No matter how big or small your business, opening a business bank account is something that all business owners need to tackle early on in the business development process. A business bank account isn’t the same as your merchant account, which will receive customer payments as part of your payment processing setup. It’s an account from which you’ll conduct almost every other financial function of your business, from paying vendors to running payroll. While it’s true that business bank accounts are necessary for every business – regardless of industry, structure or size – these accounts are far from one-size-fits-all and the process of finding the right one can seem daunting.

We’ll cover what you need to know about business bank accounts, how to choose the right one for your business’ needs, and how to open one.

What's in this article?

• What are business bank accounts?
  
• Types of business bank accounts
  
• Do I need a business bank account?
  
• Business bank account vs merchant account
  
• Which business bank account is best for you?
  
• What do I need to open a business bank account?
  
• How to open a business bank account
  

What are business bank accounts?

Business bank accounts are the financial home base for your business. Like individuals, businesses can open a variety of bank accounts, including current and savings accounts. Your primary business bank account is where you’ll hold funds for everything related to your business operations, including:

• Paying employees
  
• Paying vendors and suppliers
  
• Buying ads and other marketing expenses
  
• Receiving funds from investors
  
• Receiving sales revenue, either directly from customers and clients or in the form of payouts from your payments processor
  
• Paying taxes
  
• Ordering office supplies
  
• Applying for business loans and grants
  
• Ordering inventory
  
• Paying off the balance from business credit cards
  

Types of business bank accounts

There are three different types of business bank accounts:

• Business current account
  This is the account from which you’ll conduct the essential tasks of business operations. Most of the payment types listed above would be issued from your business current account.

• Business savings account
  Maintaining a separate savings account for your business offers the same benefits as a personal savings account. You can build up an emergency fund, set aside money for future goals and earn interest on your deposits. Most business current account providers also offer business savings accounts, so it can be advantageous to open one and start accumulating a financial cushion.

• Cash management account (CMA)
  A CMA is a managed account that combines the functionality of current, savings and investment accounts. If you’re looking for a more comprehensive and strategic approach to managing your cash on hand, or you want a higher interest rate on your business savings, a CMA might be a good option.

Do I need a business bank account?

According to the US Small Business Administration (SBA), if your business is an official entity or you’ve begun accepting payments for your goods or services, you need a business bank account. Once you’ve filed articles of organisation, officially incorporated and obtained a Unique Taxpayer Reference (UTR), you should open a business bank account as soon as possible.

SBA regulations aside, opening a business bank account at the earliest opportunity will make your life easier. No matter how big or small your business, even if you’re a sole proprietor, creating a clear distinction between business and personal funds is important for tax purposes – and your own sanity. There’s no better way to help you stay organised.

Business bank account vs merchant account

The difference between business bank accounts and merchant accounts relates to how they work and who operates them.

• Functionality
  A merchant account is a bank account used specifically for holding funds from a customer transaction before the money is deposited into the merchant’s business bank account. Unlike standard business bank accounts, which hold funds for a wide range of essential financial tasks, merchant accounts are used only to house funds from customer card transactions immediately after they’re processed, for a limited amount of time. Businesses don’t use this account for any other purpose.

• Where they’re located and how they’re operated
  Most, if not all, banks and credit unions offer business bank accounts. Merchant accounts can also work this way if you decide to open one yourself, although increasingly, many businesses are choosing a different approach to accessing the functionality they need to accept payments. Payments processors like Stripe give their users access to an umbrella merchant account as part of a broader scope of payment processing support. In other words, while you do need to choose a financial institution with which to open a business bank account, if you use a payments processor like Stripe, you don’t need to open a separate merchant account.

Which business bank account is best for you?

Businesses have more business bank account options than ever before, from offerings at traditional major banks to new online banking startups that cater to small businesses.

So how do you decide which business bank account is right for you? Start by working out which best fits your particular priorities and needs. Here are a few key factors that you should consider when vetting business bank account providers:

• Scope of services and account features
  Every business owner is different, but most will want a bank that offers the following services:

  • Online and mobile banking
    
  • Bill pay
    
  • Wire transfer
    
  • Debit cards
    
  • Paper cheques
    

Beyond the basics, you might want to open additional accounts with your bank, like a business savings, money market or retirement account. There’s no rule that says you have to get everything on your business banking wish list from one institution, but keeping your accounts within the same banking ecosystem will simplify your finances – and your life.

