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If you intend to start a small business, you’ll need to open a business bank account. Unlike a checking account, which is for your personal finances, you would use a business account for business banking purposes only.
However, opening a business account isn’t always a simple process. You’ll likely need to provide your bank with an EIN to open the account. This article explains what an EIN is, how to get one, and how to open your business bank account using one.
According to the Internal Revenue Service (IRS), an Employer Identification Number (EIN) is a unique nine-digit number assigned to your business.
Think of it like a Social Security number (SSN). The IRS uses this number for tax purposes, specifically for employment tax. However, the number will also appear on your business tax returns, hence its alternate name of Federal Tax Identification Number (FEIN).
When the IRS looks up your company’s EIN, it’ll see information about the state you’re registered in and what taxes your business is supposed to pay. It’ll also see what structure you have filed for your company.
Speaking of structure, you may wonder if nonprofit organizations need to have EINs. According to the IRS, they do. An EIN isn’t the same thing as a tax-exempt number. Even if you don’t pay taxes on your business income, you need an EIN so the IRS can track your company.
An EIN number is a unique identification number your company needs for tax purposes or to open a business bank account. It’s similar to a Social Security number for your business.
You can submit an EIN application online via the IRS website or online service.
You don’t need an EIN if you have no employees, though many companies still benefit from them.
According to SBA.gov, every new business must open a business banking account when it’s ready to start accepting money as a company.
The account ensures your business stays compliant, in addition to helping you separate your business income from your personal income. Furthermore, you may need the account when applying for specific business licenses.
Thankfully, the steps for creating a business bank account are straightforward.
Choosing the right bank is the most challenging part of opening a business bank account. Don’t assume that the bank that handles your personal checking account is automatically the best choice. Each bank has its own business offerings and extras that may influence your decision.
Think about what your company needs.
If you want specific extras, such as a line of credit or a mobile check deposit service, you must sift through all your options to look for a bank that provides those necessary additions for your business situation. There may also be fees to consider for opening and maintaining the account.
You’ll need a range of documents to open your business bank account, with the main one being proof of your EIN number. You’ll discover how to get this number later in the article.
Beyond your EIN number, you may need the following documents when opening your account:
Proof of your Social Security Number, especially if you have a sole proprietorship
A business license
Any business name filing documents you have
Partnership Agreement, if applicable
Any Articles of Incorporation or Articles of Organization you completed to form your business
Some banks may also request your Doing Business As (DBA) certificate. This document expresses any alternative names you use for your business. Ensure you have copies of these documents ready before you begin the application process.
With your documents collected and the right bank in mind, it’s time to open your account. You can do this in person by visiting the appropriate branch of your chosen bank. However, many banks allow you to complete the process online.
The option you choose depends on your preferences.
If you’re comfortable setting up a bank account with little guidance, doing it online offers speed and convenience. If you have questions about the account or the process, specifically anything related to extras or benefits of the account, it may be a good idea to visit a branch to discuss the account in person.
Regardless of which option you choose, you’ll need to provide copies of your documentation and answer questions about your business.
For new businesses, it may be quite a while before you complete your first transaction using your new account. You don’t want to wait a few months only to discover that the account isn’t set up correctly for your banking purposes.
Run the following checks as soon as you open the account to avoid this issue:
Make a deposit, followed by a withdrawal, to ensure funds enter and exit the account smoothly.
Examine the checks you’ve received if you opened a business checking account. Specifically, ensure the names on your checks match your company’s legally registered name rather than a DBA name.
Confirm you have access to any extras you require, such as a business line of credit.
Why set up a business bank account for your small business? As the business owner, you get access to several perks and benefits when you have a business account:
Opening a business banking account is a legal requirement for many business structures, such as limited liability companies and corporations.
It’s easier to separate your business finances from your personal finances when you have a separate account. This is particularly handy for tax purposes.
Having a business account allows you to accept credit card payments from your customers.
A business account may come with extra features, such as a line of credit or easier access to business loans.
You lessen personal liability when you have a business account because your business and personal finances don’t mix.
Business accounts enhance your company’s credibility, which is crucial for a small business trying to build a reputation.
Your business account allows you to start building your company’s credit score.
Opening a business bank account allows your company to create a relationship with a financial institution. That relationship may prove vital when you scale, which often requires access to special services.
There are some downsides to getting a business bank or checking account. The biggest is that fees are often attached to the account for opening and using it.
It’s also important to note that Federal Deposit Insurance Corporation (FDIC) only offers $250,000 of insurance on deposits into business banking accounts. If you’re earning more than that figure, the insurance will essentially expire once you reach the $250,000 limit. As such, many businesses open multiple accounts, so they’re insured on each.
There are several ways to complete an EIN application via the IRS website or by contacting the organization through more traditional means.
Completing an online application is the simplest way to get an EIN for your new business. However, you can also do it via mail, fax, and telephone.
