We have received an increasing number of concerns from clients about banks making it difficult to open accounts. Many banks are now requiring additional due diligence and becoming more selective on the types of accounts they will open. Even our own company had some challenges getting a checking account open recently.
Banks will always ask for your formation / incorporation documents and EIN letter. However, many will now require some combination of a corporate resolution, bylaws or operating agreement, certified copies of your documents, a certificate of good standings, and or a detailed breakdown of your specific business activities. Also, in general, if you own 25% or more of your business, you MUST be a signer on the account and may be required to be physically present. If you are opening an account from out of state (for example, you’re opening an account in New Jersey for a corporation in Delaware), you may need to provide a Certificate of Authority issued by the state in question to show you can legally do business there.
Some examples of what we’ve seen recently:
- A client in New Jersey could not open a bank account in New Jersey as they had a Delaware registered LLC. They were able to get an account by opening it in Delaware.
- A client in Pennsylvania with a fictitious name issued by Pennsylvania for a general partnership was refused an account at 2 banks because of bank policies regarding partnerships.
- A client in Florida with a Delaware LLC and a Florida Certificate of Authority was questioned about using a Delaware LLC instead of a Florida one.
- Another client in Pennsylvania could not open a bank account because the members were not listed on the Certificate of Organization (in Pennsylvania, the organizers are listed but the members are not unless they are the same people). Another bank opened an account without this being a concern.
Before opening your new business, ask your bank for their list of requirements. And shop around. You should also be aware that some banks are simply refusing certain types of entities, or have interpretations of the law that are simply wrong. With the new Corporate Transparency Act (federal law), banks are changing their policies, and you need to be ready so you do not delay your business opening.