• Interest rates
  Once you know which banking products you’re planning to use (for instance, a business current account), you’ll want to research and compare interest rates on any account that you’re considering. A competitive interest rate will help your money grow, but remember to include bank fees when weighing the pros and cons of each bank’s offering.

• Service fees
  Speaking of fees, this is a big box to tick when comparing your banking options. Here are a few types of fees that you might encounter while shopping for a business bank account:

  • Minimum balance fees
    
  • Wire transfer fees
    
  • Maintenance fees
    
  • ATM fees
    
  • Overdraft fees
    

When you’re looking into possible homes for your business bank account, consider the complete picture by comparing interest rates, financial incentives and account fees.

• Branch locations
  For some businesses, proximity to a physical bank branch is vital. If you own a food truck, for example, and accept cash payments as well as card payments, being able to swing by a bank branch to make deposits is high on your priority list. For other types of businesses, the location of a bank branch won’t factor into the decision at all. For instance, if you run a consulting business and sell subscriptions for online courses, you might never accept a cash payment or walk into a bank branch. Assess what matters for you and your business and find a bank that fits those needs.

• ATM access
  It’s wise to check the size of a bank’s ATM network and enquire about possible out-of-network ATM fees. Tip: Many banks offer reimbursement for surcharges incurred by using ATMs outside their network, so if you’re considering a bank that doesn’t offer this, see if they make up for it in other ways.

• Transaction limits
  Some banks impose limits on the number of transactions account holders can make during a given period (daily, weekly or monthly). This may include caps on the number of deposits, withdrawals, bill payments or transfers between accounts. You might also run into limits on transfer amounts. If your business often processes a high number of transactions, you may want to choose a bank that offers unlimited transactions on business bank accounts.

• Integration with existing parts of your business
  If your business already has an internal financial infrastructure, it’s probably worth finding a bank account that works with your current setup. For example, if your business is already set up with payment processing, payroll and bookkeeping support that works well for you, you should look for a bank account that easily integrates with these other important financial components.

• Best business bank accounts for startups
  Startups have unique qualities compared to other businesses:

  • Access to capital
    Startups often require access to capital in order to fund their growth and development. This may include seed funding, venture capital or other types of financing.
    
  • Cash management
    Startups need to manage their cash flow carefully to ensure that they have enough capital to operate and grow their business. This may involve working with a bank to develop cash management strategies and tools.
    
  • Foreign currency transactions
    Startups that operate globally or work with international clients may need to conduct foreign currency transactions, which requires a bank that can facilitate these types of transactions.
    
  • Financial advice
    Startups often need financial advice and guidance to help them manage their finances effectively and make informed decisions about investments and other financial matters.
    

When financial institutions tailor bank account services to these needs, such accounts can prove a better fit and a more powerful tool for startups than conventional business bank accounts.

What do I need to open a business bank account?

Banks have varying requirements to open a business bank account, but generally you’ll need the following:

• Legal business name under which you registered your business
  
• If you’re incorporated, you’ll need your UTR (this functions like a National Insurance number for your business)
  
• Business postal address
  
• Personal address and contact information
  
• Driving licence or other form of identification
  
• Business’s articles of incorporation or articles of organisation (depending on which type of entity you are registered as)
  
• Any relevant business licences or permits
  
• Business’s partnership agreement (if applicable)
  

Not every banking institution will require all of these documents – and some will require more – but it’s easier to gather them ahead of time so that you’re prepared.

How to open a business bank account

Here are the steps involved in opening a business bank account:

1. Decide which type of account you want

Do you need a business current account? Current and savings? Current, savings and investment? Before you can start putting together a list of banks that might be a good fit, it’s helpful to decide which types of accounts you’re interested in opening.

2. Research bank account options

Refer back to the list of factors and features to consider when vetting different financial institutions. As you’re reading through the business bank account offerings on the market, it’s helpful to jot down a list of must-have features, as well as features that you’d like but could live without, and those that you probably won’t use and don’t find valuable. Remember to keep track of the different fees at each bank.

