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09. How to Set Up a Nonprofit Bank Account

Nothing makes launching your own nonprofit organization feel quite as “real” as opening a bank account for your new nonprofit!

It says “We’re officially in business!”–which is why you actually DO need to be “in business” to get an account open...not to mention the fact that you need somewhere to put all of those donations.  

Learning how to start a 501(c)3 nonprofit bank account is not as straightforward as a typical business account - and we'll explain why below.

From a legal and banking standpoint, you’re “in business” once you have Articles of Incorporation as a nonprofit corporation in your State, obtain an EIN (or “Tax ID number”) from the IRS, and authorize someone inside (or outside) your organization to manage banking on a day-to-day basis.

All of these you get when you sign up for one of our Nonprofit 501(c)3 plans. 

Your organization’s 501(c)3 tax status should not be a factor or a limitation in opening an account.

We recommend using a national bank with online banking, and a good smartphone app for making deposits and managing your account, and it’s always a good idea to call your bank ahead of time to confirm their requirements.

Besides your personal identification, you need to be armed with four documents to make this happen with only a single trip to the bank:

WARNING: As exciting as it is to open a bank account for your nonprofit, you must walk into the bank forewarned and prepared. 

Bank workers handle 501(c)3 nonprofits very infrequently, and they tend to request an abundance of paperwork due to post-9/11 mandates.

Often, the bank clerk may try to force you to choose between "C Corporation" and "S Corporation" for your entity type and tax status. Your nonprofit is NEITHER OF THOSE. It is a Nonprofit Corporation (or in Virginia, a "Non-Stock Corporation"), and at this point, you need to ask for a manager to get involved. We cannot stress how many nonprofit founders have made multiple trips to the bank due to this confusion. It is the banker's job - not your job - to solve this and find the right designation to open your bank account!

Documents the banker will need in order to open your bank account:

  • A copy of your Articles of Incorporation
  • A copy of your EIN Letter
  • An executed Banking Resolution authorizing you to conduct banking
  • A copy of your Bylaws (if requested)

Documents the banker does NOT need to open your bank account:

  • A copy of your 1023 application 
  • Your IRS Determination Letter (approval letter) - although this is nice to have!
  • A statement from your Incorporator (for example our company is the Incorporator, when hired to create the organization. The Incorporator, by definition, does not have a continuing or decision-making position with the organization)

Should the banker request anything from the latter list, politely ask for the manager, and let them know you were prepared for this by showing them this definition excerpted from USLegal.com:

"An incorporator is a person who is in charge of setting up a corporation

The incorporator files the Articles of Incorporation with the state in which the corporation is registering and files any other corporate documents needed until the corporation is formally registered and recognized by the state.

An incorporator can be an attorney. The person designated as the incorporator is listed on the Articles of Incorporation and s/he will be contacted by the state, if needed. Once the corporation is registered with the state, then there will be no formal duties for an incorporator."

Download this Board Resolution  and arm yourself with the information about dealing with bank employees, and you’ll be all set to open your nonprofit bank account!

Also, if you're ready to start your nonprofit and you'd like everything done for you so you don't have to worry about any paperwork and details, then check out our done-for-you 501(c)3 nonprofit service.  

Or, if you you're ready to get started, but you have a few questions, the please book a free strategy session here. 

-Christian LeFer, How to Open Up a Nonprofit Bank Account, InstantNonprofit

I hope you enjoyed reading this blog post.

Ready to start your nonprofit? 
It's a whole lot easier than you'd think. Click here to learn how... 

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