What are the requirements to open a brokerage account – Plain guide

What is a brokerage account and why you might open one

A brokerage account is a retail account with a broker-dealer that holds investments and cash on your behalf and provides custody and trading services. Brokers act as intermediaries that execute trades, keep records of your positions, and deliver regulatory disclosures and statements to customers; these responsibilities are part of investor protection rules described by regulators SEC investor.gov brokerage accounts guide.

People open brokerage accounts for different reasons: to invest for long-term goals, to trade more actively, to hold cash while deciding how to invest, or to move existing securities from another firm. A brokerage account can also accept transferred assets, offer retirement or custodial structures, and provide account statements that support tax reporting and record keeping.

Are you opening this account to hold investments long term or to trade actively?

Understanding the basic services a broker offers, such as custody, trade execution, and disclosures, helps you pick an account structure that fits your goals and risk tolerance. See our personal finance resources to learn more about choosing an account. Keep in mind that brokers must collect certain customer information and provide required disclosures when opening accounts, a regulatory practice covered by both investor protection guidance and industry rules FINRA opening an account guidance.

Who can open a brokerage account: eligibility, age, and residency rules

Most adult U.S. residents can open an individual brokerage account if they meet basic identity and tax requirements; joint accounts are also a common option for two adults who want shared access. If you are a U.S. adult, expect to provide identifying information, a taxpayer ID, and contact details as part of the onboarding process.

Minors cannot generally open a standard adult account; instead, parents or guardians open custodial accounts under UTMA or UGMA rules, where the custodian manages assets for the child’s benefit until state law allows transfer of ownership. Custodial accounts require the custodian’s identification and follow separate legal rules about ownership and control.

Nonresident or foreign investors can often open U.S. brokerage accounts, but they usually need additional documentation to establish foreign status and tax residency. These investors should expect extra verification steps and possible withholding or reporting differences compared with U.S. persons IRS guidance on Form W-8BEN.

Regulatory ID and verification requirements you will encounter

Brokers are subject to Customer Identification Program rules that require verifying a new customer’s name, date of birth, address, and identification documents, such as a driver’s license or passport. These checks are part of anti-money-laundering and know-your-customer frameworks designed to confirm who is opening an account and to prevent illicit activity FinCEN CIP rule guidance. See the SEC broker-dealer CIP page here and the implementing regulation at 31 CFR 1023.220.

The verification process often combines automated ID checks, document uploads, and manual review. Firms typically collect tax-status information and provide regulatory disclosures during onboarding, and they may delay some account permissions, like margin trading, until additional checks are complete FINRA opening an account guidance.

Ongoing monitoring is also standard: brokers may review transactions or request further documents if information does not match records or if the account activity triggers alerts. If you plan to use margin or more advanced services, expect separate approval steps, income and experience questions, and extra disclosures.

Tax forms and reporting: W-9, W-8BEN and why they matter

U.S. persons normally complete IRS Form W-9 so brokers can capture the taxpayer identification number and report taxable activity to the IRS. That form lets brokers determine how to report dividends, interest, and sales for 1099 reporting and other tax obligations IRS about Form W-9.

Nonresident investors generally provide a W-8BEN or other W-8 series form to certify foreign status and claim treaty benefits when applicable; brokers use these forms to decide whether to withhold taxes on certain payments and how to report them IRS about Form W-8BEN.

How to fund the account and typical minimums and transfer methods

Most brokerages accept several standard funding methods: ACH transfers from your bank, wire transfers, checks, and Automated Customer Account Transfer Service (ACATS) for moving existing securities from another firm. These methods cover the common ways people add cash or move investments into a new account FINRA opening an account guidance, and you may also want to review bank account options at best business bank accounts.

Minimum-deposit policies vary by firm; some brokerages accept very small opening amounts while others require a larger initial transfer for certain account types. Industry surveys report common practices and trends, but the exact minimum and any fees or timing rules come from the firm’s disclosures and terms J.D. Power online brokerage trends.

ACH transfers are usually free and take a few business days to settle, wires clear faster but can involve bank fees, and ACATS handles full or partial transfers of securities between brokerages with its own processing timelines. Always check a broker’s funding instructions and any stated hold periods before trading with newly deposited funds.

