How To Open A Business Bank Account

If you recently started a business and you’re now sending and receiving payments, it’s time to open a business bank account. A business bank account can help you track expenses, manage invoicing and file taxes more efficiently.

More importantly, a business bank account can provide protections a personal bank account can’t, including limited personal financial liability and merchant protection for your customers. It can also help you establish business credit for future borrowing.

Here are the steps to open a business bank account.

What Do I Need To Open a Business Bank Account?

The documents you need to open a current account for individuals (business purpose) will depend on the type of business you operate. At a minimum, all business owners need to provide the following:

Personal identification in the form of a government-issued photo ID like Aadhaar and PAN card.
Business proof like Goods and Service Tax (GST) or Income Tax Return (FIRM).
Latest color photograph.
Account opening cheque from your existing Individual Current/Savings account.

And, depending on the type of business, be prepared to provide the following.

Partnership: Partnership agreement and state certificate of partnership
Corporation: Corporate bylaws
LLC: LLC operating agreement

The requirements to open a business bank account are similar across different types of financial institutions. Here are the basic steps.

1. Get an EIN

If you haven’t already, you’ll need to get an official IRS EIN (Employer Identification Number). Also known as Taxpayer Identification Number (TIN), it is a unique number assigned to your business that’s used for tax reporting purposes.

2. Have Your Documents Ready

Have any required documents, such as a government-issued photo ID or business license, ready before you go into a bank or apply online. Commonly required documents are explained above.

3. Apply in person or online

Depending on the financial institution, you can either bring your documents into a branch or open an account online by uploading your documents. Many accounts will also require an opening deposit, which you can often pay by check, credit/debit card or electronic transfer from another bank account.

Types of Business Bank Accounts

There are four main types of business bank accounts. Here’s a breakdown of each type and what it’s best for.

Business Current Account

Best for: Everyday use like sending and receiving payments
Benefits: Instant access, online banking, mobile banking, overdraft facility and conduct foreign transactions.
Watch out for: Transaction fees and transaction limits

Business Savings Account

Best for: Storing short- and medium-term savings
Benefits: Can earn interest, FDIC insurance up to $250,000
Watch out for: Account fees, changing rates

Business Credit Card Account

Best for: Spending flexibility
Benefits: Increase working capital, build credit and earn rewards
Watch out for: Interest charges, credit score impact, accumulating debt

Business Merchant Account

Best for: Supporting debit and credit card sales
Benefits: Serve more customers, Bundle with other services
Watch out for: Transaction fees, other fees

How To Find the Best Business Bank Accounts

The best business bank accounts offer low fees and a range of features to help you manage your business. Here are some factors to keep in mind as you narrow down your options.

Monthly fees. Business bank account fees can range anywhere from INR 150 to INR 3,000 a month. You can often avoid these fees by maintaining a minimum balance in your account, but some of the best online banks offer free business bank accounts.
Competitive APYs. Business savings accounts can be a smart place to stash cash for future expenses while earning a competitive interest rate.
Monthly transaction limits. Business bank accounts may allow up to 500 transactions per month before a fee is applied. Consider how many transactions you’re likely to conduct in a given month when choosing an account.
Free wire transfers and stop payments. Wire transfer varies depending on the type of transfer and amount. An account with free wire transfers could save you a lot—even if you pay a monthly fee.
Bundled accounts. Some banks offer bundled accounts, which can help you save money by bundling your business checking with a business savings account, IRA or merchant services account.
Account features. Most banks allow you to export data to accounting programs like QuickBooks. But some go further, letting you automate recurring payments and payroll, track tax-deductible expenses or harness advanced search capabilities.
Rewards and perks. Many banks offer competitive business credit cards with perks like cash back, loyalty points and travel protections, so you can make the most of your business spending.
Customer service. As a business, it’s important to be able to access customer service when you need it. Some banks have dedicated specialists that focus exclusively on business banking needs.
Room for expansion. Consider all the services a bank offers that could become important to you down the road, including merchant or treasury services, business loans, credit cards and lines of credit.

Why Open a Business Bank Account?

Opening a business bank account lets you centralize your business finances in one place and keep them separate from your personal accounts. When business and personal finances are mingled, it can be more difficult to sort and track expenses. That can create headaches when it’s time to file taxes, especially if you’re ever audited.

A business bank account also lends legitimacy to your business. Should you need to take out a business loan, lenders may expect documents like profit and loss statements or cash flow statements. Documents like this are easier to prepare when you have a dedicated account for business deposits and withdrawals, and you’ll be able to create them with greater accuracy.

Questions To Ask When Opening a Business Bank Account

If you’re opening a business bank account for the first time, asking the right questions can help you narrow down your options.

Here are some of the most important things to ask yourself when choosing an account.

What are the main features of the account and what needs can they meet for my business?
What kind of banking tools would be most useful for the type of business I run?
Is branch banking access important? If so, what functions do I need to be able to perform at a branch and how much will it cost to perform them?
Would an online bank or a banking app be a better fit for my business needs than a traditional bank account?
Are there any banking options that are specifically suited to the type of business I run?
Is there anything that would make a business bank account a poor fit for my needs?

At the end of the day, the business bank account you choose should provide the features and benefits you need most to stay on top of your finances.

Frequently Asked Questions (FAQs)

How long does it take to open a business bank account?

You can open a business bank account in just a few minutes if you’re getting started online. Opening a bank account at a branch may take a little longer if you have to wait for a banker who can get your account set up. Organizing all of your required documents and information beforehand can help to streamline the process regardless of which bank you choose.

Do you need a business bank account if you’re a sole proprietor?

Sole proprietors are not required to have separate business bank accounts, but they could still be worth having to simplify expense tracking and tax preparation. If you’re a sole proprietor, you might look for a basic business checking account with minimal fees that you can use to accept payments from customers and pay expenses.