Banking for your business won’t be like your personal banking. There are stricter rules about checks and where you can open an account. You, not your financial institution, are responsible for keeping track of your business expenses so you can properly file your taxes every year, and your financial institution will require more paperwork than they do for you to open a personal account.
First off, what type of businesses could I start?
There are four general types of businesses in the state of Michigan:
- Sole Proprietorship: This is a business owned by one owner and is not incorporated. They can only accept checks made out to the owner’s name, unless the owner also has a Doing Business As (DBA) on file with the county. In that case, they can accept checks to the owner’s name or that business name. The business can have an EIN number for tax purposes, but it is not required.
- Partnership: This is a business owned by more than one owner and is not incorporated. They can only accept checks made out to the owners’ names, unless the owners also have a Doing Business As (DBA) on file with the courthouse. In that case, they can accept checks to the owners’ name or that business name. The business can have an EIN number for tax purposes, but it is not required.
- Limited Liability Company (LLC): This is an incorporated business that can have one or multiple owners. They can only accept checks which are made out to the business name, unless the LLC has a Certificate of Assumed Name. In that case, they can accept checks to the business name or the certified assumed name. LLCs must have Articles of Organization and an EIN number for tax purposes.
- Corporation (Inc): This is an incorporated business that can have several shareholders, though the business itself is treated as a single “person”. They can only accept checks which are made out to the business name, unless the LLC has a Certificate of Assumed Name. In that case, they can accept checks to the business name or the certified assumed name. Corporations have a Board of Directors, Articles of Incorporation, Bylaws, and an EIN number for tax purposes.
You need to decide what business is best for you based on where you are located, who you service, and how large your company is. To make decisions like these, you should speak with a financial adviser.
What will I need to do to open a business bank account?
- First, you need to make sure your financial institution services businesses like yours. For example, the MTEFCU does not open accounts for Partnerships, LLCs, and Corporations at this time. Because of this, to open a business account at the MTEFCU, you must have a Sole Proprietorship (DBAs are okay).
- Bring all of the paperwork your financial institution requires for a new account. For a Sole Proprietorship at the MTEFCU, for example, we require the owner provides the following:
- Legal ID
- Address verification (if it differs from their ID)
- Business registration paperwork (such as a valid, unexpired DBA registration form, if applicable)
- EIN proof (if applicable)
For LLCs and corporations, your financial institution may require that you provide things such as the Articles of Organization/Incorporation, Board minutes approving the account opening, a list of the owners and their shares, a Certification of Beneficial Owners, etc. Contact your financial institution for a list of the documentation they require upon opening a business account.
Will financial institutions let me open an account for any category of business?
This is something that depends on the financial institution. Obviously, your entity must provide legal services or products to open a bank account. However, some institutions will not (or legally cannot) open accounts even if the business technically provides legal products/services.
For example, the MTEFCU is unable to open or maintain accounts for businesses which:
- Participate in or facilitate internet gambling,
- Own and operate their own ATM(s),
- Buy, sell, grow, or distill marijuana or CBD products, or
- Buy, sell, and/or cash monetary instruments or provides other monetary services (Money Service Businesses).
If you are unsure about your business, contact your financial institution to make sure your business type is serviceable by them.
Notes About DBAs
Business owners should keep in mind that DBA registration expires every five years. Once it expires, anyone can register that name, and if that happens, the previous owner will be unable to claim checks to that business name, so make sure you renew it before it expires! Certain businesses, like the MTEFCU, may require that you provide them with an updated copy whenever you renew it.