Opening a business bank account: steps, documents and FDIC basics

A separate business account is the first piece of financial plumbing a service company needs. It makes bookkeeping possible, it gives customers a business name to pay, and for an LLC or corporation it is part of treating the company as its own entity. It takes about an hour once your paperwork is in order.

This guide covers the order of steps, what to bring, what features matter for contractors and home-service companies, and how deposit insurance works. Figures and rules come from SBA and FDIC pages as read in October 2026. This is general information, not legal, tax or financial advice.

Why does a service business need its own account?

The SBA lists four reasons: protection (keeping company money apart from your own gives limited personal liability protection, in the SBA's words), professionalism (customers can pay the business and employees can handle routine banking), preparedness (many accounts come with optional lines of credit), and purchasing power (business cards help build business credit).

For an owner-operator, two practical reasons sit on top of those:

• Bookkeeping gets possible. Every transaction on the business statement is a business transaction. Without that, sorting the year for your accountant becomes a guessing game. See bookkeeping for service businesses.
• You can see the business. The balance tells you what the company has, not what the household has. That is the starting point for any cash forecast.

What do you need before you open it?

Do things in this order:

1. Choose and form your entity. Sole proprietor, LLC or corporation. If you form an LLC or corporation, the account should be opened in that entity's exact legal name. The trade-offs are in our LLC or sole proprietor comparison, and your state's filing office is listed on our state pages.
2. Get an EIN. It is free from the IRS and takes one online session; see how to get an EIN. A sole proprietor can sometimes open an account with an SSN, but an EIN keeps your SSN off W-9s you hand to commercial clients.
3. Register any trade name. If the name on your truck differs from your legal or entity name (a DBA or trade name), many banks want proof of the registration before they will accept checks in that name.
4. Gather documents. The SBA says banks commonly ask for your EIN (or SSN for sole proprietors), business formation documents, ownership agreements and a business license. Each owner or signer will usually need personal identification too. Call the bank and ask for its list before you go.

How do you choose a bank or credit union?

The SBA suggests comparing transaction fees, minimum balance requirements, interest rates and early termination fees. For a service company, add these questions:

A local bank or credit union that lends to small businesses in your area can be worth a slightly higher fee, because the person who opens your account may be the person who reviews your truck loan in two years. See how to get a small business loan.

How does FDIC insurance cover a business account?

The FDIC's standard coverage is $250,000 per depositor, per FDIC-insured bank, for each account ownership category. It covers deposit products such as checking, savings, money market deposit accounts and CDs. It does not cover stocks, bonds, mutual funds, annuities, crypto assets or Treasury securities, even if you bought them through a bank.

How your business account is counted depends on your entity. According to the FDIC's guide to business accounts:

• Corporations, partnerships and LLCs are in the corporation, partnership and unincorporated association category. Deposits of a validly formed entity are insured separately from the owners' personal deposits, up to $250,000 per entity at the same bank, as long as the entity is engaged in an independent activity (operated primarily for a legitimate business purpose).
• Sole proprietorships and DBAs are not in that category. A sole proprietor's business deposits are insured as the owner's single accounts, added together with the owner's other single accounts at the same bank.

Most small service companies never hold anywhere near the limit. If yours does at certain times of year, ask your bank about options, and use the FDIC's BankFind tool to confirm a bank is insured.

What about online business accounts from fintech apps?

Many apps offer business accounts with good software and low fees. Some are banks. Many are technology companies that hold your money at one or more partner banks. The FDIC is direct about the difference in its consumer guidance on third-party apps: nonbank companies themselves are never FDIC-insured, and FDIC deposit insurance does not protect against the insolvency or bankruptcy of a nonbank company. Pass-through coverage may apply if the money is properly deposited at an insured bank and that bank fails.

That does not make fintech accounts a bad choice. It means you should read who holds the money, keep records of your balances, and consider keeping payroll and tax reserves at an insured bank you can call.

How should you set up the account once it is open?

1. Point every payment at it. Card processor payouts, ACH from commercial clients, mobile check deposits. Update the bank details in your invoicing and payment tools the same day. See online payments for contractors.
2. Move recurring business bills over. Insurance, phone, software, fuel cards, supplier accounts.
3. Get a business card for purchases, and stop using personal cards for business.
4. Open a tax savings account. Move a set share of deposits into it every week for estimated taxes. The payment schedule is in our estimated tax guide.
5. Set alerts and permissions. Low-balance alerts, large-withdrawal alerts, and limited access for anyone who is not an owner.
6. Connect it to your bookkeeping software so transactions import automatically, and reconcile monthly.
7. Pay yourself by transfer. Owner draws or payroll, on a schedule, from business to personal. Never the other way around for personal bills.

What mistakes do owners make with a new account?

• Leaving old payment links pointed at the personal account. Saved invoices, a payment link on your website, a property manager's vendor file. Make a list of everywhere a customer pays you and update each one.
• Depositing a business check into a personal account "just this once". It breaks the clean record you opened the account to create, and your bookkeeper will have to chase it.
• Paying a personal bill from the business account. If it happens, record it as an owner draw, not a business expense.
• Giving a field employee the owner's debit card. Issue cards with their own limits, or reimburse receipts, so every purchase can be traced to a person and a job.
• Ignoring the monthly statement. Reconcile it. A missed duplicate charge or an unknown withdrawal is much easier to dispute in week two than in month eight.

The account is only half of clean money handling. The other half is making sure every job gets invoiced and every payment gets matched to its invoice. A custom CRM that ties quotes, jobs, invoices and payments together does that matching for you. If you want help seeing how your leads and jobs flow today, request a free system quote.

Frequently asked questions