While there’s no question that a tax ID number is important for any type of business, you generally can’t open a business bank account with only an EIN. Most banks also require additional documentation such as articles of incorporation, IRS Form 1040, and a business license.
The exact documentation differs from state to state and depending on the type of business. Such documents prove that your business was formed legally and is operating according to state and federal laws.
That said, when you want to open a business savings or checking account, you’ll discover that most banks require your company to have an EIN. Thus, while you can’t open a business bank account with an EIN alone, it’s one of the documents that you'll need to open the account.
What is an EIN?
EIN is short for Employer Identification Number. An EIN is a unique, nine-digit tax identification number that the IRS uses to identify companies that are required to file business taxes. Think of it as a social security number, but strictly for businesses.
EINs are issued by the IRS. Once issued, the number can’t be reissued because it does not expire. Therefore, your business will retain its EIN for its lifetime and beyond.
As a business owner, you use an EIN to file your company’s income tax return. This helps the IRS to correctly identify your business and accurately tax it. But that’s not the only use of an EIN.
Do I need an EIN to open a business bank account?
If your business is a corporation, limited liability company (LLC) or partnership, then yes, you’re legally required to have an EIN number. Similarly, the law requires you to have an EIN before hiring employees or engaging contractors. As such, banks will also request this number before allowing you to open a business bank account.
There are, however, a few cases where you may open a business bank account without an EIN. Sole proprietorships and single-member LLCs are not required by law to have an EIN so therefore, depending on your bank's policies, they may allow you to open a checking or savings account without an EIN as long as you have no employees, no contractors, no excise tax, and no pension plan tax. If your sole proprietorship has a DBA (doing business as), you will also have to present a certificate showing the fictitious name.
So, do you need an EIN to open a business bank account? If your business is a corporation, LLC or partnership, then yes, you'll need an EIN. However, if it’s a sole proprietorship or single-member LLC, then you may be able to open a business bank account without an EIN, but you’ll likely need one eventually anyway. Make sure to check your bank's specific policies beforehand.
Why an EIN Is needed to open a business bank account
As previously mentioned, you need an EIN to open an account for a corporation, LLC or partnership, but it may be possible to open a business bank account without an EIN if your business is a sole proprietorship or single-member LLC.
With that in mind, most banks will still ask for an EIN regardless of your type of business. That’s because the EIN proves – among other things – the identity and nature of your business. Banks always want to verify those two things before opening a business bank account.
In addition to helping banks verify your business identify, an EIN is also important for a handful of other reasons:
Makes your business legitimate
Perhaps the most important advantage of having an EIN is that it legitimizes your business. For one, the IRS can identify you as a legal and lawful company. Secondly, suppliers, vendors and creditors will use your EIN to verify that you’re in fact a business. This is important in building trust between your business and other entities.
Creates an identity for your business
Just as a social security number gives you a unique identity, an EIN does the same for your business. This identity may come in handy when your company is interacting with other institutions that require strict verification, including banks and the IRS.
Protects your social security number
Without a business EIN, you’ll be forced to use your social security number as an alternative (if you're a sole-proprietorship). This puts your SSN out there, perhaps more than you would like.
Helps the business grow
An EIN allows your business to hire employees and contractors. This, in turn, helps the business grow thanks to an increase in human resources. The business can’t enjoy the same benefits if it doesn’t have an EIN.
Gives you more options
Some financial institutions won’t allow you to open a business account without an EIN, even if you’re a sole proprietor or single-member LLC. This tends to limit your options as far as where to open an account. But if you have an EIN, you can safely open a business bank account with any institution, big or small (including credit unions and online banks).
Easier access to credit
Most financial institutions require an EIN before approving business loans, lines of credit, business credit cards and other types of credit. An EIN is not legally required for credit approval, but most banks will ask for it. They’ll also process your credit request faster if you have a tax ID.
How to get an EIN
Obtaining an EIN is completely free. It’s a simple and straightforward process that you can complete online via the IRS’s website. The only thing you’ll need is a form of identification. This can either be a taxpayer identification number, social security number, or a previous EIN (if you had one).
Once you’re ready to start the process, head over to the IRS.gov website and fill in the forms. Just keep a few things in mind before you start your application:
You can only apply for one EIN per day. So, if you’re registering multiple businesses, you’ll need to schedule a different day for each business.
Since there’s no option to save and continue at a later time, you must complete the application process in one session. Make sure that you have ample time to get everything done in one sitting.
The session will expire after 15 minutes of inactivity. For that reason, you may want to have all the relevant information at hand so that you don’t waste any time looking for it. Make sure that you have the following information handy:
Your legal business name
Your legal name (or legal name of the person applying for EIN) and SSN, Taxpayer ID or previous EIN
Trade name where necessary
Address of the person applying. This includes physical address as well as mailing address
Location and address of the business
Depending on the type of business, you may also need to specify the number of members, state or country of incorporation, date of business incorporation or acquisition, primary activities of the business, and the expected number of employees in the next twelve months.
Requirements to open a business banking account
As stated, it’s beneficial for your business to use an EIN when opening a bank account. In fact, it’s more likely than not that the bank will ask you to provide it. However, you can’t open a business bank account with only an EIN. Below are some additional requirements to open a business bank account:
Choose a suitable type of account
First, you’ll need to find the right type of account for your business needs. Options range from traditional bank accounts to online-only accounts, but your choices don’t end there. You can proceed to narrow down your selection to either a checking, savings, certificate of deposit or money market account.
Find the right bank for your business
The best bank for managing your business finances is one whose fees and rates are affordable, particularly if you’re a small business owner. Of course, you'll also want conveniences like bill pay, ATM networks, and online banking. Consider which services are most important for your business when you make the decision.
Gather the necessary documents
The fact that you can’t open a business bank account with an EIN only means that the banks will typically request more documentation. The exact types of documents vary from bank to bank and depending on the type of business. However, they typically include:
Some form of personal identification, like a driver's license
Business license or partnership agreement
Articles of incorporation
Fictitious or assumed name certificate
Articles of organization
EIN. This is a must-have if the business is a corporation, LLC or partnership. You also can’t open a business bank account without EIN if your business has employees and/or contractors.
Learn more about the process of opening a business checking account here. Our detailed guide includes all of the requirements and types of bank accounts for businesses.
Are you looking to open a business checking account? Nearside offers the ideal checking account for businesses. Designed to keep more money in your business, Nearside checking comes with no NSF fees, no minimum balance, no monthly fees, and no hidden costs.
Click here to get started. Make sure to have your business EIN on hand for an easy application process.
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