3. Narrow down your list

At this stage, try narrowing down your options to three to five banks that tick all of your boxes. This assessment could be based on the features that they offer through their accounts, their market positioning specifically catering to businesses in your industry or stage, or recommendations from other businesses whose needs mirror your own.

4. Have conversations with your top choices

It can be helpful to contact the financial institutions on your short list and ask for a brief conversation. You’ll have a chance to ask a real person your questions, and you might even receive unadvertised offers or incentives to open an account.

5. Choose a banking institution

By now, you’ve done your homework, you’re familiar with the options, and it’s time to choose.

6. Gather your required documentation

You already have a solid idea of what documents you’ll need to open the account, but once you’ve decided which bank to use, you can ask the bank directly for a list of required materials.

7. Submit documents and open the account

Once you have everything you need in one place, the process of opening the account is usually straightforward and brief. You’ll submit the required documents and be given onboarding instructions from the financial institution.

In most cases, the process of opening a business bank account isn’t overly complicated. The real challenge is tackling the volume of financial institutions that are competing for your business – it’s a crowded market, and it can be overwhelming to work out which institution is the right home for your business banking. But by assessing all the possible options and weighing them against your list of needs and priorities, you’ll be in the best position to make a strong choice.

How Stripe can help

Stripe Atlas makes it simple to incorporate and set up your company so you're ready to charge customers, hire your team and fundraise as quickly as possible.

Fill out your company details in the Stripe Atlas form in less than ten minutes. Then, we'll incorporate your company in Delaware, get your IRS tax ID (EIN) for you, help you purchase your shares in the new company with one click and automatically file your 83(b) tax election. Atlas offers multiple legal templates for contracts and hiring, and can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

Atlas founders also gain access to exclusive discounts at leading software partners, one-click onboarding with selected partners and free Stripe payments processing credits. Start your company today.

The Stripe Atlas application

It takes less than ten minutes to fill out the details of your new company. You'll choose your company structure (C corporation, limited liability company or subsidiary) and pick a company name. Our instant company name checker will let you know if it's available before you submit your application. You can add up to four additional cofounders, decide how you split equity between them and reserve an equity pool for future teammates if you choose. You'll appoint officers, add an address and phone number (founders are eligible for one year of a free virtual address if you need one), and review and sign your legal documents in one click.

Forming the company in Delaware

Atlas will review your application and file your formation documents in Delaware within one working day. All Atlas applications include expedited 24-hour processing service at the state, for no extra fee. Atlas charges US$500 for your formation and your first year of registered agent services (a state compliance requirement), and US$100 each year thereafter to maintain your registered agent.

Getting your IRS tax ID (EIN)

After your formation in Delaware is complete, Atlas will file for your company's IRS tax ID. Founders who provide a US Social Security number, US address and US phone are eligible for expedited processing; all other users will receive standard processing. For standard orders, Atlas calls the IRS to retrieve the EIN for you, using real-time IRS data to determine when your filing is likely to be available. You can read more about how Atlas retrieves your EIN and view current tax ID ETAs.

Purchasing your shares in the company

After Atlas forms the company, we'll automatically issue shares to the founders and help you purchase them so you formally own your share in the company. Atlas allows founders to purchase their shares with intellectual property in one click and reflect this in your company documents, so you don't need to mail and track cash or check payments.

Filing your 83(b) tax election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. Atlas can file and mail your 83(b) tax election in one click for both US and non-US founders—no trip to the post office required. We'll file it using USPS Certified Mail with tracking, and you'll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner perks and discounts

Atlas partners with a range of third-party tools to offer special pricing or access to Atlas founders. We offer discounts on engineering, tax and finance, compliance and operations tools, including OpenAI and Amazon Web Services. Atlas also partners with Mercury, Carta and AngelList to provide faster, automatic onboarding using your Atlas company information, so you can get ready to bank and fundraise even faster. Atlas founders may also access discounts on other Stripe products, including up to one year of free credits toward payments processing.

Read our Atlas guides for startup founders, or learn more about Stripe Atlas and how it can help you set up your new business quickly and easily. Start your company now.