the certificate's term.

Opening a Business Bank Account

Usually, small business owners open a checking business account when they first start out so they can make and accept payments. Then they open a savings business account to earn interest on extra cash. After that, they invest in certificates of deposit. Fees associated with these bank accounts include:

  • Transfer fees.
  • Monthly service fees.
  • Deposit fees.
  • ATM fees.

Fees differ depending on the type of bank account. You can open some business bank accounts for free as long as you meet certain criteria, such as a minimum balance amount, transaction limits, and bill pay. Some banks waive the monthly service fee, which usually costs $10-15 per month, in some conditions. Other fees a bank might waive include:

  • Minimum balance fee.
  • Transaction fees.
  • Out-of-network ATM fees.
  • Wire transfer fees.
  • Monthly service fees.
  • Cash deposit fee.
  • Broker fees.

Before coming to a decision, make sure your future business bank account can work with your company's accounting software and can offer you a business credit card.

Necessary Documents for Opening a Business Bank Account

To open a business bank account, you must prepare the necessary documents verifying the nature of your business. You must also provide documents proving you've registered your company with the IRS. The exact documents depend on the company's corporate structure.

If you are the sole owner of your business and have not applied for your company to be a corporation or a limited liability company, then you need just two forms of personal identification and your social security number to open a business bank account. If your business is not run under your name, you will need a “doing business as” certificate. If your business is a corporation or an LLC, you must bring with you the LLC's operating agreement, the Federal Employee Identification Number, and a copy of the articles of organization. You might also have to provide any necessary business licenses and a signed operating agreement, which is similar to a business partnership agreement.

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