December 17, 2020

What Documentation Needed To Open a Business Bank Account

By mye455y

Before you apply for a business bank account, make sure you have all your documents and information together. This will help the process move forward quickly and more smoothly. Here’s what you’ll need:

Articles of incorporation
Business licenses
DBA certificate
Employer identification number (EIN)
Identification documents
“There are various factors business owners should consider when opening a business bank account,” said Rampenthal. “It’s essential to prepare all necessary documents from the get-go in order to facilitate a painless process.”

Here’s more information about each of the documents you’ll need to open a business bank account.

Articles of incorporation
Your articles of incorporation show the bank how your business is structured, and you use these legal documents to register your business with the state and other entities.

“If you form a business as an LLC, limited partnership, corporation or other separate legal entity, to open a bank account, you will need the articles of incorporation that you filed with the state if you are the sole owner,” said Tiffany Wright, president of The Resourceful CEO, a financing advisory firm for small and midsize businesses, and project director at Cogent Analytics.

Business licenses
Rampenthal said that banks will likely ask for your current business license to prove you are legally permitted to conduct business in your region.

“This also ensures that your business is accountable for all actions taken – including taxes and finances,” he said. “Check with your state, county and local governments to determine if you need any licenses to operate your business.”

Doing-business-as name (DBA) certificate
A DBA, often referred to as a “fictitious name,” allows you to conduct business “like marketing or advertising, or accept money, under a name that differs from the existing name of your business,” said Deborah Sweeney, CEO of MyCorporation.

Sweeney added that most banks require a certified copy of a DBA to open a business bank account, since entrepreneurs aren’t allowed to use their personal bank account under their business name.

“Filing for a DBA allows entities to do business under another name without having to form a new organization,” Sweeney said. “For example, imagine an entrepreneur named Tom Johnson. Tom is a sole proprietor who runs his own business and wants to open up a sandwich shop called Subs ‘n Chips. Tom wants this business to operate under the Subs ‘n Chips name and not under his own name, Tom Johnson. As such, he would need to register for a DBA so he could do business under this name, including accepting and signing checks made out to and on behalf of Subs ‘n Chips.”

Employer identification number (EIN)
If you’re a sole proprietor, you will need an EIN, your Social Security number, and a driver’s license or passport, according to Levi King, co-founder and CEO of credit solutions and monitoring firm Nav.

EINs are also used to prevent identity theft, fraud and money laundering. King added that while some banks allow a sole proprietorship to open accounts without an EIN, it’s still beneficial to create one.

Rampenthal said that the EIN is essential for managing taxes and paying employees.

“Sole proprietors may use their Social Security number for business tax purposes in lieu of an EIN,” he added. “You can obtain an EIN for your business by filing with the IRS.”

Identification documents
Finally, you’ll need to provide documents proving your identity.

Forms of proof “can include a government-issued picture ID, such as a driver’s license or passport,” Rampenthal said. “This is used in order to corroborate [that] the business owner is indeed the person who owns and/or runs the corresponding business.”

Key takeaway: To open a business bank account, you’ll need to present documents that prove your identity and the legitimacy of your business.

Is it better to apply in person or online?
Rampenthal said that some banks do not offer the option of opening a business account online, either to reduce the risk of identity theft or due to the nature of certain businesses.

Banks that do offer the option of applying for a business bank account online may take more time to review your documents and set up the account than they would if you applied in person.

If the bank you choose offers both application options, you’ll need to decide which option (and trade-off) is more preferable: the convenience of applying online but waiting longer for your account to be set up or applying in person and having your account set up the same day.

Key takeaway: Some banks don’t allow you to apply online. If your bank offers an online application, it may take longer to set up your account than if you were to apply in person.