How to Set Up a Bank Account in the United States : 2023 : Articles : Resources : CLA (CliftonLarsonAllen)

U.S. banks undergo extensive customer due diligence procedures — not only to comply with anti-money laundering and anti-terrorism requirements, but also to guard against reputational, operational, legal, and concentration risks. For foreign-based companies establishing business operations in the United States, this complex system can often cause significant delays.

Review three tips that can help your organization reduce some challenges and pitfalls when banking in the United States.

Don’t procrastinate

Opening a bank account requires multiple steps. Don’t wait until the day you need it to start. You can’t process U.S. payroll without a U.S. bank account.

• Create a U.S. entity at the state level. This procedure is generally straightforward and completed documents can be processed within 24 – 48 hours.
• Once the entity is formed, you must file for a Federal Employer Identification Number (FEIN) (Form SS-4). This is the number you will use on your federal tax return. If the company officer who signs Form SS-4 is a U.S. citizen, you can apply for and obtain a FEIN immediately. If not, it could take two to three weeks.
• Once your FEIN is received, you can apply for a U.S. bank account.
• It normally takes about three weeks to open a bank account, and in some cases requires an in-person meeting with the bank.

Make sure you have the right documents

The Financial Crimes Enforcement Network (FinCEN) issued Customer Due Diligence Requirements for Financial Institutions (the CDD rule) in 2018 to amend the Bank Secrecy Act regulations. Under the CDD rule, financial institutions act almost as proxies for law enforcement. Banks must now collect information on client companies’ beneficial owners and provide it to law enforcement agencies upon request.

Consider this representative list of documents you may need:

• FEIN confirmation letter — A FEIN confirmation letter (or Form SS-4) is required by banks for tax reporting purposes.
• Corporate documents — As proof of your entity’s creation and how it will operate, required documents may include articles of incorporation or certificate of incorporation, operating agreements, organizational minutes and bylaws, certificates of good standing, or certificates of incumbency.
• Beneficial ownership information — Banks must identify any individual who owns 25% or more of a legal entity, and any individual who controls the legal entity.
• Photo identification — Banks generally require two forms of identification for the beneficial owners and the company representative opening the account; at least one of these must have a photo.
• Proof of address — Banks require the company representative to submit a personal proof of address. Foreign bank account statements are usually preferred, although utility bills may also be accepted.
• U.S. business address — Most U.S. banks will not open a business account without a physical U.S. address. However, banks may accept the street address of a registered agent or a virtual mailbox service, especially if your business is one in which having a physical branch is impractical (such as purely online sales).
• Minimum deposit — As this may vary from bank to bank, it’s good to verify your bank’s minimum deposit requirements for foreign clients.

Double-check your application information

Incorrect or missing information can delay obtaining a U.S. bank account. Communicate with your bank to understand exactly what information you need to provide.

Pay specific attention to a “doing business as” (DBA) name versus a legal name. Printing a DBA name instead of your company’s legal name on checks could pose a problem. Due to increasing online banking fraud, most credit card merchant processors are required to match the entity’s legal name to the one on the check.

How we can help

Expanding your company into the United States can be a great way to create opportunities, but you need a solid plan and experienced team.

CLA’s global advisory and outsourcing team is familiar with the challenges of growing your business across borders and can help you navigate international finance and business complexities worldwide.

For more detailed information, read Kirthi Mani’s Chapter in the SelectUSA Investor Guide.

In light of recent failures and strains in the bank industry, read our article “Bank Industry Uncertainty Raises Cybersecurity Risk” for tips on how to better protect your accounts.