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Opening a business bank account online can seem daunting, but it’s a crucial step toward financial clarity and security for your company. With the digital age making banking more accessible, you can set up your business’s financial foundation from the comfort of your office or home.
This guide outlines four straightforward steps on how to open a business bank account online. It ensures you understand the documentation needed, how to choose the right bank, and how to make your initial deposit, while also providing tips for a smooth application process. Whether launching a startup or expanding your business, these steps will help streamline the opening process, and hopefully, you’ll find your business on the way to profitability.
How to Open a Business Bank Account Online
1. Finding the Right Bank Account
There are so many options when it comes to business bank accounts. Should you go with an online bank or a brick-and-mortar one? We’ll explore the benefits of each so you can decide what works best for you.
But first, let’s review the most common business bank accounts: free, standard checking, online, and savings accounts.
- Free business bank accounts are delivered in their name. You’ll never pay a monthly maintenance fee, which is ideal for companies that don’t make daily transactions. Online platforms primarily offer free business bank accounts. They have many banking features similar to their traditional counterparts, such as deposits, transfers, and withdrawals.
- Small business checking accounts charge a low monthly fee, though many financial institutions offset this with welcome offers and sign-up bonuses. This platform gives you access to various branches and ATMs nationwide. You can write checks on behalf of your business and use company credit cards, too.
- If you don’t need a physical branch or ATM, consider opening an online business checking account. Online banks typically don’t charge fees or handle cash deposits. Put your money to work with an account that offers an annual percentage yield (APY) of more than 1%.
- Conventional business savings accounts also have APYs above 1%. This makes them one of the safest options for your money, maximizing company savings for future transactions, expansions, and emergencies. Several varieties include business CDs, high-yield savings, and money market accounts.
Once you know what you want, you can narrow your list to the banks that offer those accounts.
2. Choosing the Best Type of Business Bank Account
How you select a business bank will depend on your company’s size, net income, number of employees, and many other factors.
Many people open business accounts at banks where they’re already customers. For example, if you’re a Bank of America user, you have a relationship with the staff and understand what to expect from their financial products and services. The best banking experiences should be seamless in all aspects.
Start by selecting a bank that offers all the services you need, whether in-branch or online. Core in-branch services include making deposits and speaking face-to-face with customer service representatives. Online banking lets you view your balance, initiate transfers and wires, and pay your bills.
Other things to consider when choosing a business bank account include:
- Fees
- Proximity of branches and ATMs
- Website and mobile app quality
- Bookkeeping integration
- Annual percentage yields
- Other financial products and services, such as loans and credit cards
Most business bank accounts are similar, so don’t overthink it. What separates one bank from another is the people. The knowledgeable and friendly staff will make all the difference when using your bank account.
Make sure your financial institution can grow with you. A sage choice will make operating your company’s finances easier and give you more time to focus on running your business.
Related: Best Banks for Small Business
3. Documents Needed, Online or In Person
The documents you need to open a business bank account vary between institutions. However, most banks have the same requirements for online and in-person accounts. As an example, here’s the paperwork you’d need to open some business accounts:
- Two forms of identification, including one government-issued ID, such as a passport, birth certificate, or driver’s license.
- A Tax Identification Number (TIN), Employer Identification Number (EIN), or Social Security number. Non-citizens can use an ITIN.
- Basic information about your business, such as your address, phone number, number of employees, and annual sales.
Depending on your company type, you’ll need to submit additional information. If you run a sole proprietorship, the owners or other authorized representatives must be present when you open the account. You should also bring an assumed name certificate or company trust.
Other structures, such as unincorporated business organizations or associations, have more complicated setups. An authorized representative must be present with the supplemental paperwork, which includes a letter with a company masthead listing current business partners.
The process diverges depending on your EIN. If you have your own EIN, you’ll need articles of association, a charter, and documents from the IRS approving your EIN. If you have a parent company, you should have a letter of approval from the national or regional office.
4. How to Deposit Your Funds into Your Business Account
You can deposit money into your bank account in person, online, and via mobile. The question is: How do you want to account for those funds? You have two options, both with distinct risks and tax consequences.
First, loans. If you want to receive loans, you’ll need a business loan agreement between you and your lender. The contract establishes the loan terms, including how much you’re borrowing and when you’ll repay the sum with interest.
Make sure the loan qualifies as an arms-length transaction. Both parties should act independently without outside pressure or duress. Arms-length transactions are especially important if you receive money from friends or family members who may have a potential conflict of interest.
The federal government taxes the interest on the loan when you repay it. The company should send the lender a Form 1099-INT accounting for the total interest received. Note that you’ve already paid taxes on the principal and don’t need to pay those again.
Second investing. Investing offers another way to bolster your bank account. If the business isn’t incorporated, you can collect checks or money orders before depositing them. In return, you give investors shares in the company, which appear as owner equity on your balance sheet.
