Find out how business brokerage accounts work, how to open one, and how to start making investments with your business’s profit.
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.
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 nameEmployer identification number (EIN)Social Security number (SSN)Contact informationBusiness 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 availableHow long the money will be availableHow comfortable you are with riskHow 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. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
