Banking Requirements for Entities
By Michael Freeman | Acacia
Opening a business bank account is not a formality. It is a legal and operational necessity for any entity that will conduct business, receive payments, or hold assets. Commingling business funds with personal accounts is one of the most reliable ways to undermine the liability protection that an LLC or corporation is supposed to provide. Courts routinely consider financial separation a key factor when evaluating whether an entity’s liability protection should be honored.
The banking requirements for a new entity are straightforward in principle, but the process has become considerably more document-intensive over the past decade. Knowing what banks will ask for before walking substantially improves the experience.
What Banks Require to Open a Business Account
At a minimum, most banks will require the entity’s EIN, the formation documents (articles of organization for an LLC or articles of incorporation for a corporation), and an operating agreement or bylaws that identify who has authority to act on behalf of the entity. The person opening the account will also need to provide personal identification, typically a government-issued photo ID, and, in most cases, will undergo Know Your Customer verification as the entity’s beneficial owner.
Under the Financial Crimes Enforcement Network’s beneficial ownership rules, banks are required to collect information on individuals who own 25 percent or more of a legal entity, as well as on the individual with primary control. This is a federal compliance requirement, not a bank policy choice. Anyone forming an entity should be prepared to provide this information and should understand that it is a standard part of the process.
Some banks also request a business license, a fictitious business name registration (if the entity is operating under a trade name), or a certificate of good standing from the state of formation. The specific requirements vary by institution. Larger national banks tend to have more standardized onboarding processes; smaller regional banks and credit unions often have more flexibility but may have their own specific documentation preferences.
Single-Member LLCs and Sole Proprietors
For a single-member LLC treated as a disregarded entity, the banking setup is straightforward in most cases. The account is opened in the name of the LLC, using the LLC’s EIN, with the single member identified as the owner and authorized signer. The account should never be titled in the owner’s personal name; it should reflect the entity’s legal name as it appears in the formation documents.
Sole proprietors operating without a formal entity can open business accounts, but those accounts are typically titled in the individual’s name and often require a fictitious business name (doing business as) registration if the business operates under a name other than the owner’s legal name. These accounts do not carry the same liability separation function as an account held in the name of a properly formed entity.
Multi-Member LLCs and Corporations
For entities with multiple owners, the operating agreement or shareholder agreement is particularly important in the banking context. Banks will want to see documentation establishing who has signing authority, whether that authority is shared or individual, and how major financial decisions are made. An operating agreement that is vague or silent on these points creates friction during account opening.
Corporations typically need to provide a corporate resolution authorizing the account opening and designating the authorized signatories. This is a standard document, but it must be prepared correctly. Many formation services include a template for this; working with a service experienced in this area is worth the time.
Choosing the Right Banking Institution
Not all banks are equally suited to every type of business. For entities holding real estate, some banks prefer institutions with commercial banking departments that understand property-related transactions. For entities engaged in international transactions, banks with robust wire transfer infrastructure and foreign currency capabilities become relevant. For holding companies with no active operations, some banks are more comfortable with the account profile than others.
Online business banking platforms have expanded the options considerably. Mercury, Relay, and similar platforms have simplified account opening for domestic LLCs and corporations, particularly for newer entities. They are not substitutes for a traditional commercial banking relationship in every situation, but for straightforward domestic entities, they often provide a faster and less document-intensive onboarding process.
Acacia works with clients on entity formation and the downstream compliance steps, including EIN procurement and banking setup documentation. For more on structuring entities for operational and compliance readiness, MichaelIoane.com provides additional perspective.
The information in this article reflects general structural principles and practical observations from consulting experience and is provided for educational purposes only. It should not be interpreted as individualized legal or tax advice.