Company Incorporation With Bank Account: What You Need To Know

6

Min Read

Tom Smery

Corporations and LLCs are distinct legal entities through which an owner decides to operate their business. Incorporating generally makes it smoother for your business to raise capital or apply for loans, limits personal liability, asset protection, offers tax advantages, and adds a sense of credibility to your business.

A corporate business bank account holds money for investment and saving purposes and their day-to-day banking need

If you are an entrepreneur looking to form a corporation a business bank account is a must. Opening a business checking account is part of the incorporation process. Since the legal entities are detached from their owners, both are legally required to maintain a separate bank account for their business.

In this article, we'll go over how to form company incorporation with a bank account for your separate legal entity.

Note: Try Bonsai Cash if you are looking for a business bank account with no hidden fees or minimums. Our easy to set up merchant account allows you to create sub-accounts instantly to better organize your finances for business taxes, vacations, or retirement. Open an account today.

How do you set up a corporate bank account?

There are many different banking options with different services, perks or benefits, and costs. Many banks and credit unions give services such as free checking, interest-free saving, or no fees along with a new bank account. After you review the best business bank accounts and pick which one you want, opening an account is pretty straightforward.

A bank would need your proof of identification for both you and your business when you open a new account.

Must a bank account be opened prior to incorporation?

Prior to incorporation, a bank account is not required to be opened. Typically, you'll need to prove incorporation before you open a business account.

A company account is necessary to be used by the company, and the company registration number and documents must be available prior to process the bank account.

Once the company can prove it has been incorporated, all of those documents must be handed over to the bank for processing purposes.

Although banks have different requirements, here are some of the most common documents banks require when you open a business bank account.

Identification Documents

  • Tax ID number or Employer Identification Number (EIN)
  • Social Security number (read how to open a business bank account without a SSN)
  • Passport or Driver's license
  • Your business's formation documents (with name, address of the business, month/year the business was established)
  • Ownership or partnership agreements
  • Business licenses depending on your business type (banks will ask for a business license to verify if you can legally conduct operations in a region).

Verification documents

If a bank may not properly verify your information, they would ask for more information.

  • Proof or Articles of Incorporation
  • Articles of organization
  • Corporate Charter
  • Certificate of Authority - if you are forming a corporation outside your respective State. A bank account consists of a part of a company's operations.
  • Certificate of Good Standing
  • Certificate of Company Formation
  • Certificate of Incorporation
  • Certificate of Registration

Frequently Asked Questions For Business Bank Accounts

Let's dive into some commonly asked questions in regards to forming a company and business bank accounts.

Can I open a business bank account with a company name?

Yes, you can open a bank account under the corporation's name. In fact, opening a bank account under the corporation name is necessary to show that the company is not mixing the shareholders' personal funds with cash generated from the company.

A corporation that does not open business bank accounts using the corporation's name puts the company's limited liability status in trouble. After all, if you use a personal account under your name, business finances can be mixed up and it would be difficult to separate personal and business property.

The majority of banks will open new bank accounts under the corporation's name and without an EIN. It should be noted, that various banks will require a corporate resolution to open a business account in the corporation's name.

Must it be a local bank account?

When you are opening a business bank account for your corporation, you do not need to use a local bank account. You can open a new account with Bonsai Cash or other places to open a bank account online.

You'll usually need the same documents and records to prove your business exists and to open a new account.

Note: If you are looking for an easy business account for your corporation, try Bonsai Cash. We have no hidden fees or minimums and our envelopes feature allows you to instantly create as many sub-accounts you need to organize your business funds easier. Open an account today.

Can I use my bank account for my Limited Liability Company?

No, only sole proprietors may use their personal bank accounts for business purposes. Limited liability companies are separate legal entities and would need a distinct business bank account to maintain legal separation between owner and business. Read more about the best LLC business bank accounts here.

A separate account for an LLC will protect the owner from legal liability and from creditors going after their personal assets or money. Most banks will allow Single-Member LLCs to open a bank account with their Social Security Number.

If you have any tax-related questions or questions on how to meet ongoing obligations, we always recommend you speak with an accounting firm or tax professional.

What About Setting Up Offshore Companies?

A neat little tax loophole many U.S. companies take advantage of is company formation in other jurisdictions or countries. The reason is for tax purposes. U.S. corporations can avoid paying federal taxes. The corporation acts as an offshore tax haven to avoid paying a substanital amount of taxes. Until a company comes home, U.S. tax law allows corporations to avoid paying taxes on foreign profits.

It is perfectly legal to set up an offshore corporation as long as you follow the rules in both the home and foreign country you choose to incorporate in.

Many businesses prefer offshore company incorporation in a country with minimal reporting requirements.

Foreign Companies Look To Create U.S. Merchant Accounts

Many international businesses try to open U.S. business bank accounts to make doing business with U.S. customers more convenient and simple. The U.S is well known to have the proper protection and private ownership as well as a ton of attractive business opportunities. This makes it an ideal landing spot or environment for businesses.

Because of new regulations, it has become virtually impossible for a foreign company to get a tax number in the States and open corporate bank accounts.

Corporate Account Benefits

There are many advantages to opening a business bank account for your corporation. Let's review some potential benefits.

Organize Finances For Taxes Better

One of the main reasons why business owners open a separate business bank account is to avoid commingling personal transactions from business ones. Having a separate account will leave a clear trail for the IRS in case you get audited. Plus, since your business is a separate entity, having its own account would prevent your personal savings from being sought after by creditors. The company would be responsible for the funds and liability, rather than just one person.

Manage Business Payments

Companies may use corporate accounts to manage vendor payments or purchase new items. Corporate accounts can keep business funds safe for the future. Many companies hold their company savings for future purchases.

Improved Investment Opportunities

Corporate business bank accounts help give you better investment opportunities. let's say you have a good year and you put your excess funds in a corporate bank account. You are able to use your savings to reinvest the money into other generate

Many corporate accounts come with other features, such as automatic portfolio balancing, to help your company organize its funds.

Tom Smery
Tom Smery is a certified CPA for over a decade. In his free time, he writes articles to pass on his expert knowledge on taxes and accounting. Thomas has a wide range of deep knowledge on 1099 taxes, and finance topics. You can find him fishing when he is not preparing taxes for his clients or writing about accounting.

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