How to Open a Business Bank Account

One of the first things you think of when starting a new business is opening a new bank account. You must have the answers to three questions before you open a new business bank account: (1) what is the name of your business, (2) how can you prove that you are authorized to open the account, and (3) what is your tax identification number. Every answer to these three necessary questions has legal consequences.

First, you must think of a name for your business. Naming your business requires more than just creativity. The name of your business must be available. You must not choose a name that someone has already chosen before you decided to start your new business. You must register your name with the county in which your principal office is located [1] or with the secretary of state in which your principal office is located or both. [2] Your business name cannot be the same as a previously registered business name. [3] You are responsible to choose a name that is not yet being used. [4] You can register your business name by filing an assumed name certificate with the county clerk or by filing a New Mexico Articles of Incorporation [5] or Texas Certificate of Formation with the Secretary of State of the State that you choose [6]. Once you have chosen a name, you must obtain certain paperwork.

Second, you must show proof of your authority to open an account to the bank clerk responsible for opening new accounts. It seems like common sense that you must “own” the business name. Now you must prove it. A business name is an asset that might have value someday. Your articles of incorporation, [7] certificate of formation, the foundation of your business entity, will show that you are a director of a corporation, managing member of an LLC, or partner of a partnership. The Texas assumed name certificate or New Mexico fictitious name certificate might also prove that you have the right to open an account. In my experience, most banks will also ask for minutes. Minutes are the notes taken at a meeting but could also mean minutes of organizational meeting or unanimous written consent in lieu of minutes of an organizational meeting. Most business attorneys will draft minutes or unanimous written consent which show that the company has given an officer of the company (president, secretary or treasurer) the right to open a business bank account. Once you have your official business name and proof of authority to act on behalf of the business, must decide what the tax identity of the business will be.

Third, the banker will ask for your business’ tax identification number. This number might be your social security number or it might be a unique number you have obtained from the Internal Revenue Service. This taxpayer identification number is also known as the employer identification number. The banker must have this in order to comply with the Patriot Act and in order to issue a 1099 for any interest earned. If you are using an assumed name, DBA, or fictitious name, you might use your social security number or an EIN depending on whether you already have employees. If you are using a legal business entity apart from yourself, you still might use your social security number or EIN. Deciding on whether to use your social security number or EIN has tax consequences. You will hire a certified public accountant (CPA) for official tax advice to determine whether you should use your social security number or an EIN.

[1] Texas Bus. and Comm. Code Section 71.051 and 71.054 (2016).

[2] Texas Bus. Org. Code Chapter 5

[3] Texas Bus. and Comm. Code Section 71.157 and Texas Bus. Org. Code Section 5.001

[4] Texas Bus. Org. Code Section 5.053

[5] 53-12-2 NMSA 1978

[6] Deciding which State you will register your business is beyond the scope of this article. It also requires that you hire an attorney for legal advice.

[7] 53-12-4 NMSA 1978