How to Open a Nonprofit Bank Account

One of the most important steps in starting a nonprofit is opening a bank account. This allows your organization to deposit funds, to write checks, and to begin saving money. However, opening an account is not as easy as strolling into your friendly neighborhood branch. Each bank or credit union has its own requirements and procedures that your organization must meet before you can open an account.

Today’s post will cover the major items your bank will need from you, and touch on the questions you have about opening a nonprofit bank account. A slight disclaimer: not all banks will have the same requirements and procedures. Ultimately, only the bank your board selects will tell you what you need.

Compliance Checklist for Nonprofits

Have you covered all the bases? Make sure with our simple 13-point compliance checklist for nonprofits. 
Download now.

How do I open a nonprofit bank account?

First, your board should select a bank or credit union that is right for your nonprofit. Shop around, as each bank has varying benefits and disadvantages. Then, call that bank before you visit. Ask what documents you’ll need, and schedule a meeting. Many times, several individuals must be in attendance, including directors and officers. When you arrive at the bank, you’ll present your organizational and personal documents, sign the bank’s contract, and deal with any specific procedures by which your bank operates.

What if my bank is in another state?

If your bank is located in a different state from which you live, or from where the nonprofit is registered, plan for additional cost and complexity. Most of the time, you need to physically walk into the bank to open an account, so be sure to make travel considerations. You may also need additional paperwork, such as a Certificate of Authority to transact business across state lines. Again, calling ahead will save you a headache.

When can I open a nonprofit bank account?

When you decide to start a nonprofit, the first step is not to rush to a bank to open an account. The board should meet to decide on which bank to use, and should record the decision in its organizational minutes. Once you choose a bank, you will be turned away without the right organizational and personal documents. Typically, you can open an account only after your nonprofit has been incorporated, has obtained an EIN, and has approved bylaws. Keep reading for the details.

What organizational documents do I need to open a bank account?

Most banks request the three following items from your organization: recorded Articles of Incorporation, a federal Employer Identification Number (EIN), and bylaws. Collectively, these documents show your organization has registered with the state as a nonprofit corporation, has obtained an EIN for business transactions, and operates for charitable purpose.

Some banks are more particular. They may request a Certificate of Good Standing for the organization or a Certified Copy of your formation documents. Only the Department of State can issue these documents. Harbor Compliance can contact the state and quickly retrieve copies and certificates for you.

This author has heard of banks requesting an IRS determination letter, meaning your organization has filed Form 1023 and received a favorable determination (i.e. your organization is exempt from federal income tax). This is extremely uncommon, and you should consider whether you can wait several months for this letter to arrive when you need a bank account now.

But I have pending donations, I need a bank account now!

It should go without saying that the best course of action is to plan ahead. If you’re lucky, some banks don’t require approved Articles of Incorporation; sometimes just an EIN may suffice. If the bank you’ve selected does require articles, the good news is that incorporating doesn’t take all that much time (usually less than two weeks, and expedite options are available). Using Harbor Compliance to prepare and file incorporation documents means they are completed quickly and accurately.

How do I obtain these organizational documents?

Harbor Compliance equips your organization to open its first bank account. We incorporate your nonprofit with the Department of State, obtain your federal EIN, and draft custom bylaws. We also prepare your 1023 application for you, meaning becoming a 501(c)(3) nonprofit is painless. You can view our packages and sign up immediately online.

What personal documents do I need to open a nonprofit bank account?

In addition to organizational documents, banks and credit unions require multiple forms of personal identification from directors, officers, and you. The main purpose is to conduct background checks, which since the passing of the Patriot Act in 2001 is required for authorized signers on the account. Driver’s Licenses, military IDs, passports, social security cards, and birth certificates are potentially fair game. So that you bring the appropriate documentation, it’s best to call the bank before you visit.

What did we learn?

Hopefully, you learned that opening a bank account is an important decision, as it determines which institution will manage your hard-earned funds. The second takeaway is to be prepared. If you anticipate donations coming in, do your due diligence by incorporating, opening a bank account before they arrive, and file for federal tax exemption. Your preparation makes giving easy for your donors, and builds their confidence in your nonprofit.