In the past, business bank accounts offered very little value for small businesses. Traditionally, banks tended to focus on larger clients and didn’t make time for businesses that weren’t giant corporations. Small businesses were paying high fees only to be overlooked and undervalued.

But times have changed. Thanks to a more competitive banking market, and the arrival of digital banks in the U.S., small businesses can expect a better and more personalized service. 

Many of these newer banks were built with the specific needs of small businesses in mind. These banks have the capacity to adapt over time to meet the changing needs of small business owners. 

With so many great options available, opening a bank account for your business is a no-brainer. In this article, we’ll help you understand what type of bank account is right for your business and show you how to open an account in a few easy steps. 

What Business Bank Accounts Are Available? 

Business Bank Account

Most businesses will benefit from having a business bank account. The main advantage is that it allows you to separate your business finances from your personal ones. Whether you’re a freelancer or sole proprietor, this will save you a lot of time and energy come tax time and allow you to more easily key an eye on bookkeeping. 

When it comes to selecting a bank to open an account for your business, check out what extra features they offer. Digital banks like North One are built specifically to help small businesses and are constantly adding new features that will make running your business easier. 

Some of the benefits of a bank account for small businesses include: 

  • Multiple Logins— If you have more than one key stakeholder in your business, or you want to allow access to employees like bookkeepers, business bank accounts offer multiple logins. 
  • User limitations— If you do give access to multiple people but don’t want them to have the ability to authorize payments or transfer money, business bank accounts often allow you to set up user limitations. 
  • Subaccounts— Not all business bank accounts offer this feature but it’s definitely a benefit if they do. This will help you save for things like payroll and tax time. 
  • Invoicing feature— This is a feature offered almost exclusively by North One. Imagine how easy getting paid would be if you could send invoices, track, and send reminders all from your bank account. 

Merchant Bank Account

If you are a business that uses a POS system and you are receiving consistent, lucrative income from sales, then a merchant bank account is something you’ll want to consider. 

This should be set up in addition to a business bank account. You don’t want to be dipping into your merchant bank account sporadically as this makes it difficult to keep track of your sales and profits. Instead, you can have your merchant account automatically transfer money into your business account on a scheduled basis. 

To set up a merchant account you will need to provide a bank history, length of time in business, the credit history of the business owners, and documentation of previous bank accounts. 

What documents do I need to open a business bank account?

So now that you understand the benefits of a business bank account, how do you go about setting one up? This will depend on the structure of your business. The most common business structures in the US are sole proprietorships, partnerships, limited liability corporations and regular corporations. 

Sole Proprietorship

A sole proprietorship is a business that is owned by a single person. You are entitled to all profits and are responsible for all your business’s debts, losses, and liabilities. As a sole proprietor, you are not legally required to have a business bank account, but that doesn’t mean having one won’t greatly benefit your business. A business bank account will help you keep track of your payments and transactions, making things a lot easier come tax time. 

To open a bank account as a sole proprietor you will need the following documents:

  • SSN
  • Personal identification 
  • Certificate with name and date of birth
  • Business license
  • Monthly credit card revenue if opening a merchant account 

Partnership

A partnership is a business owned by two or more people. Similar to a sole proprietorship, the owners in a partnership are not separate from their business and share profits, responsibilities, and liabilities. If you are forming a business with other people, it is important you open a business bank account so business and personal finances are separate and all owners have access to this account. 

For starters, you need an EIN to open a business bank account for a partnership. You will also need the following information for each of the owners:  

  • Personal identification
  • Business license
  • Certificate with name and date of birth
  • Organizing document that has been filed with the state
  • Partnership agreement
  • Monthly credit card revenue if opening a merchant account

Before you start a business partnership you should be aware of the risk. Business partnerships have a very high rate of failure. This doesn’t mean yours won’t work out, but it does mean you should understand the reasons why business partnerships fail and be proactive about combating the hardships that can make failure more likely. 

Limited Liability Corporation (LLC)

If you want to protect your personal assets in the case of your business being sued, the easiest way to do this is by registering your business as a Limited Liability Corporation. An LLC in some ways allows you to have the best of both worlds by combining the pass-through taxation of a sole proprietorship or partnership and the asset protection of a corporation. 

There are pros and cons to opening a business bank account for an LLC, but to open an LLC business bank account you will need the following information for each of the owners:    

  • Employer Identification Number (EIN) 
  • Personal Identification
  • A certificate with name and date of birth
  • Business license
  • LLC agreement (name of business and partners)
  • Articles of organization
  • Monthly credit card revenue if opening a merchant account

Corporation

A corporation is a legal entity that is separate and distinct from its owners. The shareholders of a corporation are not personally liable for the company’s debt. The difference between a regular corporation and a limited liability corporation is as an owner of a regular corporation you can’t ‘pass through’ your business taxes. You will have to file two sets of taxes, one for the business and one for your personal finances. 

To open a business bank account for a corporation you will need the following information for each owner: 

  • Employer Identification Number (EIN)
  • Personal identification 
  • Certificate with name and date of birth
  • Business license
  • Corporate bylaws
  • Articles of incorporation
  • Monthly credit card revenue if opening a merchant account

Tips to Navigate Opening a Business Bank Account

Gather all of your information ahead of time 

If you are planning on opening a business bank account, you will want to gather the information ahead of time. This will streamline the process. The information required to open an account will depend on two things — The structure of your business, as outlined above, and what bank you choose to open an account with. That being said the key items of information you will need include: 

  • Personal ID, 
  • Business license, 
  • A certificate with name and date of birth
  • Proof of your monthly credit card revenue

Go Mobile

Most small business owners don’t have the time to stand in line at the bank. We suggest when it comes to finding a business bank account, you go mobile. These days there are a number of digital banks that can offer you everything you’d get from a traditional bank (often more) without the hassle of ever having to enter a branch. A mobile bank offers you the freedom to check on transactions and bank no matter where you are. Banking is much easier and faster to manage when it’s on your phone. Make sure when you are selecting a digital bank it is reputable and FDIC insured. 

Thinking about opening an account with North One? Good news: North One is FDIC insured!

Streamline Your Financial Management

A business bank account can do so much more than hold funds. You can streamline finances with the help of financial tools like accounting and payroll software making it easier than ever to stay on top of business finances.  These tools can be integrated into your business bank account so everything is working together to save you time and money. 

Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank, N.A., Member FDIC (“Bank”).  Bank is not responsible for the accuracy of any content provided by the author(s) or contributor(s).