Choosing a business bank account

The SBA’s open a business bank account (opens in a new tab) guide lists the reasons: a separate account can help with legal protection, makes it simpler to track income and expenses, and looks more professional to customers. It also gives lenders a clean record later. Our separate finances guide covers the habits that go with it.

To open an account, many banks ask for your EIN (or Social Security number for some sole proprietors), your formation documents, any business license, and ownership details. Requirements vary by institution, so check the list before you go.

• Banks: national, regional and community banks. A local bank can be useful if you deposit cash or expect to borrow from the same institution later.
• Credit unions: member-owned. Many offer business accounts, though membership rules apply.
• Online business accounts: app-first accounts, often from financial technology companies that partner with one or more banks to hold the money. Many owners like the software features; the trade-off is that support and cash deposits can be harder.

At an FDIC-insured bank, deposits are insured by the FDIC up to the legal limit if the bank fails. Credit union deposits are insured by the NCUA’s share insurance fund at federally insured credit unions. Limits apply per depositor, per institution and per ownership category; the FDIC and NCUA websites explain the current rules.

Many online business account providers are not banks. They place your money at one or more partner banks. In that setup, deposits may be covered by “pass-through” insurance, but only if the partner bank fails and the records show which money belongs to whom. Deposit insurance does not cover the failure of the technology company itself.

1. Find the name of the partner bank in the account’s terms or website footer.
2. Look it up in the FDIC’s BankFind tool at fdic.gov (or the NCUA’s credit union locator at ncua.gov for a credit union) to confirm it is insured.
3. Ask whether your money is spread across several banks and how insurance is tracked.
4. Ask what happens to your access to funds if the app provider has a problem.

• Monthly fees, and what it takes to have them waived.
• Cash deposits: whether you can deposit cash, where, and whether there is a charge.
• ACH, wire and card fees, both incoming and outgoing.
• Integrations with your accounting software and payment processor.
• Sub-accounts or envelopes for setting aside taxes and savings.
• Multiple users and permissions, if a bookkeeper or partner needs access.
• Support: phone or in-person help, and how account freezes or reviews are handled.
• A lending relationship later: some owners value a bank that may also offer lines of credit or SBA loans.

• You cannot easily find which bank holds your money, or whether it is insured.
• Marketing that implies the app company itself is FDIC-insured.
• Reports of accounts frozen for long periods with no way to reach a person.
• Fees for basic things, such as statements or paper checks, that are only in the fee schedule.

Questions to ask: Who holds my deposits? How is insurance tracked? How do I deposit cash? Can I download statements and transaction history if I leave? How do I reach a person if my account is restricted?

The SBA’s manage your finances (opens in a new tab) guide covers what comes next: bookkeeping, cash flow and building credit.