The Simple Guide On How To Open A Business Bank Account

Starting a business can be a life-changing, exciting venture. It also requires some planning, organization, and a lot of work. The intricacies of starting a business, can be tedious and oftentimes confusing to navigate on one’s own. One step in starting your own business includes opening up a business bank account. This is an important step, even if you don't think of yourself as a business owner. Such a situation includes wherein you work as a sole proprietor by default because you are not officially incorporated into a business but classified as a 1099 contractor by those for whom you perform a service.

Let us examine here who should open a business bank account, why to open a business account and the intricacies of how to open a business bank account.

Who Should Open A Business Bank Account?

Simply put, a business bank account is intended for anyone who operates a business or independent contractor job. The more stereotypical situation of being a business is whereby one owns an official company, maybe even prepares a separate tax return for their company. This is a situation where one owns an s-corp or a c-corp. At the very least, their business is official and registered as a limited liability company and from that, the requirement for a business bank account seems most natural.

However, there are some individuals who find themselves in situations where they had never intended to officially open a business. Instead, they become a business by default. Such situations are where the company for which they work labels them an independent contractor and pays them in the form of 1099. Such a situation constitutes conducting business as a sole proprietorship.

Such situations include working as a driver in various forms of transport (e g. Truck driver, uber driver, etc) or entertainment (e g. Broadway performer, ecdysiast, magician performer for a venue, etc). Oftentimes contractors work part-time in an independent contractor capacity with a single company and at other times, independent contractors are contracted with multiple companies where they provide a particular service.  

In the form 1099 issued to independent contractors, no taxes for social security or medicare are taken out. Instead, the contractor is charged an additional 15.3 % self-employment tax liability that accounts for social security and medicare taxes that are not usually deducted from 1099 checks. Since independent contractors do not have any taxes withheld, it is important to be proactive in estimating the quarterly payments of one’s income tax liability as well as additional self-employment taxes and paying them. Since a business bank account separates the everyday personal funds, yet another perk of setting up a business bank account is that it eases the process of setting money aside as an independent contractor.

Additionally, as an independent contractor, one is usually obliged to pay all of their work-related expenses. The independent contractor is also responsible for saving for their own retirement. A business bank account better enables one to do this. The advantages of a business bank account also includes the appearance of professionalism and organization and the ability to open a line of credit specifically for one’s business. Lastly, in separating one’s business and personal finances, one helps establish a layer of protection for oneself in terms of liability and also purchase protection for customers by way of merchant services account offered through the business bank account.

Where Should You Open A Business Bank Account?

In order to open a small business bank account, one first needs to decide if a bank account is appropriate for their situation. As noted above, if one is a 1099 contractor, even if one is not legally incorporated into an official business, a business bank account is useful to separate personal and business expenses, set money aside for 1099 taxes and even retirement. If one is incorporated, then a business bank account is most certainly always necessary.

Once one decides that a business bank account is necessary, one needs to decide where to open a bank account and how. As far as to where, it is most convenient to open a business bank account where one already has a personal bank account. In that scenario, one is already familiar with a particular bank and established as a customer, so opening one other account, such as a business bank account, can be a logical next step.

If one does not want to open a business bank account at a branch where one has a personal account, one can also open a business bank account at another institution. If one belongs to a local credit union, opening up a business checking account and/or business savings account is an option at the credit union where one is a member. Otherwise, one can open up a business bank account at one of the larger, more popular branches with many locations nationwide, such as Bank of America or Chase, or choose a smaller, regional bank, like Regions Bank in New Orleans or Liberty Bank in Detroit. Whatever the institution where a business bank account is opened, there is most likely to be a minimum balance requirement and monthly maintenance fee.

Opening a business bank account would enable one to obtain a business debit card and a business credit card, either of which can be used at an atm. Purchases for the business can then be made by way of card payments. Overall, business banking makes keeping track of cash flow easier and with a digital account balance.

What Should You Bring?

Once one settles on the institution where one would like to open a business bank account, the next step would be to gather certain pieces of documentation. In order to open a business bank account, regardless of the financial institution where one plans to do so, several documents would be required. These documents need to prove one’s legal identity, and the scope of one’s business.  

