Two people meeting with a banking specialist.
There are many factors to consider when determining the best bank and account for your business, including the bank's reputation and any potential fees. — Getty Images/skynesher

When establishing a business, it’s critical to have a sound financial management strategy in place. One key component of this strategy is opening a business bank account that will cater to your business’s unique needs while allowing you to keep your personal and business finances separate.

Here’s what you should know about the benefits of separating your business finances, key factors to consider when choosing a banking partner, and how to open your business bank account.

[Click here to learn more about Live Oak Bank's small business banking solutions.]

Why open a business bank account?

Especially in the early stages of your business, it can be tempting to fund business expenses from your personal account or vice versa. However, separating your business and personal finances can make it easier to manage both.

“A business savings account can and should be an integral part of your overall business plan,” advised Mark Moroz, EVP, Head of Deposits at Live Oak Bank. “It demonstrates contingency planning and shows others who may join your venture later that you’re ready for the long haul.”

Having a solid business savings balance can also factor positively into a bank’s decision to lend to small business owners.

“Banks look kindly on small business owners who can show they have the means and discipline to pay back borrowed money,” said Moroz.

Finally, keeping your business and personal finances separate can make taxes and budget planning less daunting. To ensure a good balance of working capital and available savings, Moroz recommends small business owners keep two to three months of operating expenses in their business checking account — and leave the rest in a high-yield business savings account to cover any unexpected expenses down the line.

Who qualifies for a business bank account?

There are numerous types of business bank accounts available, including checking accounts, savings accounts, credit card accounts, and merchant services accounts. Generally, qualification for a business bank account will depend on your individual business’s circumstances, including its legal structure and financial health.

First, consider your business’s legal structure — sole proprietorships, partnerships, corporations, and limited liability companies (LLCs) usually qualify to open a business bank account, especially if they’re operating under a dedicated business name. You’ll typically need a valid business license and employer identification number (EIN) and may need to present other documentation as well. Banks might also assess your business credit history to gauge the level of risk involved.

How to choose the best small business bank and account type

The right bank and account type for your company depends on various factors, including the institution you choose and your individual business requirements. Here are some key considerations when choosing a small business bank and account:

  • The bank’s reputation. Research and opt for a bank with a stellar reputation in handling small business accounts. According to Moroz, banks that are experienced in working with business owners will be better equipped to understand and anticipate your needs. Seek referrals from your network and read reviews to garner insights into the bank’s service quality.
  • Accessibility. Consider the bank’s accessibility, including the proximity of physical branches and the user-friendliness of online platforms.
  • FDIC insurance. Moroz recommends asking if your prospective bank provides FDIC insurance, and if so, if the facility offers more insurance than what the FDIC offers.
  • Banking features and additional services. Evaluate the banking features, such as online banking, mobile banking, and invoicing services. Some banks also offer additional support for entrepreneurs, such as business and financial planning.
  • Fees, charges, and interest rates. Moroz advises asking prospective banks about any potential fees. These may include monthly maintenance fees, transaction fees, and ATM fees. If the account yields interest, scrutinize the interest rates offered. At 4.00% APY,* Live Oak offers some of the most competitive business savings rates in the country.
  • Customer service. Ensure your chosen bank provides top-of-the-line customer support to small businesses. “Some banks are most concerned with the largest of businesses and consumers, and they leave the small business customer to fend for themselves,” Moroz emphasized.

Banks look kindly on small business owners who can show they have the means and discipline to pay back borrowed money.

Mark Moroz, EVP, Head of Deposits, Live Oak Bank

How to open a business bank account

Once you’ve chosen a bank, the next step is opening your account. While each bank may vary in its specific requirements, here’s a general overview of the steps involved.

Gather the necessary documentation

Most banks require the following documentation to open a business bank account:

  • Proof of identity: A government-issued ID for the business owner and other principal associates.
  • Business license: A copy of your business license verifying the legality of your business.
  • Business formation documents: Documents like articles of incorporation, partnership agreements, or LLC agreements.
  • Tax Identification Number (TIN): Your business’s TIN or EIN.
  • Financial statements: Recent financial statements to give the bank an overview of your business’s financial health.

You may also need to share a copy of any ownership agreements you may have, depending on your business structure.

Fund your account

Be prepared to fund your new account with a preliminary deposit, the amount of which you can confirm with the bank representative. You can typically use cash or a check written from an existing bank account.

Set up your account and any additional features your bank may offer

Once you’ve opened your account, activate your business debit card and set up your PIN. You may also choose to set up online and mobile account access, order business checks, and sign up for online bill payments. To streamline financial tracking, integrate your new business bank account with any existing accounting software.

Why choose Live Oak Bank for your small business banking needs?

When choosing a bank for your small business banking needs, you’ll want an institution that makes your life easier, allowing you to focus on what matters most: the growth and success of your business. As the nation’s top SBA 7(a) lender by dollar volume, Live Oak Bank showcases its unwavering commitment to small business every day.

“Live Oak is on a mission to be America’s small business bank,” Moroz told CO—. “We embody this in the way we treat our customers, and the services and products we provide.”

[Click here to learn more about Live Oak Bank's small business banking solutions.]

Some of Live Oak’s key offerings include online access and easy-to-use digital tools, competitive savings rates, and genuine customer support from its employees.

“At Live Oak, we like to say that we treat every customer like the only customer,” Moroz said. “And we mean that.”

*Live Oak Bank Savings Annual Percentage Yield (APY) is valid as of 9/22/2023. Rates may change at any time without prior notice, before or after the account is opened.

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