How To Establish a Brokerage Account for a Business

Lisa Jo Rudy covers entrepreneurship and small business finance and terms for The Balance. During her career, Lisa launched her own small writing and instructional design business and writes about business for major web publishers such as Harvard Business Publishing. As a teacher and instructional designer, Lisa has created business-related tutorials and interactive courses for universities, educational publishers, and students and adults entering the business world.

Heather van der Hoop (she/her) has been editing since 2010. She has edited thousands of personal finance articles on everything from what happens to debt when you die to the intricacies of down-payment assistance programs. Her work has appeared on The Penny Hoarder, NerdWallet, and more.

If your business is making a profit, you may have more money on hand than you need to pay your bills. If you put that money into a simple bank account, you’ll earn a little interest. But you might also consider investing as a business. Opening a business brokerage account would allow you to buy and sell many types of investments, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs).

Find out how business brokerage accounts work, how to open one, and how to start making investments with your business’s profit.

Key Takeaways

• Business brokerage accounts allow businesses to invest in stocks, bonds, and other non-cash items.
• You may want to open a business brokerage account if you have more money than you need for your business expenses and expect that extra money to be available for years.
• Before opening an account, consider why you want to invest and learn about the options available to you based on your business structure.
• It’s a good idea to speak with a financial advisor to learn more about investing as a business.

What Are Business Brokerage Accounts?

A business brokerage account (sometimes called an “entity account”) is an account held in your business’s name that allows your business to buy and sell investments such as stocks, bonds, mutual funds, and ETFs. All of these types of investments have the potential to grow faster than money held in a typical business bank account, though like all investments, they could also decrease in value.

How To Open a Business Brokerage Account

Opening a brokerage account isn’t difficult, but it does require some careful thinking and research.

Note

Because the regulations and tax implications can be complicated, it’s a good idea to speak with a financial advisor and your business’ accountant before you start investing.

Decide Whether a Brokerage Account Is Right for You

Start by considering why you want to invest in a brokerage account. Investments rarely make money overnight, so you’ll want to be sure your money can grow for years. Before opening an account, make sure you won’t need to reinvest your profits into the business by hiring new staff or contractors, upgrading equipment, or pursuing additional training. Think about how investing through a brokerage account will help you meet your business goals.

Consider Your Business Structure

Your business’s organizational type or legal structure has important implications for your investment options and tax treatment. For example, if you operate as a sole proprietor, there’s no distinction between you and your business for tax or legal purposes. However, if you operate a limited liability company (LLC), your business’s holdings are separate from your personal holdings, but business income “passes through” to you and is reported on your personal income tax return.

A qualified financial advisor or small business advisor can help you understand the tax and legal implications of investing as a business.

Choose a Broker

Not all brokers allow business brokerage accounts, but a few common options include Charles Schwab, Fidelity, and TD Ameritrade. To help make your decision, consider factors like:

• Brokerage fees: Different firms will have different fee structures. Some charge per transaction, while others only charge if you need broker assistance for your trades. Make sure you fully understand the pricing structure before opening an account.
• Minimum deposits: Some brokerages require a minimum balance to open an account, so check before you begin filling out the paperwork.
• Online tools and support: Most brokerage firms offer online accounts where you can manage your investments, but each company’s tools are different. Take a look at each broker’s website to be sure you’re comfortable with their online dashboard.

Open an Account

Opening a business brokerage account is very similar to opening a business bank account. Some brokerages may allow you to open the account online, while others may require you to submit your information another way.

To open a business brokerage account, you’ll need all your business information at your fingertips, including your:

• Business name
• Employer identification number (EIN)
• Social Security number (SSN)
• Contact information
• Business formation documents

You’ll also need to share how much you plan to invest, and how you plan to fund the account.

Potential Investments To Consider

Your choice of investments will depend on your investment strategy, and your strategy will depend on a number of factors, including:

• How much money you have available
• How long the money will be available
• How comfortable you are with risk
• How much investing knowledge you have

For example, if you’d prefer low-risk investments, you might decide to invest in mutual funds, ETFs, bonds, or treasuries. If you have more investment knowledge or a higher tolerance for risk, you might decide to invest in individual stocks. Either way, it’s a good idea to ensure your portfolio is diversified—and to speak with an advisor who can explain the risks, rewards, and regulations associated with your options.

Note

You can also consider hiring a professional to manage your business investments.

Frequently Asked Questions (FAQs)

What are the tax implications of a business brokerage account?

Tax treatment of the gains and losses in your business brokerage account depend on your business’s legal structure. To fully understand the tax implications of this type of investing, it’s important to speak with your accountant or a financial advisor.

Which brokerage is best?

There is no single “best” brokerage with which to invest. In general, it’s a good idea to select a brokerage that’s well-established, has positive reviews, and offers the specific services you need for your business. You’ll also want to confirm any fees and minimum deposits before you open an account.

How much money do you need to open a brokerage account and start investing?

In most cases, you don’t need much money to open a business brokerage account. For example, TD Ameritrade allows sole proprietorships, LLCs, partnerships, and corporations to open accounts with no minimum deposit. However, you’ll also need to consider how much money you’re ready to set aside for investing—which is a conversation to have with a financial advisor or accountant.

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