Congratulations on registering your new business! Or if you’re still contemplating forming your business, and just trying to better understand the steps required for having a bank account under the company name, you’re in the right place. Be sure you have seen our Lloyd & Mousilli guide on incorporation here for a step by step analysis.
There are many benefits to having a bank account under the name of the corporation- checks printed under the company name, corporate credit cards with a host of perks, accounts on PayPal and other online processors, and receiving payments from your clients under your company name.
But beyond the benefits of opening a bank account in the name of a corporation, it is actually a necessary step for legal compliance. Having a corporate bank account helps prove that the company is not mixing the shareholders’ personal funds with cash generated from the company. A corporation that does not open a bank account using the corporation’s name puts the company’s limited liability status in serious jeopardy.
Opening a bank account in the corporation’s name establishes the fact that the company is operating as a separate legal entity from the corporation’s shareholders. That’s why this is an important step in starting a business. We typically advise our clients to follow the steps below to simplify the process of opening a bank account.
Draft a corporate resolution
The corporate resolution indicates to the bank the individuals who are authorized by the corporation to open the corporate banking account and sign checks. The individuals listed in the corporate resolution have complete authority to act on the corporation’s behalf in regard to the company’s bank account. Some banks will require a corporate resolution to open an account in the corporation’s name.
Provide photo identification
Every person who is authorized by the corporate resolution to control the company’s bank account must supply the bank with a photo identification. This allows the bank to verify the identity of each person who is authorized to make transactions for the corporation. Acceptable photo identification includes a state identification card or a driver’s license.
A common issue that many startups run into is not realizing that different types of entities have different signing requirements, and this can lead to a number of issues when opening the bank account. For example if your startup is setup as a Limited Liability Corporation (LLC) and it is member managed, then all of the members must be present to open the company bank account. You need to check with the bank beforehand.
Present Employer Identification Number (EIN)
Present the corporation’s employer identification number (EIN) that is issued by the Internal Revenue Service. The EIN is a 9-digit number used to identify a corporation for tax and banking purposes. Most banks will not open a business account in the corporation’s name without an EIN.
You can apply for an EIN by following this link to the IRS website.
Corporate Seal
Show the corporation’s seal to the bank. The corporate seal contains information about a corporation such as the date when the company became incorporated, the state of incorporation and the legal name of the corporation. Banks may require a corporation to use the company’s seal as a signature on all the corporation’s banking documents.
Articles of Incorporation
Present the corporation’s articles of incorporation to the bank representative. The articles of incorporation contain information about a corporation such as the number of shares the company has the authority to issue, as well as the legal name and address of the corporation. A corporation’s articles of incorporation offer proof that the company has been established as a separate legal entity.
Often, you will be required to present the copy of your articles of incorporation that are file-stamped by the Secretary of State’s office in the state in which the corporation was registered.
Entity Type Checklist
The specific documentation that the bank may require will often vary depending on the type of entity that you are opening an account for. Below you will find the documentation often requested based on the type of entity for your business.
Corporation
- Business Tax Identification Number
- Articles of Incorporation or Certificate of Incorporation
- Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Incorporation or Certificate of Incorporation
Limited Liability Company
- Business Tax Identification Number
- Articles of Organization or Certificate of Formation
- Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Organization or Certificate of Formation
Professional Corporation
- Business Tax Identification Number
- Articles of Incorporation or Certificate of Incorporation
- Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Incorporation or Certificate of Incorporation
General Partnership
- Business Tax Identification Number
- Partnership Agreement showing business name and name of partners, and
- Business name filing document, such as Fictitious Name Certificate or Certificate of Trade Name, showing business name and name of partners
Limited Partnership
- Business Tax Identification Number
- Limited Partnership Agreement showing business name and name of partners, and
- Business organizing document filed with and certified by state official, such as Certificate of Limited Partnership, showing business name and name of partners
Limited Liability Partnership
- Business Tax Identification Number
- Limited Liability Partnership Agreement showing business name and name of partners, and
- Business organizing document filed with and certified by state official, such as Certificate of Limited Liability Partnership, showing business name and name of partners
Links to Bank Requirements
Further details are available from the banks themselves. We have provided the following links to help you decide which best suits your particular needs and objectives:
If you encounter any issues, please feel free to reach out to us at www.lloydmousilli.com and we can provide the templates for corporate resolutions that you might require. Happy banking!