Here are the list of documents to bring:

1.*EIN or SSN

If you applied for an employer identification number (EIN), otherwise known as a federal identification number, with the IRS, then you can bring this with you to the bank where you plan to open a business bank account. If you did not apply for an EIN, your social security number will suffice just as well.

A social security number is usually used with those who operate their business as a sole proprietor. Many independent contractors who receive a 1099 fall under this category. Though one can apply for an employer identification number (EIN) as a sole proprietor, many sole proprietors do not think of doing this. An EIN, which may or may not be used as part of a s or a c-corp for tax purposes, is used for businesses without incorporation.

Whether or not you plan to use an EIN or your SSN as a federal tax identification for doing business, you need to bring this documentation to the establishment where you plan on opening a business bank account. The EIN or SSN serves as your proof of identification. This enables you to open up a business bank account, through which you can begin to conduct your business needs.

2. Personal Identification Documents

Along with the EIN or SSN, bring your state identification or driver’s license or US Passport. This verifies your identity. Banks routinely ask for proof of identity to open an account or deposit funds, so especially if you do not have a personal account established already at the institution where you plan to open a business bank account, identification document is a common-sense piece of documentation to bring when you try to open a business bank account.

3. Business Formation Documents

If you officially registered your business as an LLC and/or classified it as an s-corp or c-corp, it is advisable to bring these documents as proof to the institution where you plan to open a business bank account. There are numerous online services that enable you to easily startup and register your business as an LLC and make it official with a business name. An attorney can do that as well, or otherwise, you can do that manually with the Secretary of State in your state of residence, or wherever it is you plan to do business or register your business.

Wyoming and Delaware are known as the two most business-friendly states where many small business owners prefer to register their businesses. If you are conducting an in-person business operation, it may still be necessary to also register your business in the state where you reside. Some banks would actually require that your business is registered within the state where you open a business bank account. If the majority of your business is conducted online, sometimes the need to register your business where you reside and choose to open a business bank account may be waived in lieu of registering it in a more business-friendly state, like Wyoming and Delaware.

4. Ownership Agreements

If your business is owned by a single party, your business articles of incorporation would denote that. If the business is a partnership, then it is important to draft up a partnership agreement to delegate owner rights and responsibilities. All in all, the ownership agreement is yet another useful document to bring when opening up a business bank account because it further proves the legitimacy of your business.

5. Business License

Depending on the nature of your business, your state of operation may require you to possess a business license. This business license is the permission from your state or municipality to do business, wherever it is you choose to conduct business. Not all types of businesses require it. Yet, the stringency of the requirement varies from city to city and state to state. For example, the state of Nevada requires all 1099 independent contractors to purchase a business license, though this is not the case for many other states. If you plan to operate a business that involves food handling or sale of firearms, special licensing may almost always be required regardless of state.

It is of course advisable for you to check whether your state or municipality requires you to possess a special license to conduct your type of business. If it does, be sure to bring your business license with you when you plan to apply to open a business bank account.

6. DBA or Doing Business As

Some states require that you register a DBA if you conduct business under a name that is not your own. This requirement is as essential for some states or municipalities as a business license. Check your state or municipality if this is required. If it is required, a simple LLC articles of incorporation or even your own name would suffice.


Opening a business bank account can help formalize and professionalize your new business and thereby, enhance its business image. Perhaps more importantly, opening a business bank account has the more practical reason of separating personal funds from business finances, helping you set aside money for taxes, contribute to retirement accounts, and open a business line of credit. It also enables access to online banking, ach (electronic bank-to-bank transfers), electronic deposits, cash deposits and access to lenders with competitive interest rates for apy and fdic and business lines of credit.

If you plan to take this important step of opening a business bank account, refer to the above guidelines for what to bring when you plan to open a business account, as well as the how and the where. If you have any unanswered questions, the SBA (small business administration) can serve as a helpful resource for additional information.

Yekaterina Galanova

Yekaterina Galanova


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