Opening a corporate bank account is an important part of running a solid corporation. It may not seem necessary when you first start out, but it can prevent headaches in the long run. You’ll need to do some research and gather some documents before you can get started.
Why You Should Be Opening a Corporate Bank Account
When you’re running a corporation or even just a limited liability company, it’s extremely important that you don’t mix your personal funds with your business’s money, or you might risk losing your personal liability protection. If your company’s finances are mixed, creditors can start to come for your personal assets if your corporation goes through financial hardship and you find yourself in debt. It’s one thing when a corporation goes bankrupt, but when a human goes bankrupt, it can be life-ruining. You can, quite literally, lose your home.
A corporate bank account not only ensures your personal liability protection but it also looks more professional to clients. You get checks with your company’s name on them rather than a rinky-dink personal check with your home address. In addition, your accountant will probably thank you. During quarterly tax time, it’s a lot easier for your accountant to go over your records if all your money is tied to company credit cards and a corporate bank account.
Choose the Type of Account
When you’re opening a corporate bank account, you’ll have to choose from three different types: a business checking account, a business savings account and a merchant services account. They each have their own benefits, and in some cases, you’ll want all three of them. Think about how you use your personal accounts: You make day-to-day purchases with your checking account but pull in some interest if you put your leftover cash into a savings account. It’s the same with a corporate or business bank account.
Open a business checking account first so you can hit the ground running with making purchases, paying vendors and keeping your cash flow in line. Once your corporation starts to have a little bit more money in the bank, you’ll want to transfer that over to a savings account so you can accrue interest.
Merchant accounts are an entirely different story. You’ll need this if your corporation accepts credit card payments if you’re not using a service like Square or PayPal Here. These kinds of accounts front you the payment from your customers immediately before they pay their credit card company. The only caveat is that you need a business checking account in order to open a business merchant account.
Find an Account With Low Fees
Before you pick a bank with which you’ll be opening a corporate bank account, you should take a close look at the fees a bank charges. Business accounts rack up a lot of different fees. If your business is just starting out and the financial future looks uncertain, you probably don’t want to open a corporate bank account with a bank that has high early termination fees or large minimum balance requirements. For example, a TIAA Bank business checking account requires a daily balance of $5,000, whereas a Chase Total business checking account requires a daily balance of $1,500, and some banks don’t have minimum requirements at all.
Banks also sometimes charge per transaction for their business accounts. You’ll probably want to find a business account that has a high threshold. For example, Chase Total Business checking accounts let you make 100 transactions without a charge, but Capital One Spark Business Unlimited checking accounts allow you to make unlimited transactions. The only caveat is you need to maintain an average balance of $25,000.
Other fees charged by banks include monthly fees, ATM Fees, ACH daily batch fees (which is a charge you get when you settle all the credit card transactions for a day) and address verification service fees. Shop around for a corporate account at a bunch of different banks and see which fee structure works best for you.
Consider the Benefits
Business accounts generally have more fees than personal accounts, but they also have more benefits. You will definitely want to find a corporate savings account with a great interest rate. Most business saving accounts fall between 1% and 1.5% APY. Currently, Capital One offers a 2% APY, which is higher than a lot of its competitors.
Sign-on bonuses are a factor you should consider. Some banks will give you a couple hundred dollars of credit if you spend, say, $3,000 in the first 90 days of opening. Don’t let a sign-on bonus sway you if you’ll end up spending more than that in fees in the long run.
You’ll also want to consider access, especially if you frequently travel for business. Some banks have a large network of ATMs and branches, which is ideal if you’re always on the road. If not, you may just want to choose a bank that has the lowest fees in your immediate proximity.
Create a Corporate Resolution
Before you even gather all the documents you’ll need to open a corporate bank account, you should draft a corporate resolution. This tells the bank who has the authority to open a bank account in your company’s name and sign checks on behalf of the corporation.
Some banks require this, and others don’t as long as the people are also listed in your articles of incorporation. You can list more than one person in your corporate resolution, like a partner or a CFO, but make sure anyone you list can be trusted with the entirety of your business’s finances.
Bring Photo Identification
Most banks will ask for two forms of personal identification to initially open a corporate bank account. This includes passports, state-issued identification and drivers' licenses. They need to prove you’re actually connected to the business. Everyone who is listed on your corporate resolution must also present a valid form of photo identification.
Gather Your Documents
In addition to a corporate resolution and some photo identification, you’ll need a wealth of documents that prove your business is actually a legal business. This includes:
- A business license: You can acquire this from your state or local government. This basically says you’re allowed to conduct business in your state.
- A certificate of assumed name or DBA: Sometimes, businesses don’t operate under their legal name and use a trade name instead. If this is true for your corporation, you will need to prove your DBA (or "doing business as") name by registering it with your state’s secretary of state. Provide a copy of these DBA filings to your bank when opening an account.
- Articles of incorporation: You’ll need to present your articles of incorporation to your bank. This is proof that you’ve established a legal entity and also provides information about the number of shares you can issue and when your company was formed. Sometimes, you’ll need this stamped by the secretary of state office before opening an account.
- Corporate bylaws: The bank will need to see your bylaws to prove you’re a functioning corporation.
- Tax identification number: This is also known as an EIN or employer identification number, and you can get this from the IRS.
Once you have your documents in order, head to the bank to open an account. You’ll probably need an appointment, so call in advance.
- Fundera: What Do I Need to Open a Business Bank Account?
- ReadWrite: How to Open a Company Bank Account for Your Startup & Avoid the Pitfalls
- Magnify Money: Best Business Checking Accounts
- Magnify Money: The Best Business Savings Account Rates in 2019
- U.S. Small Business Administration: Open a Business Bank Account
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- Think carefully about which employees and/or corporate officers you wish to have banking authority. Have all required documents at hand so you can open your account(s) in one bank visit. Consider requiring two signatures on all checks and other bank-related transactions to maintain control.
- Don't create a corporate resolution that gives unlimited authority to one or two officers unless you trust them to handle all banking decisions and full monetary control. Don't neglect to have a system of checks and balances to maintain control and integrity of monetary transactions.
Mariel Loveland is a small business owner, content strategist and writer from New Jersey. Throughout her career, she's worked with numerous startups creating content to help small business owners bridge the gap between technology and sales. Her work has been featured in publications like Business Insider and Vice.