If you have a business, you’re going to need a business bank account. If you have an LLC or corporation, the requirement is a legal one. Alternatively, if you’re operating as a sole proprietor, it is merely good business practice.
Where To Open A Business Bank Account
Generally, you open your business bank account at a bank. However, some credit unions and non-bank financial institutions offer checking accounts for businesses as well. My preference comes down to only a few things:
- Do you have an existing relationship with a banker you know and trust?
- Are you going to get the level of attention you need at the bank you choose?
The existing relationship criteria is listed first because it can sometimes be the only criteria you look at. For example, if your relative is the banker, there’s a good chance you’re going to want to stick with them. Similarly, if your relative is the banker, you’re likely going to get the attention and cost where you want them.
On the other hand, simply knowing the banker because you’ve seen him or her once a year, is not sufficient to even weigh in on this determination.
Level of Attention
You typically don’t need your banker’s attention until you absolutely need them. For example, at lot of people banking with national banks found out they weren’t important during the COVID-19 pandemic and the PPP loans. On the other hand, I had several phone calls with my banker and my PPP loan was processed in 2 days.
Shout out to Fidelity Bank NC! (Note: This is not a sponsored post, nor was I given anything of value for saying this. They just did a great job.)
When you’re starting a business, cost is always a concern. When it comes to banks, please take a moment to throw the old adage “you get what you pay for” in the trash. With most banks, I’m unsure what you get that is different when you pay $0 per month versus those you pay $50 per month.
The monthly fee is not the only cost you’ll see though. How much does it cost to order checks? Is there a minimum balance? Are you charged for downloading digital copies of your checks? (Yes, that was a thing I encountered… $0.75/check).
A bank doesn’t do you any good if you cannot access it. I rarely recommend people use banks they can’t easily drive to. However, as technology improves (I sound really old here), location has less and less to do with banking. This is a matter of preference. Despite having mobile deposits, I continued to make physical deposits until just this year. I also deal with a lot of checks. You might not.
If you don’t care as much about physical location, you should make sure you can access the things you do care about like a mobile app, ATMs, etc.
What Do I Need to Open a Business Bank Account?
When opening a business bank account, you typically need the same core things. Some banks may ask for more, but never less than the following:
- Business name and articles (if LLC or corporation);
- EIN or SSN (if not using an EIN);
- Operating agreement, bylaws, or something that shows that you’re in charge;
- Your ID;
- Your signature; and
- Opening deposit.
Choosing a bank is not a critical issue when starting your business. You have a lot on your plate already, so try not to stress about this decision. Follow the above advice and you will end up with a suitable business bank account that serves your needs. If you end up not liking it, you can change.
My final piece of advice is to never use your personal bank account for business purposes. If you’re operating as an LLC or corporation, this will remove your liability protection. If you’re a sole proprietor, you’re opening yourself up to confusion and potential mishandling of your money.
Richard is the managing attorney for Law Plus Plus, a local small business law firm. As managing attorney, he helps small businesses and nonprofits startup, creating the contracts, and navigate the legal needs of businesses. Some of his practice areas include: corporate, contract, mergers & acquisitions, corporate litigation, and estate planning.