What Do I Need To Open Business Bank Account In 2022?

A business bank account is necessary for any person running any business. Whether you are a freelancer, an independent contractor, or an upcoming business person, you need a business account. This is because business accounts offer features that are key to financial management.

The US Small Business Administration encourages opening a business account as soon as you start undertaking business expenses. You want to separate your expenses and incomes from business ones completely. Separating your personal finance from your business finance can help prove that your business is a separate entity in the case of a limited liability company (LLC) or a corporation.

In addition, it is also essential when it comes to the calculation of your taxes. When filing taxes for the business, you must have clear documentation of your income and expenses. Otherwise, you may find yourself having problems with the IRS and even paying higher taxes.

IMAGE: UNSPLASH

Types Of Business Accounts

Before we look at the requirements for opening a business account, let’s look at the types of business accounts you may open. Generally, there are five types of business accounts. These accounts offer diverse features; business owners should only open an account that matches their needs. The main business accounts include

Checking account: With a business checking account, you can easily manage daily business operations due to the ease of deposits and withdrawals. However, the account has somewhat high maintenance fees.
Savings account: Business savings accounts are designed to offer business long-term savings options. Such an account allows your business to earn interest on the amount saved.
Money market account: This account offers more accessible access to money than traditional bank accounts. Such accounts are used for trading in the money markets such as the stock exchange or forex.
Business CD: This account is used for long-term savings. It locks your amount for a specified period for purposes of growth.
Merchant services account: These are accounts that are ideally made for businesses that want to track down their account books. They track down all credit and debit transactions, making accounting work much easier for the users.

You have to decide which of these accounts you want to open depending on your current business needs and their future potential.

Requirements For Opening A Business Account

You will need similar documents to open all the above account types. Like the case with a personal account, you will be required to provide proof of identity documents for yourself and tax compliance documents for the business. The requirements are as follows:

Business Owners’ Personal Information

All business owners must be involved in the opening of the account. Although sometimes it may not be necessary for all owners to be present when opening the account, their personal details will be required. These include the legal names, government-issued ID, or a driver’s license. A valid passport, working permit, and/or visa might be required for foreigners.

Business License

The other documentation necessary for opening an account includes the various types of licenses. You will be required to show all the necessary licenses and permits or the type of business you are running in your state.

Employer Identification Number (EIN) Or Social Security Number (SSN)

The Employer Identification Number (EIN) is one of the key and most vital details needed when opening a business account. The EIN is used when more than one person owns the business in question. In the case of a sole proprietorship, you may use the SSN in place of the EIN.

Additional Business Documentation

Depending on the model and type of business you are running, you may be required to provide more information. Different banks may also have other requirements above the general requirements highlighted here. Apart from personal information, licenses, and the SSN or EIN, you may also want to prepare the following documents:

A Partnership Agreement: If the type of business you are running is a partnership, you will require a partnership agreement. The agreement should be signed by all the parties in the presence of witnesses and guided by a lawyer. If the agreement is not signed in the presence of a commissioner of oaths, it may not be binding.
Certificate of the limited partnership: The other document you may need is a certificate of limited partnership for limited companies.
A copy of your LLC’s articles of organization: Certificate of formation/articles of organization or an equivalent document will be required when opening an LLC account.
Certificate of the corporation: This will be required when opening a corporate account.

Though opening a business bank account is not expensive, you can further save by opening an account through some business formation services. Some banks such as Bank of America often partner with company formation services such as LegalZoom and competitors to offer you bonuses that can save you a lot of money.

Bottom Line

The bottom line is that a business account is good for everyone running a business. It does not matter the size of the business or its mode. A bank account is an important tool that helps ensure prudent financial management. Business accounts also help business owners avoid heavy taxes that may come as a result of mixing personal finances with a business one.