Category: Starting a Business

One of the first practical steps for a new business is opening a business bank account. Separating business and personal finances makes bookkeeping easier, looks more professional to clients and can matter for legal and tax reasons.

This guide covers general considerations. It is not financial, legal or tax advice. Account features, fees and requirements vary by bank and change over time. Check current terms directly with banks and consult qualified professionals.

Why Open a Business Bank Account?

Cleaner Bookkeeping

A dedicated account keeps business transactions in one place. See bookkeeping basics for small business.

Professionalism

Clients may pay a business name rather than a personal name.

Separation of Finances

Professionals often recommend keeping business and personal finances separate, particularly for LLCs and corporations. Ask an attorney or accountant how this applies to you. See how to start an LLC.

Easier Tax Preparation

Separate accounts make it easier to identify business income and expenses.

Types of Business Accounts

Business Checking

For daily transactions, deposits and payments.

Business Savings

For setting aside money, such as for taxes or emergencies.

Merchant Accounts

For accepting card payments, often provided by payment processors.

Traditional Banks vs. Online Banks

Traditional Banks

Pros: Branches, in-person service, cash deposits and broader services such as loans.
Cons: May have more fees or minimum balance requirements.

Online Banks and Fintech Platforms

Pros: Often fewer fees and modern apps with integrations.
Cons: Limited cash deposits and in-person support. Some fintech platforms partner with banks to provide accounts; check how deposits are held and insured.

Credit Unions

Some credit unions offer business accounts with competitive terms. Membership requirements apply.

Features to Compare

• Monthly fees and how to waive them
• Minimum balance requirements
• Transaction limits
• Cash deposit options
• ATM access
• Wire and transfer fees
• Mobile app and online banking
• Integrations with accounting software
• Multiple users and permissions
• Debit cards and spending controls
• Deposit insurance coverage

Documents Typically Required

Requirements vary by bank and business type, but commonly include:

• Government-issued identification
• EIN or Social Security number for sole proprietors
• Business formation documents for LLCs and corporations
• Business licenses where applicable
• Operating agreement or ownership information

Check with your bank before applying.

Setting Up Your Account for Success

Connect to Accounting Software

Bank feeds import transactions automatically.

Set Up Tax Savings

Some owners transfer a portion of income to a savings account for taxes. Ask a tax professional how much to set aside.

Use Business Cards for Business Expenses

Use the business debit or credit card for business purchases. See our expense tracking apps guide.

Enable Security Features

Use two-factor authentication and alerts.

Pay Yourself Properly

How you pay yourself depends on your business structure. Ask an accountant.

Accepting Payments

Connect your account to payment processors and invoicing software. See invoicing software for freelancers.

Common Mistakes

• Mixing personal and business transactions
• Choosing an account with fees that do not fit your activity
• Ignoring cash deposit needs
• Not connecting to accounting software
• Skipping security features

Questions to Ask a Bank

Before opening an account, consider asking:

1. What are the monthly fees, and how can they be waived?
2. Are there minimum balance requirements?
3. How many transactions are included each month?
4. How can I deposit cash?
5. What are fees for wires and other transfers?
6. Can I add other users with limited permissions?
7. Which accounting software integrations are available?
8. How is my deposit insured?
9. What support channels are available?
10. What documents do I need to open the account?

Write down the answers and compare them side by side.

Matching Accounts to Business Types

Freelancers and Service Businesses

Often value low fees, easy transfers, invoicing integration and good mobile apps.

Retail and Cash Businesses

Often need convenient cash deposits and merchant services.

Growing Businesses

May value lending relationships, multiple users and treasury features.

Reviewing Your Account Over Time

As your business grows, your banking needs may change. Review fees and features annually, and consider whether a different account type or bank better fits your current activity.

Business Banking Checklist

• Business checking account opened
• Savings account for taxes or emergencies considered
• Accounting software connected
• Business card used for business expenses
• Two-factor authentication and alerts enabled
• Users and permissions set
• Fees reviewed against activity
• Deposit insurance confirmed

Business Credit Cards

A business credit card can help separate expenses and simplify tracking. Compare fees, interest rates and features carefully, and pay balances on time. Ask a financial professional whether a business card fits your situation.

Keeping Accounts Secure

Business accounts can be targets for fraud. Use strong, unique passwords stored in a password manager, enable two-factor authentication, set alerts for large transactions and verify payment change requests directly with vendors before sending money. Train anyone with account access to recognize phishing attempts.

Opening the Account

Once you have chosen a bank, gather your documents, complete the application and fund the account. Then connect it to your accounting software, set up alerts, order cards if needed and update your invoices and payment details so clients pay into the new account. Notify any existing clients and vendors of the change and confirm the first few payments arrive correctly. Keep your old personal account separate from business activity from that point on.

A Note on Changing Banks

Switching banks later is possible but takes coordination. Keep the old account open until all recurring payments, deposits and integrations have moved, then close it once nothing new arrives.

Frequently Asked Questions

Do sole proprietors need a business account?

It is often recommended for cleaner records. Ask a professional.

Can I open an account online?

Many banks offer online applications.

What documents do I need?

Commonly ID, EIN or SSN and formation documents.

Are online banks safe?

Check deposit insurance and how accounts are held.

Should I have a business savings account?

Many owners use one for taxes and emergencies.

The Bottom Line

A business bank account separates finances, simplifies bookkeeping and supports professional operations. Compare fees, features, cash needs and integrations, and confirm requirements with banks and professionals.

