Banking for a new nonprofit: opening and running your account

This guide is for the founder or treasurer of a new nonprofit who is about to open its first bank account, or who has been running the group's money through a personal account and knows it's time to stop. A separate account is the first real financial control a charity has. After reading, you'll know what a bank will usually ask for, how to set up signers and approvals so no one person controls the money, why charity and personal money must never mix, how FDIC insurance covers a nonprofit's deposits, and the basics of taking card donations.

Before you go to the bank

Banks set their own rules, so call ahead and ask what they need. The U.S. Small Business Administration (SBA) says a business account usually needs your employer identification number (EIN) and your formation documents, and that some banks may ask for more. For a nonprofit, expect to bring:

• Your EIN. The IRS says "you can use your EIN immediately for most business needs," including opening a bank account. Bring the IRS notice that confirmed your EIN. If you've lost it, you can ask the IRS by phone for Letter 147C, or eligible users can download a digital confirmation notice (CP575) from their IRS Business Tax Account.
• Your articles of incorporation, stamped as filed by your state. Our guide to articles of incorporation explains what they are.
• A board resolution that approves opening the account, names the bank, and lists who may sign checks and approve payments. Many banks have their own form for this.
• Your bylaws, if the bank asks to see who can act for the organization.
• ID for each signer, such as a driver's license.
• Your IRS determination letter, once you have it. Some banks ask for it to waive fees or open a nonprofit account; you can usually open an account before it arrives.

Federal rules require the bank to identify one person with significant responsibility for managing a nonprofit corporation, such as its president or treasurer, and to verify that person's name, date of birth, address and ID number. Your bank may ask the same of each signer.

Signers, approvals and online access

Decide who does what before you open the account, and write it into the board resolution.

• At least two signers, usually the treasurer and the board chair or president. Never just one person.
• Two approvals for larger payments. Many small charities require two signatures, or two approvals online, above a set amount. Write the amount down.
• Separate duties. The person who pays bills shouldn't be the only one who reviews the bank statement.
• Read-only access for a reviewer. Give a board member who doesn't handle the books view-only online access, and ask them to look at the account every month.
• Update signers when people leave. When an officer steps down, the board passes a new resolution and you take it to the bank right away.

Don't count on the bank to enforce a two-signature rule; ask whether it checks. Either way, the rule is your own control. Our financial controls guide explains two-signature rules, monthly bank reconciliations and the board report in plain steps.

Keep charity money separate

Every dollar the charity receives goes into the charity's account, and every dollar it spends comes out of it. The SBA notes that a separate account protects you by "keeping your business funds separate from your personal funds," and for a charity it matters even more:

• Donors trust you with their gifts. Mixed accounts make it hard to show that gifts were used for your mission.
• Your records must stand up. Your annual IRS return and any audit or grant report rely on a clean account.
• It protects volunteers. If personal and charity money never mix, no one can accuse the treasurer of taking what wasn't theirs.

So:

• Don't deposit gifts into a personal account, even "just for now."
• Don't pay charity bills from a personal card and sort it out later. If someone has to, pay them back promptly against a receipt, using a written expense reimbursement policy.
• If a donor gives for a specific purpose, track it. Our restricted funds guide shows how.

Is your money insured?

The FDIC (Federal Deposit Insurance Corporation) insures deposits at insured banks. A nonprofit corporation's deposits fall in the FDIC's category for corporation, partnership and unincorporated association accounts, which it says includes "for-profit and not-for-profit organizations." The rules, from the FDIC:

• The limit is $250,000 for each organization at each insured bank. All of the organization's deposits at the same bank, such as a checking account and a reserve savings account, are added together.
• It's separate from personal coverage. The organization's deposits are "insured separately from the personal deposits of the organization's owners." Your board members' own accounts don't reduce the charity's coverage.
• Members don't each get $250,000. The FDIC's example is a homeowners' association: its deposits at one bank are insured "up to $250,000 in total," not $250,000 for each member.
• The organization must be real. It must be "engaged in an independent activity," meaning it exists for some purpose other than to increase deposit insurance.
• Investments aren't covered. The FDIC doesn't insure stocks, bonds, mutual funds, crypto assets or annuities, even if you bought them at an insured bank.

You can check whether a bank is insured with the FDIC's BankFind tool or by calling 1-877-ASK-FDIC. Credit unions are insured by a different agency, the National Credit Union Administration (NCUA), whose share insurance fund insures accounts at federally insured credit unions. Ask your credit union how its coverage applies to an organization's accounts.

If your charity ever holds more than $250,000 at one bank, ask your bank and the FDIC how to stay covered, for example by using more than one insured bank.

Taking card donations

Most donors expect to give by card. You have two common routes:

• A payment processor or online giving platform, which collects card gifts and pays them into your bank account. The SBA notes you still need a business bank account to receive the money.
• A merchant services account from your bank, which lets you take cards in person or online.

Fees vary. The SBA suggests comparing providers on rates, per-transaction fees, batch fees and monthly minimums. Ask about nonprofit pricing, read how often money reaches your account, and make sure the deposits come straight into the charity's account, never a person's. Our online fundraising guide covers giving pages and crowdfunding.

Your banking checklist

• The account is in the charity's legal name, under its own EIN
• The board passed a resolution naming the bank and the signers
• At least two people can sign, and larger payments need two approvals
• A board member who doesn't handle the books has view-only access
• All gifts go into the charity's account, never a personal one
• Someone reconciles the account with our records every month
• We know our deposits are insured up to $250,000 per insured bank, and check if we get close
• Card donations are paid straight into the charity's account
• We update the bank's signers whenever an officer changes