If you’re a freelancer or a small business owner, then you need to open a business checking account that’ll help you keep your business and personal finances separate.
In this digital age, more and more banks are allowing potential customers to open a business checking account online in order to make the process more efficient and provide greater convenience to their customers.
That said, opening a business checking account still involves a more complicated process than simply opening a personal account. You’ll need documents and licenses – such as your Employer Identification Number and Articles of Incorporation – that simply isn’t a concern when opening a personal bank account.
As a result, it can be quite daunting to navigate the various options and requirements of opening a business checking account online. In this article, we’ll guide you through the steps and provide you with all the information you need to finally check this task off your to-do list.
Do You Need a Business Checking Account?
Before we start talking about the technicalities of opening a business checking account online, it’s first important for you to determine whether or not you even need a separate account to handle your business finances.
The U.S. Small Business Administration (SBA) states that business checking accounts offer several benefits that personal accounts do not, such as better access to financing, limited liability protection, fraud protection, and much more. To help you make an informed decision, we’ll discuss a few of them in greater detail below.
- Limits Personal Liability: Having a business checking account will keep your personal funds separate from your business funds, thus limiting your personal liability in case of any legal disputes or unpaid business debts.
- Increased Professionalism: With a business checking account, you can ask your investors and customers to make checks to your business instead of asking them to make checks to your name as an individual. A business account makes it easier to do business with other companies, enables your customers to make payments via credit cards, and even allows you to delegate some of the banking tasks to your employees.
- Better Access to Financing: Banks and other financial institutions will be more willing to lend to a small business that has a separate business checking account, as it demonstrates a higher level of professionalism and organization. Many banks also provide business credit cards and lines of credit to the holders of their small business checking accounts.
- Fraud Protection: Many banks offer special fraud protection features to those who hold business checking accounts. These features include purchase protection for customers, protection of customer data, and alerts for suspicious activity. These features can help you enhance customer satisfaction and reduce the risk of fraudulent transactions.
The Pros and Cons of a Business Checking Account
Like any business decision, opening a business checking account online will also come with its own pros and cons, some of which we’ll touch upon in this section.
The Pros of a Business Checking Account
- A separate business checking account will allow you to avoid any confusion between your personal and business expenses.
- It will also add a sense of professionalism and credibility to your small business, inspiring confidence among lenders, customers, and investors.
- It will provide your small business with access to important financial tools like mobile deposits, online banking, credit card payment processing, etc.
- It will make it easier to prepare tax returns for your business since you’ll have a clear record of all business income and expenses for the year.
- It will allow you to constantly monitor your firm’s cash flow and make informed decisions about your business finances.
The Cons of a Business Checking Account
- You’ll usually need to pay a monthly service fee for your business checking account, as well as maintain a minimum balance in your account. On the other hand, a personal bank account doesn’t involve any fees and can be maintained even with a $0 balance.
- Maintaining a business checking account will require you to perform certain administrative tasks like reconciling bank statements and tracking your receipts, which might take time away from your business.
- Typically, your business checking account will offer a lower interest rate than a personal savings account. As a result, you might miss out on some interest income by keeping your money in the former.
Can You Open a Business Checking Account Online?
In this digital age, most banks allow potential customers to open a business checking account online from the comfort of their home or office.
So, in this section, let’s dive in and look at some of the common questions people have when they’re planning to open a business checking account online.
Can You Open a Bank Account for Your LLC Online?
Yes, you can open a checking account for your Limited Liability Company (LLC) online. To begin the online application process for a business bank account, you’ll usually need to provide the bank with the following information:
- Legal name and address of the business
- Business Employer Identification Number (EIN) or business tax ID number
- The date (month/year) that the business was established
- The country/state of business formation and operation (country must be the U.S.)
- Personal information of the owners (including date of birth and social security number)
- Article of Organization/Certificate of Organization
- Business License
After you’ve submitted the application (along with all required documents and information), the bank will begin the review process and may ask you for additional information or documentation if needed. If the review process is successful, you’ll be able to start using your business checking account to make and receive payments.
Can You Open a Business Checking Account with Just an EIN Number?
The Employer Identification Number (EIN) is a unique, nine-digit tax ID number issued to your business by the Internal Revenue Service (IRS).
If your business has any employees, then it must have an EIN. However, certain types of businesses – such as sole proprietorships and single-member LLCs – may not need an EIN as long as they do not have any employees.
Most banks will want to know your EIN before allowing you to open a business checking account online. However, you usually cannot open a business account with only an EIN. Some of the other documents/information you’ll need to provide are as follows:
- Personal identification documents include a driver’s license, passport, or any other government-issued photo ID. If the small business has more than one owner, then all of their IDs will have to be submitted.
- Your DBA (Doing Business As) certificate will be required if the legal name of your business is different from the name under which it has been registered with the local or state government.
