How to open a business bank account

Why a separate account matters

Mixing personal and business money is one of the most common mistakes new owners make. A separate business account makes bookkeeping and tax filing much easier, gives you a clear record of income and expenses, looks more professional to customers and suppliers, and for LLCs and corporations helps keep business and personal finances separate, which supports the liability protection those structures are meant to provide. It also makes paying employees and payroll taxes far simpler.

See how EZTime works for your industry, from time tracking to shift scheduling.

Before you apply

1. Choose and register your business structure: sole proprietorship, partnership, LLC or corporation. See Form 8832 and Form 2553 for tax classification elections.
2. Get an EIN (Employer Identification Number) from the IRS. It is free and required if you will have employees or if you are an LLC with more than one member or a corporation. Sole proprietors without employees can often use their Social Security number, but many banks still prefer an EIN.
3. Register a trade name (a “doing business as” or DBA name) if you operate under a name different from your legal name or entity name; banks usually need proof of it.
4. Get any required local business licenses.

Documents banks usually ask for

Banks must verify the identity of business customers and, in most cases, of the people who own or control them, so expect to provide personal identification and ownership details for significant owners. Requirements vary by bank, so check the list before you go.

Choosing an account

• Monthly fees and how to get them waived, for example with a minimum balance.
• Transaction limits: how many deposits, checks or transfers are included each month.
• Cash deposits: essential for retail, restaurants and services that take cash; check limits and fees.
• Online and mobile banking, including mobile check deposit and multiple user access with permissions.
• Payments: ACH transfers, wires, card acceptance and how fast funds become available.
• Integrations with your accounting software and payroll provider.
• Deposit insurance: confirm the bank is FDIC-insured or the credit union is NCUA-insured, and understand the coverage limits.
• Local support: a branch or business banker when you need help.

Online banks vs. traditional banks

Questions to ask before you sign up

• What exactly triggers each fee, and what would my monthly cost be at my expected volume?
• How long do deposits take to become available, including card settlements and mobile check deposits?
• Is there a limit on cash deposits, and where can I make them?
• Can I give an employee or bookkeeper limited access without sharing my login?
• How do I reach support if a payment fails on payroll day?
• What happens to the account if I change my business structure later, for example from sole proprietorship to LLC?
• Are there lending or credit options I may need as the business grows?

Write the answers down and compare two or three banks side by side. The cheapest account on paper is not always the cheapest once your real transactions are counted.

Set it up for payroll

Once you hire, your bank account becomes part of payroll. Plan for:

• Enough balance to cover payroll and payroll taxes on each pay date.
• Direct deposit through your payroll provider. See direct deposit.
• Federal tax deposits through the IRS electronic system on the schedule that applies to you.
• A separate savings or sub-account to set aside payroll taxes and sales tax so they are never spent by mistake.
• Dual approval for large payments if more than one person can move money.

Accurate payroll starts with accurate hours. See hourly payroll workflow and our payroll year-end checklist.

Good habits from day one

• Run every business payment and deposit through the account.
• Pay yourself with a recorded owner draw or salary, not ad hoc transfers.
• Reconcile the account with your books every month.
• Keep receipts and link them to transactions.
• Use a business credit card for expenses, paid from the business account.
• Limit who has access and review permissions when people leave.

Common mistakes

• Waiting to open an account until after the first sales.
• Using a personal account for business “just for now”.
• Choosing an account with low fees but no practical way to deposit cash you take in.
• Letting payroll taxes sit in the operating balance and spending them.
• Not adding a second authorized signer for emergencies.

A short example (fictional)

A new cleaning company owner forms an LLC, gets an EIN online the same day and opens a business checking account with a local bank that allows free cash deposits and integrates with her accounting software. She opens a separate savings account and moves a fixed share of every payroll into it for tax deposits. When she hires her first two cleaners, direct deposit is set up through her payroll provider, and hours come from the cleaners’ clock-ins at each site.

How EZTime helps

EZTime does not handle banking, but it gives your payroll accurate inputs: clock-ins, breaks, overtime and approved timecards, exported for your payroll provider through attendance reports. Employees can see their pay stubs in the mobile app.

Choosing a bank: questions table

See how to apply for an EIN and how to run a cash-only business.

Setting up payroll from the account

Before your first payroll, link the account to your payroll provider, confirm when funds are pulled and keep a buffer above each payroll amount. Approve hours before the cut-off so payroll runs on time. If you pay by direct deposit, collect employee bank details securely through the payroll system. See sync time tracking with payroll.

Your first 30 days with the account

1. Move all business income and expenses to the new account.
2. Connect it to accounting software and categorize transactions weekly.
3. Order a business debit card and stop using personal cards for business.
4. Set up payroll funding and test a small payment.
5. Create a simple monthly routine to reconcile the account.

Business banking setup check

Tick each item that is done.

Frequently asked questions

Where to go next