---

Editorial note: Biz Benchly is independent and reader-supported. This guide is based on research into manufacturer documentation, published specifications and widely accepted best practices; we have not been paid to mention any product. If we add affiliate links in the future, they will be clearly disclosed per our Affiliate Disclosure.

A limited liability company (LLC) is a common business structure in the United States. Many small-business owners and freelancers consider forming one. The process varies by state, but the general steps are similar.

Important: This article is a general overview of the typical process. It is not legal, tax or financial advice. Requirements, fees and rules vary by state and change over time. Whether an LLC is right for you depends on your circumstances. Consult a qualified attorney, accountant or your state’s official business resources before making decisions.

What Is an LLC?

An LLC is a business entity created under state law. It is commonly described as combining some features of corporations and partnerships. The specific legal and tax implications depend on your situation and state, which is why professional advice is important.

Typical Steps to Form an LLC

Step 1: Choose a State

Many businesses form in the state where they operate. Some consider other states, but forming elsewhere can create additional requirements. A professional can help you decide.

Step 2: Choose a Name

States typically require that an LLC name:

• Be distinguishable from other registered businesses in the state
• Include a designator such as “LLC” or “Limited Liability Company”
• Avoid restricted words without approval

Most states offer an online business name search. You may also want to check domain name availability and trademarks. Some states allow you to reserve a name for a period of time.

Step 3: Appoint a Registered Agent

A registered agent receives official legal and government documents on behalf of the LLC. States have requirements for registered agents, such as having a physical address in the state. Some owners serve as their own agent; others use a registered agent service.

Step 4: File Formation Documents

You typically file a document often called Articles of Organization or a Certificate of Formation with the state, usually through the secretary of state or a similar office. These documents often include:

• LLC name
• Registered agent information
• Business address
• Management structure
• Organizer information

States charge filing fees, which vary. Check your state’s official website for current fees and forms.

Step 5: Create an Operating Agreement

An operating agreement describes how the LLC will be run, including ownership, management, voting and what happens if a member leaves. Some states require one; even where not required, many professionals recommend having one. An attorney can help draft it.

Step 6: Obtain an EIN

An Employer Identification Number (EIN) is issued by the IRS and is used for tax purposes. Many LLCs obtain one, especially if they have employees or multiple members. You can apply through the official IRS website. Be cautious of third-party sites that charge fees for services the IRS provides free.

Step 7: Open a Business Bank Account

Keeping business and personal finances separate is important. See our business bank account guide.

Step 8: Obtain Licenses and Permits

Depending on your business type and location, you may need business licenses or permits at the state, county or city level. Check with local and state agencies.

Step 9: Understand Ongoing Requirements

Many states require periodic reports and fees to keep the LLC in good standing. Other ongoing obligations may include tax filings and maintaining a registered agent. Mark deadlines on your calendar.

Tax Considerations

LLC taxation can be complex and depends on how the LLC is classified and on your circumstances. A qualified tax professional can explain options and obligations.

Setting Up Business Systems

Once your LLC is formed, set up systems to run it:

• Bookkeeping. See bookkeeping basics for small business.
• Invoicing. See invoicing software for freelancers.
• Expense tracking. See our expense tracking apps guide.
• Payroll if you hire. See our hiring your first employee checklist.

DIY vs. Formation Services vs. Attorneys

DIY

Filing yourself through the state website can be straightforward. You handle forms and deadlines.

Formation Services

Online services file on your behalf for a fee and may offer registered agent services. Compare what is included.

Attorneys

Attorneys provide legal advice tailored to your situation and can draft operating agreements.

Common Mistakes

• Skipping research into state requirements
• Mixing personal and business finances
• Missing annual report deadlines
• Not having an operating agreement
• Assuming an LLC is right without professional advice

Using Official Resources

Every state has an office, often the secretary of state, that handles business filings. Official state websites usually provide:

• Name search tools
• Formation forms and online filing
• Current filing fees
• Annual report requirements
• Contact information for questions

The U.S. Small Business Administration and the IRS also publish free resources for new business owners. Start with official sources before paying for third-party services, and be cautious of mailings that look official but come from private companies offering paid compliance services.

Keeping Good Records

Keep copies of formation documents, your operating agreement, EIN confirmation, licenses and annual report filings in a secure place. Many owners keep both digital and paper copies. These documents are often requested when opening bank accounts, applying for loans or working with professionals.

After Formation: A First-Month Checklist

• Store formation documents and the operating agreement securely
• Obtain an EIN if needed
• Open a business bank account
• Apply for required licenses and permits
• Set up bookkeeping
• Calendar annual report and tax deadlines
• Review insurance needs with a qualified agent

Working through this list early helps your new business start on a solid footing.

Frequently Asked Questions

How long does it take to form an LLC?

It varies by state and filing method. Check your state’s processing times.

How much does it cost?

Filing fees vary by state. Check official state websites.

Do I need an attorney?

Not always, but an attorney can provide advice for your situation.

Do I need an EIN?

Many LLCs need one. Check IRS guidance or ask a professional.

Is an LLC right for me?

It depends on your circumstances. Consult qualified professionals.

The Bottom Line

Forming an LLC typically involves choosing a name, appointing a registered agent, filing formation documents, creating an operating agreement, obtaining an EIN and meeting ongoing requirements. Requirements vary by state, so use official resources and consult qualified professionals.

---

Editorial note: Biz Benchly is independent and reader-supported. This guide is based on research into manufacturer documentation, published specifications and widely accepted best practices; we have not been paid to mention any product. If we add affiliate links in the future, they will be clearly disclosed per our Affiliate Disclosure.