How to open a business bank account: documents, fees and online vs traditional banks

A business bank account is the first thing to set up after your LLC and EIN, and it does more than hold money. It's the clearest evidence that your company is separate from you, which is what protects your personal assets if the business is ever sued. It also turns tax season from an archaeology project into a download.

Opening one is straightforward. The friction comes from not having the right documents ready, picking an account with fees that don't suit how you take payments, or not knowing how deposit insurance works at an online bank. This guide covers all three.

Why you need one, even as a one-person LLC

Three reasons, in order of importance.

Liability protection. If you pay personal bills from the business account, or business bills from your personal card, a court can treat the LLC as your alter ego and set aside its protection. Separate accounts are the simplest way to show the company is a real, separate business.
Clean books. Every transaction in the business account is a business transaction. Your bookkeeping software can import it directly, and your accountant won't have to sort personal coffee from business software.
Credibility. Clients pay a business name, not you personally, and many payment processors require a business account to pay out to.

When to open it

Open the account after your LLC is approved and you have your EIN. Banks need both: the formation documents prove the company exists, and the EIN identifies it for tax. If you haven't got the EIN yet, our guide to getting an EIN shows how to get it free in about 15 minutes.

Sole proprietors don't need an LLC or an EIN to open a business account. Most banks accept your SSN, and a DBA certificate if you trade under a name other than your own.

What banks will ask for

Have these ready before you start. It makes the difference between a 15-minute application and a week of back-and-forth.

Formation documents. Your articles of organization for an LLC, or articles of incorporation for a corporation, as filed with the state.
Your EIN confirmation letter from the IRS.
Your operating agreement or bylaws, especially for a multi-owner company, so the bank can see who can act for it.
ID for owners and a controller. Under FinCEN's customer due diligence rule, banks identify each person who owns 25% or more of the company and one person who controls it, such as a managing member. Expect to give each one's name, date of birth, address and a government ID.
A business address. Some banks won't accept a registered agent's address or a PO box as your principal business address. Mercury, for example, accepts residential and international addresses but not registered agent addresses.
A DBA certificate, if the account will use a trade name.
An opening deposit, if the bank requires one.

Online bank or traditional bank?

Most new small businesses now choose between an online business bank and a traditional bank with branches. Neither is better in general. They suit different businesses.

Online business banks such as Mercury, Relay and Bluevine are usually technology companies that hold your deposits at partner banks. They open accounts online, often in days, and their free plans have no monthly fee. They tend to be strong on software: several checking accounts or envelopes, many cards, user permissions, and connections to accounting software. Their weak spot is cash.

Traditional banks have branches, take cash easily, and offer loans and credit lines once you have a relationship. They usually charge a monthly maintenance fee unless you keep a minimum balance, and their software is often weaker.

A simple rule: if customers mostly pay you by card, ACH or wire, an online bank will probably serve you better and cost less. If you take cash every week, weigh cash deposits first.

The fees that actually cost you money

Every bank advertises "no monthly fees." These are the fees that show up on real statements.

Monthly maintenance fees, often waived above a minimum balance. Online banks' free plans usually have none.
Wire fees. Mercury says domestic wires are free to send and receive. Bluevine charges up to $15 for an outgoing wire. Traditional banks often charge more.
International payments. Mercury lets you send US dollar international wires for free, or pay a flat $15 to cover intermediary fees, and charges a 1% conversion fee for wires in other currencies. Currency conversion is where international payments get expensive, wherever you bank.
Cash deposits. Mercury doesn't accept cash at all. Relay takes cash at Allpoint+ ATMs with no fee from Relay, up to $1,000 per deposit. Bluevine charges $4.95 per deposit at Green Dot retail locations, or $1 plus 0.5% at Allpoint+ ATMs.
Paid plans. Upgrades such as Mercury Plus at $29.90 a month, Relay Grow at $30 a month or Bluevine Plus at $30 a month add features or higher interest. You rarely need them at the start.

Our comparison of Mercury, Relay and Bluevine puts their plans side by side.

How deposit insurance works at an online bank

Standard FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category. A business's account is a separate category from the owner's personal accounts, so each gets its own coverage.

Online business banks hold your money at partner banks that are FDIC members. Many go further with a sweep network, which spreads your deposits across several banks so more of it is insured. Relay advertises up to $3 million in coverage this way, Bluevine up to $3 million, and Mercury up to $5 million. If you'll hold more than $250,000, ask how the sweep works and which banks hold your money.

How many accounts do you need?

One business checking account is enough to start. Many owners soon add a second or third, because separating money by purpose makes it harder to spend what isn't really yours.

An operating account for everyday income and expenses.
A tax account. Move a fixed percentage of every payment into it, so the money for quarterly estimated taxes is there when it's due.
A reserve or savings account for a few months of expenses, ideally one that earns interest.

Online business banks make this easy. Relay's free Starter plan includes up to 20 checking accounts per business, and other online banks offer sub-accounts or "envelopes" for the same purpose. At a traditional bank, each extra account may carry its own fee or minimum balance, so check before you open several.

How to apply

Choose the bank using the fees and features above.
Gather the documents: formation documents, EIN letter, operating agreement, IDs and your business address.
Apply. Online applications take about 15 to 30 minutes. Some banks ask for a short description of what the business does and where its money comes from.
Answer follow-up questions. Banks may ask for more detail about your business, your customers or your website. Reply promptly.
Fund the account with a transfer or deposit.
Set it up properly: connect it to your accounting software, order cards, and add anyone who needs access with the right permissions.
Move payments over. Update your payment processor, invoice details and any client payment instructions to the new account.

If you're turned down

Banks decline business accounts more often than people expect, usually for reasons that can be fixed.

Missing or inconsistent documents, such as a name that doesn't match the state filing exactly.
A business type the bank doesn't serve. Many online banks don't serve certain industries, such as cannabis, gambling or some financial services.
Where the owners live. Some banks can't serve founders in certain countries. Mercury publishes a list based on country of residence.
Address problems, such as a registered agent's address used as the business address.

Ask the bank whether you can fix the issue and reapply. If not, try another bank. A decline at one fintech doesn't predict a decline at the next, and a local bank or credit union where you can talk to someone in person is often the most flexible option of all for an unusual business.

After it's open

Pay every business expense from the account, and transfer money to yourself deliberately, as an owner's draw or salary, never by paying personal bills directly. Our guide to paying yourself from an LLC explains how. Then connect the account to your bookkeeping, covered in our guide to small business bookkeeping, and you'll spend minutes a month on records instead of a weekend in April.

Frequently asked questions

What do I need to open a business bank account?

Usually your formation documents (such as articles of organization), your EIN confirmation letter, your operating agreement or bylaws, and a government ID for each owner of 25% or more plus one person who controls the business. Sole proprietors can often use their SSN instead of an EIN and a DBA certificate if they use a business name.

Can I open a business bank account online?

Yes. Online business banks such as Mercury, Relay and Bluevine open accounts entirely online, often within a few business days. Traditional banks increasingly allow online applications too, though some still want you in a branch, especially for multi-owner businesses.

Is my money safe in an online business bank?

Online business banks are usually financial technology companies that hold deposits at partner banks insured by the FDIC. Standard FDIC coverage is $250,000 per depositor, per insured bank, per ownership category, and many online banks use sweep networks to spread deposits across several banks for higher coverage, such as up to $3 million or $5 million.

Do I need a separate bank account for my LLC?

Yes. Keeping the LLC's money separate from yours is central to protecting the liability shield, and it makes bookkeeping and taxes far simpler. Open the account as soon as you have the EIN, and pay every business expense from it.

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