A similar process applies if you run a corporation. Investors become shareholders and can take their money out at any time. If you invest in your business, the IRS won’t tax your withdrawals because you should have already paid taxes on your company’s net income.
Benefits of Opening a Business Bank Account
If you want to run a successful company, you have to act the part. A business bank account gives you a professional appearance. Thanks to small gestures like company credit cards and checks printed with your logo, vendors and investors will perceive your organization as more credible.
A business bank account helps centralize your financial information. It keeps you organized, which is handy without in-house accountants. The bank automatically separates business and personal transactions while keeping track of overall profitability.
The bank’s organization saves you time during tax season. The clear and detailed paper trail makes filing tax returns more straightforward and minimizes your chances of IRS penalties. You can also use the business bank account to deduct expenses from your returns.
Credit bureaus will take notice if you maintain your business bank account long enough. The credit monitoring agencies will raise your company’s credit score after you demonstrate a reliable pattern of borrowing money and paying off debts. Some of the other benefits of high credit scores include:
- Lower interest rates
- Improved reputation
- More favorable lending terms
- Increased negotiating power
- Approval for higher spending limits
- Avoidance of certain penalty fees
Your customers will also benefit from your business bank account. Companies can use the platform to accept payments from merchant accounts, which means clients can use credit cards. Most financial institutions handle banking and merchant finances together for added ease.
Two Excellent Business Bank Account Options
Bluevine
The Bluevine Business Checking Account is a compelling option for small business owners looking for a seamless and cost-effective way to manage their finances. This account distinguishes itself with its fee-free structure, meaning no monthly service fees, no non-sufficient funds (NSF) fees, and no minimum balance requirements, making it an excellent choice for businesses at all stages.
Additionally, Bluevine offers an attractive interest rate on balances, which is relatively rare for a business checking account. Thus, businesses can earn returns on their parked funds. With the ease of online account management and mobile banking features, businesses can efficiently handle their day-to-day financial transactions and cash flow management with minimal hassle.
Moreover, the Bluevine Business Checking Account is designed with the modern entrepreneur in mind, providing features such as the ability to deposit checks via the mobile app, make electronic payments, and even access fee-free ATMs across a vast network. The account also supports integration of third-party payment services, facilitating smoother transactions for e-commerce and brick-and-mortar retail businesses.
For businesses looking for more than just a place to store their funds, Bluevine’s emphasis on providing a blend of traditional banking services with the flexibility and convenience of fintech innovations makes it a standout choice in the crowded market of business banking solutions.
Lili
The Lili Basic Checking Account is tailored for freelancers and independent contractors looking to simplify their financial management. It combines personal and business banking features into a single, easy-to-use account, eliminating the need for multiple banking relationships. With no monthly fees and no minimum balance requirement, Lili makes banking accessible and affordable for freelancers at various stages of their careers.
The account supports mobile check deposits and direct deposits and provides a Visa business debit card, which can be used worldwide wherever Visa is accepted. Additionally, account holders benefit from fee-free access to thousands of ATMs across the country, adding a layer of convenience for those who need cash on the go.
One of the standout features of the Lili Basic Checking Account is its built-in expense management tool, which allows users to automatically categorize transactions for tax purposes, potentially saving hours of bookkeeping. The account also offers a “Save for Taxes” feature, where users can set aside a percentage of income for taxes with each deposit, making it easier to manage tax obligations.
Lili provides valuable financial insights and expense reports, helping freelancers understand their spending patterns and make informed financial decisions. For freelancers seeking a banking solution that caters to their unique needs, the Lili Basic Checking Account offers a compelling mix of features designed to streamline financial operations and enhance their banking experience.
Frequently Asked Questions (FAQ)
Can I open a business bank account online if my business is not yet registered?
Banks usually require your business to be legally registered. Sole proprietors might open an account with their SSN and business evidence. Other businesses need registration and an EIN.
Is it possible to open a business bank account online for a business outside the country?
Opening an account for a foreign business depends on the bank’s policies and the regulatory environment. It typically requires additional documentation, an understanding of tax regulations, and sometimes a physical presence. Contact banks directly for specific requirements and consult with a financial advisor for international banking.
Final Thought on Opening a Business Bank Account Online
Opening a business bank account online simplifies the financial management of your company, providing a streamlined and efficient process to ensure your business’s monetary operations are handled easily. By gathering the necessary documentation, such as personal identification, business licenses, and incorporation papers, and choosing the right bank that aligns with your business needs, you can initiate the application process online in just a few clicks.
While the exact requirements and process may vary depending on the bank and the type of business account, the convenience of online applications allows business owners to set up their banking solutions swiftly, often without the need to visit a branch. Selecting a bank that offers tailored business banking solutions, competitive fees, and robust online banking features will set the foundation for your business’s effective financial management and growth. With these steps, you’re well on your way to establishing a business bank account online, marking a crucial step in your business journey.