- Some banks may ask you to provide a business operating license, which can serve as proof that your business is registered with the government, is paying taxes, and has permission to operate in the state.
- If your small business is structured as an LLC, then you might be required to provide Articles of Organization as well as an operating agreement.
So, be sure to gather all the necessary documents before you begin the process of applying for a small business checking account online.
Opening a Business Checking Account Online vs. Traditional Methods
Most banks today allow you to open a business checking account either through an online application process or through the traditional, in-person method.
Both the online and in-person options have their own advantages and drawbacks, and your needs and preferences as a small business owner will largely determine which one is right for you.
Online Account Opening
Some of the major advantages of opening a business checking account online are:
- You can complete the application process from the comfort of your home or office.
- The application process is fast and convenient, requiring minimal third-party intervention.
- Your online application will be reviewed within a few business days and will soon be approved if you meet all the requirements.
- With an online account opening, you may even get slightly lower monthly fees and more competitive interest rates.
On the other hand, opening a business checking account online may also come with certain drawbacks:
- Online account opening does not allow you to talk directly with a representative from the bank to ask questions, seek suggestions, etc.
- Instead, you’ll have to rely on customer support service for answers to any questions you might have, and the speed and quality of such customer support can vary widely from one bank to another.
In-Person Account Opening
Here are the major pros of the traditional, in-person account opening method:
- The traditional method of opening a business checking account involves face-to-face interaction with a representative of the bank, which might be helpful if you value a more personal touch in your business dealings.
- A face-to-face interaction ensures that all your questions and concerns will be answered in real-time, with no need to wait for customer service to get back to you.
However, this method does have certain cons, such as:
- Physically going to the bank to open a business checking account could be very time-consuming and require more effort on your part.
- It could also be a hassle if your business is location-independent and most of your employees or co-founders work remotely.
At the end of the day, both the online and traditional account opening methods will help you arrive at the same goal. So don’t worry too much about the details and choose the one that best suits your needs.
How To Open a Business Checking Account Online
If you have a computer or smartphone with access to the internet, then you can open a business checking account from any part of the country to efficiently manage the income and expenses associated with your small business. Here are a few of the simple steps you need to follow:
Determine Your Business Needs
To make the right choice, you must first determine what types of banking services your business requires the most.
Do you need a way to process credit card payments from customers? Are you trying to secure financing to grow your business? Is security your primary concern?
The needs and priorities of your business will determine which type of business checking account is right for you and which bank you should open an account with.
Choose Which Type of Business Account to Open
There are three major types of business accounts you can choose from. These are:
- Business checking account: This account is best suited for the basic financial tasks essential for the smooth operation of your business, such as tracking expenses, managing payroll, etc.
- Business savings account: This is the account you should be using to hold the income from your business (for the short term) and earn a slightly higher interest rate in the process.
- Merchant account: By setting up a merchant account for your small business, you’ll be able to accept credit and debit card payments. You’ll also benefit from other merchant services like chargeback management and fraud protection.
Compare Online Banks and Other Fintech Providers
Once you’ve decided what type of business account you want to open, it’s time to compare the different banks and financial institutions in terms of the features they offer, the fees charged, etc.
Here are a few points you should consider when choosing which bank you want to open your business account with:
- Do they offer 24/7 online banking, bill pay, remote deposits, and other remote banking services?
- Do they charge a high monthly maintenance fee for their business accounts?
- Do they offer tools and analytics like cash flow insight, spend analysis, etc., to help improve your business operations?
- Do they offer a free business debit card and robust overdraft protection facilities?
- Do they offer cash rewards for everyday business purchases?
Keeping an eye on these factors will help you compare the different banks and fintech providers and choose the right one for your business needs.
Prepare the Requirements
Once you’ve chosen the bank, you want to work with, go to their website and check out their requirements for opening a business checking account online. Most banks will require the following information and documents:
- Your Employer Identification Number (EIN)
- Your Social Security Number (SSN) if you’re a sole proprietor
- The Doing Business As (DBA) certificate, if the legal name of your business is different from the one you use for advertising and operations
- Some state-issued personal identification documents of the owner, such as a passport or a driver’s license
- Article of Organization, if your business is an LLC
- An operating agreement, if your business is a corporation or a partnership
You should check the specific requirements of your chosen bank before you begin the process of applying for a business checking account online.
Fill Out and Submit Your Information
Once you’ve identified the type of business bank account you want to open and gathered all the required documents, it’s time to fill out the online application form on the website of your chosen bank.
After submitting the form (along with the necessary documents), you should wait at least two weeks for the bank to review the online application and either approve or reject it.
If you haven’t received a reply at the end of two weeks, you may call or email the bank for an update on your application.
Bottomline: Opening a Business Checking Account Online
The process of opening a business checking account online may at first seem a bit confusing and daunting. But with a bit of research and some basic knowledge of technology, you can set up a much-needed bank account for your small business within a fortnight without ever having to visit the bank physically.