Regardless of your chosen method, your business likely needs an EIN for tax purposes. At Swyft Filings, we help companies obtain their EINs without any hassle. Our experienced staff walks you through the process and handles the paperwork, allowing you to focus on your business. Get in touch if you’re ready to get started.
These are two crucial steps if you do want to do it yourself.
Every company that applies for an EIN must complete Form SS-4, which you can get via the irs.gov website. This form simplifies the application process, allowing you to denote the nature of your business and its legal structure without sifting through various documents.
Nevertheless, your business structure can affect the application process.
You don’t necessarily need an EIN if you’re self-employed or an independent contractor with no employees. In these cases, the IRS uses your SSN to handle tax filings. However, you’ll likely still want an EIN to set up a business bank account, apply for business licenses, or set up a pension plan tax return.
You’ll need the following when applying for your EIN:
The legal name of the sole proprietorship
Any DBA names that apply to the company
Your SSN or Individual Tax Identification Number (ITIN)
Information about the business type, what it does, and why you’re applying for the EIN
Contact information for the company
The ending date for the business’s tax year
The IRS will also ask whether you plan on paying more than $1,000 in employment tax for the business year.
Even if you have a single-member LLC, getting an EIN for your business is still a good idea.
The application process is similar to that for a sole proprietorship. You have to provide information about the business and what you expect your employment tax liability to be. However, you also need to provide the following information when applying for an EIN as an LLC:
Information about the country, state, and territory where the LLC is located and will do business
Your LLC’s start date
Confirmation of whether the LLC has a highway motor vehicle weighing 55,000 pounds or more
The number of employees in the LLC
The first date you paid wages to your employees
Confirmation of whether the business needs to complete Form 720, which is the Quarterly Federal Excise Tax Return
You have four options when submitting Form SS-4.
By far the easiest method of submitting Form SS-4, you can complete the application process online. The IRS validates the information you submit during the session, meaning you can get your EIN as soon as you complete your application.
If you wish to send Form SS-4 via mail, you can do so to the following address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
The IRS says this process takes four weeks, or 20 business days, before you get your new EIN.
A business owner can send Form SS-4 via fax to:
It takes four business days for the IRS to assign an EIN and send a fax back to your designated responsible party.
You can only apply via telephone if you’re applying for an EIN as an international applicant.
Call 267-941-1099 between 6 am and 11 pm Eastern Standard Time. The number operates during these times between Monday and Friday.
The benefits of having an EIN include the following:
It’s easier to complete your tax returns as you have a unique Tax ID number for business tax purposes.
Having an EIN offers liability protection in cases of identity theft.
Your new EIN makes it easier to get specific business licenses and credit.
You need an EIN to hire employees and complete W-9 forms.
Though some businesses don’t require an EIN, it’s essential if you want to open a business bank account. An EIN filing also keeps your small business on good terms with the IRS.
With Swyft Filings, you can ensure your business EIN filing is accurate and compliant. Our EIN service will handle the employer identification number application without errors or missed steps.
Don’t want to deal with the IRS directly? Let us get an EIN on your behalf with our application filing service. We offer rapid turnaround times, exceptional customer service, and an eye for detail to ensure your business entity gets its EIN quickly.
Can I start a business bank account with only an EIN?
Most banks ask for other documents, such as your Articles or Organization, in addition to your EIN.
Can I apply for an EIN entirely online?
Yes, you can complete the process online using the IRS website or an online filing service.
Do I need an EIN to open a business bank account?
The vast majority of banks require you to have an EIN before you can open a business bank account.
Can I use the same EIN for two businesses?
You can use the same EIN for two businesses as long as those businesses aren’t established as separate legal entities.
What if I get an EIN and never use it?
The IRS can’t cancel an EIN once you have it. However, you’re also not obligated to use the number if your business closes.
Can I get EIN for a sole proprietorship?
You can get an EIN for a sole proprietorship, even without employees. Many choose to do so if they want to open a business banking account.
What is an EIN?
An EIN is a nine-digit identification number that is essentially an SSN for your business.
Internal Revenue Service. “Employer ID Numbers.” Accessed March 6, 2023.
Internal Revenue Service. “Employer Identification Number.” Accessed March 6, 2023.
Small Business Administration. “Open a business bank account.” Accessed March 6, 2023.
U.S. Chamber of Commerce. “How to Protect Your Business Bank Account from Theft.” Accessed March 6, 2023.
Internal Revenue Service. “Application for Employer Identification Number.” Accessed March 6, 2023.
Internal Revenue Service. “Quarterly Federal Excise Tax Return.” Accessed March 6, 2023.
Internal Revenue Service. “Apply for an Employer Identification Number (EIN) Online.” Accessed March 6, 2023.
Internal Revenue Service. “How to Apply for an EIN.” Accessed March 6, 2023.
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