As a sole proprietor, opening a business bank account is a crucial step to keep your personal and business finances separate, maintain accurate records, and ensure legal protection. Unlike other types of businesses, the process for sole proprietors is simpler, often requiring only basic identification, an EIN or SSN, and a DBA registration if you’re using a business name other than your own.

Here’s everything you need to know about opening a business bank account for your sole proprietorship.

What is a Sole Proprietorship Bank Account? 

A sole proprietorship bank account is designed to keep your business finances separate from your personal finances. This makes it easier to track payments, expenses, and income related to your business, and can even provide important legal protections depending on your business structure. Typically, there are three types of business bank accounts used by sole proprietors: 

Business Checking Account 

A business checking account is similar to a personal checking account by enabling businesses to manage their day-to-day financial transactions. Unlike personal checking accounts, though, a business checking account allows companies to separate their business finances from personal funds.

Business checking accounts typically offer features like the ability to deposit checks, pay bills, transfer funds, and access business credit. They often come with higher transaction limits than personal accounts and additional services tailored to business needs, such as merchant services for credit card processing.

Opening a business checking account is an essential step for sole proprietors to establish financial organization and enhance professionalism. For many, it may be the only business bank account needed, especially when working with a banking partner like North One. With North One, sole proprietors can access low or no-fee options and seamless integrations that automate payment flows between their bank account and essential daily tools, simplifying financial management and saving valuable time.

Business Savings Account

Once a business is doing well and has enough cash coming in every month to cover expenses, you might opt to put away money for your business’s future in a business savings account. These accounts offer a safe place to store funds while earning interest, helping your business grow its savings over time.

However, business savings accounts generally have lower interest rates than business money market accounts or other investment options. While they offer stability and easy access to funds when needed, they may not provide the same growth potential as higher-yield accounts or investment vehicles.

An alternative option is to get a primary business account that comes with Envelopes, a feature to designate purposes for funds like payroll or rent. That way, you can organize your money while still having access to it in one primary account.

Business Merchant Account

If your business accepts credit card payments you’ll need a business merchant account. This account processes credit card payments and transfers funds directly into your primary business account, ensuring a smooth flow of revenue. Popular providers for merchant accounts include Square, Stripe, and PayPal—all of which offer reliable payment processing and can be easily integrated with a North One account to streamline your transactions and financial management.

How to Open a Sole Proprietorship Bank Account in 3 Steps

Opening a business bank account as a sole proprietor is a straightforward process. Follow these steps to get started:

1. Research your options 

Finding the right bank account for your business is essential. Sole proprietors are often overlooked by major banks that don’t tailor their services to meet the unique needs of smaller enterprises. Just because you use a certain bank for your personal finances doesn’t mean it’s the ideal choice for your business. Set yourself up for success by evaluating these key aspects before choosing a business account:

  • Cost: While some bank accounts are free to open, hidden fees can add up over time, costing your business hundreds or even thousands of dollars. North One simplifies this with a transparent flat fee of $10 per month—no small print, no surprise charges. The only additional fee is $15 for sending or receiving a wire transfer, giving you predictable costs you can rely on. 
  • Accessibility: Traditional banks often require a lot of unnecessary paperwork and weeks of waiting just to open a business account. This doesn’t have to be the case. North One lets you apply for a Business Account in as little as 3 minutes (based on real-life user tests). No paperwork, no bank lines, no headaches. 
  • Features: These days, a good business bank account should do more than hold your money. It should actually make the day-to-day running of your business easier. For example, for those on the go or with unconventional hours, a digital business account offers the flexibility to manage finances anytime, anywhere—no bank visits required.

2. Gather your information 

Opening a business bank account as a sole proprietor is much more straightforward than with other business structures. Banks will have different requirements and policies for opening an account but typically this is all you’ll need: 

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

3. Apply for your account 

Once you’ve found the right bank account for your business, the only thing left to do is to apply. Despite what some traditional banks might tell you, this actually doesn’t have to take a lot of time or effort. Apply for a North One account and secure your business finances in one place. 

Sole Proprietorship Bank Account Requirements

The requirements for opening a sole proprietorship bank account can vary depending on the bank, but there are a few key documents that are generally required.

Here are the most common requirements for opening a sole proprietorship bank account:

  • Personal Identification: Only an officer or owner of a business can open a business bank account, which is why most banks require one or two forms of personal identification, such as a driver’s license, state-issued ID, or passport. This step verifies your connection to the business.
  • EIN or SSN: You’ll need to provide your Employer Identification Number (EIN) and any documentation issued by the IRS. If you’re a sole proprietor, you can often use your Social Security Number (SSN) instead of an EIN.
  • Business Name Registration (DBA): If you operate under a name other than your personal name, you must register your Doing Business As (DBA) name with your state or county. This ensures that your business name is legally recognized and available for use in official documents.
  • Business License and Permits: A business license shows that you are authorized to operate by your state or local government. Banks typically require this documentation to confirm your business’s legitimacy.
  • Business Formation Documents: If your sole proprietorship has special arrangements or partnerships, you may need additional documentation, such as partnership agreements or proof of business formation. This is more relevant for sole proprietors with complex business structures but can be necessary if you have a unique situation.
  • Initial Deposit: Some banks require an initial deposit to open an account. The amount can vary depending on the bank, so it’s a good idea to check the bank’s minimum deposit requirements before proceeding.

Why Sole Proprietors Should Open Business Bank Accounts 

Legally speaking, you don’t need a business bank account as a sole proprietor but it is highly recommended. Here’s why: 

Save time and money on bookkeeping

Having a separate bank account for your business lets you easily keep a record of your business transactions without them getting mixed up in your personal transactions. This will save you time and money on bookkeeping. 

Limit stress at tax time

Tax time can be extremely stressful for people who work for themselves, no matter how small their business may be. One of the easiest ways to limit stress around tax time is by keeping a clean and organized record of your business finances year-round. This is much easier to do with a business bank account. It’s also easier to claim taxes as a sole proprietor vs. as an LLC.

Secure financing to grow your business

If you’ve got big plans for your business (and why shouldn’t you?) you might eventually need to look into some small business financing options so you are able to grow. You might choose to take out a bank loan, open a line of credit, or even apply for a grant. In all cases, you’ll need to demonstrate your business’s earning potential. Having a business bank account will be vital to this process. 

Appear professional to your customers

A business bank account can help you build credibility as a business. For example, getting your customers to make a check out to your business account instead of a personal account will make the transaction feel more legitimate and establish trust. 

Frequently Asked Questions

Can I use a personal bank account for a sole proprietorship?

Technically, the answer is yes. There is no legal requirement for a sole proprietor to have a separate account for business. That being said, we highly recommend not using your personal account for your business. Opening a business bank account is a very small investment that will save you time and money in the long run. You won’t regret it. 

Do I need an EIN to open a sole proprietor bank account?

You technically don’t need an EIN to open a business bank account if you are a sole proprietor without employees. However, this might change depending on the policies of the bank you choose to open an account with.

Should I get a business bank account as a sole proprietor?

Yes, opening a business bank account as a sole proprietor helps keep your personal and business finances separate, making it easier to track expenses and manage cash flow. It also enhances professionalism and simplifies tax preparation.

Which bank is best for sole proprietorship?

The best bank for your sole proprietorship will depend on the unique needs of your business. Look for a bank that offers low fees, easy account access, and features that support small business needs, like budgeting tools or seamless payment processing. Prioritize options that provide flexible online banking and strong customer service to make managing your sole proprietorship simpler.

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 (“Bank”).  Bank is not responsible for the accuracy of any content provided by the author(s) or contributor(s).