Do You Need an EIN to Open a Business Bank Account?

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify a business entity. An EIN is essential for various business operations, including tax filing, hiring employees, and establishing financial accounts. This article details when an EIN is necessary for opening a business bank account, how to obtain one, and account opening requirements.

When an EIN is Required (and When it Isn’t)

The requirement for an EIN to open a business bank account depends on your business structure and activities. An EIN is federally mandated for certain business entities. Corporations, partnerships, and multi-member Limited Liability Companies (LLCs) generally require an EIN because they are separate legal entities from their owners for tax purposes. This distinct identifier is necessary for federal tax filings and other official reports, such as annual information returns for partnerships.

Sole proprietorships and single-member LLCs that elect to be taxed as sole proprietorships often have more flexibility. The IRS treats these business types as “disregarded entities” for federal income tax purposes, meaning business income and expenses are reported on the owner’s personal tax return using their Social Security Number (SSN). Therefore, for federal tax purposes, an EIN may not be required for these entities if they do not have employees or certain excise tax liabilities. In such cases, a sole proprietor can use their SSN to open a business bank account.

Many banks may still require an EIN for single-member LLCs or sole proprietorships to open a business bank account, even if not federally mandated. Some financial institutions prefer an EIN for all business accounts, regardless of entity type. An EIN can also be required if a single-member LLC has employees, files certain excise tax forms, or elects to be taxed as a corporation or S corporation. Obtaining an EIN, even when not required, can offer benefits such as separating personal and business finances and enhancing business credibility.

Obtaining an Employer Identification Number

Acquiring an Employer Identification Number (EIN) is a straightforward process and free when obtained directly from the IRS. The most common and fastest method for eligible businesses is to apply online through the IRS website. The online application is generally available Monday through Friday, 7:00 a.m. to 10:00 p.m. Eastern Time. Upon successful completion, the EIN is usually issued immediately.

Before applying, gather specific information about the business and its responsible party. This includes the business’s legal name, address, entity type (e.g., corporation, LLC, partnership), and the reason for applying. The responsible party, the individual managing the business’s operations and finances, must provide their Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or an existing EIN. The online application is accessible for businesses located within the U.S. or its territories.

Alternative application methods are available for those who cannot apply online. Businesses can apply by faxing a completed Form SS-4, “Application for Employer Identification Number,” to the IRS. If a return fax number is provided, the EIN is typically sent back within four business days. Applying by mail, also using Form SS-4, is another option, though it usually takes about four weeks to receive the EIN. International applicants without a U.S. residence or location can apply by calling the IRS directly.

Opening a Business Bank Account

Once an EIN is obtained, if necessary, opening a business bank account involves providing specific documentation and information to the chosen financial institution. Banks generally require proof of identification for both the business and its owners. This includes the business’s Employer Identification Number (EIN) or, for eligible sole proprietorships and single-member LLCs, the owner’s Social Security Number (SSN). Personal identification for account signers, such as a state-issued driver’s license or passport, is also a standard requirement.

Beyond tax identification, banks request business formation documents that confirm the entity’s legal existence and structure. Corporations may need to provide Articles of Incorporation or corporate bylaws, and LLCs often require their Articles of Organization or operating agreement. Partnerships typically present their partnership agreement. Businesses operating under a “doing business as” (DBA) or assumed name may need additional registration documents. Banks also ask for the business’s physical address, phone number, and operational details like the nature of the business and expected annual sales.

When selecting a business bank account, various types are available to suit different operational needs, including a business checking account for managing daily transactions, including deposits, withdrawals, and payments. Business savings accounts allow for setting aside funds and can earn interest. Other options are money market accounts, which offer higher interest rates and some check-writing capabilities, and merchant accounts designed for businesses that accept electronic payments like credit or debit cards. Most financial institutions offer a range of business accounts, so compare features, fees, and minimum balance requirements before choosing.