Account features, limits, and permissions you may be asked about

When you open an account, the application will usually ask about trading permissions, such as whether you want options trading or margin. Margin access requires a separate application, additional disclosures, and approval based on the broker’s review of your identity, income, and experience FINRA opening an account guidance.

Different account types impose different rules: taxable brokerage accounts allow broad trading and transfers, retirement accounts have tax and withdrawal rules, and custodial accounts restrict how the custodian may use assets under state UTMA or UGMA laws. Some features may be limited until verification and funding steps are complete.

Step-by-step: what to do when you apply online

1. Gather documents: have a government ID, your Social Security Number or taxpayer ID, proof of address, bank routing and account numbers for funding, and the tax form you expect to use (W-9 for U.S. persons or W-8BEN for nonresidents). If you need the official FINRA New Account Form, see this PDF FINRA New Account Form.

2. Start the online application, enter personal and contact details, and carefully match name and address formatting to your ID and tax documents to avoid mismatches that can trigger holds FINRA opening an account guidance.

3. Complete tax and suitability questions, upload required ID if prompted, and choose funding methods. The platform may run automated identity checks and ask you to photograph or upload documents for manual review.

4. After submission, watch your email and account message center for verification status, requests for more documents, or funding instructions. Many firms will allow limited access immediately but reserve full trading or margin privileges until reviews finish.

Common verification delays, holds, and why accounts are sometimes restricted

Delays often come from mismatched information, such as a name or address that differs across ID and tax records, or from funding that has not yet cleared. Brokers also perform suspicious-activity checks that can lead to manual review and temporary restrictions if concerns arise FinCEN CIP rule guidance.

If a transfer is held, it may be because the bank or the broker needs confirmation of routing details or because checks have not cleared. To resolve delays, respond promptly to document requests, verify account and routing numbers, and keep records of confirmations or transfer receipts.

Typical mistakes to avoid when starting a brokerage account

Common errors include entering a different name format than what appears on your government ID or tax records, mistyping your Social Security Number or taxpayer ID, and choosing the wrong tax form for your residency status. These mistakes commonly trigger holds or extra verification steps FINRA opening an account guidance.

Another frequent issue is assuming funding arrives instantly; ACH and ACATS transfers take time, and attempting to trade with unsettled funds can lead to failed orders or restrictions. Double-check the broker’s stated hold and settlement policies before placing trades.

Practical scenarios: minor custodial account, nonresident investor, and ACAT transfers

If you are opening a custodial account for a child, plan to provide the custodian’s ID and personal details and expect the account to be governed by UTMA or UGMA rules where assets are legally the child’s property once transferred under state law. Custodial accounts require the custodian to act on behalf of the minor until the age of majority.

Nonresident investors typically complete W-8 series forms to document foreign status, and brokers use that paperwork to assess withholding and reporting obligations. Extra verification steps or document requests are more common for foreign-resident applicants, and treaty benefits, when applicable, are claimed through the W-8 process IRS about Form W-8BEN.

To move securities from another firm, ACATS is the standard transfer service that brokers use; it can transfer full or partial positions and has its own timing and potential fees, so confirm details with both the delivering and receiving firms J.D. Power online brokerage trends.

Pre-application checklist: documents and details to have ready

Before you begin, gather government-issued photo ID, your Social Security Number or taxpayer ID, proof of address, and bank routing and account numbers if you plan to fund by ACH or wire. Having completed a W-9 or W-8BEN in draft can speed the process.

Double-check that your name and address appear the same across your ID, tax documents, and bank records to reduce the chance of mismatches. Finally, review the broker’s disclosures for any minimum-deposit or funding-specific instructions so you can meet the requirements on first submission FINRA opening an account guidance.

After you open the account: funding, tax reporting, and security steps

Once the account is open, confirm that your funding cleared before placing trades that require settled funds. Watch for any short-term holds on new deposits and verify that your chosen tax form is on file so the broker can produce correct 1099s or apply withholding properly IRS about Form W-9.

Set up account security like two-factor authentication, review communication preferences for electronic delivery of tax documents, and save records of documents you submitted. These steps reduce friction during later tax reporting and help you respond quickly if the broker requests follow-up documentation SEC investor.gov brokerage accounts guide.

Summary: key takeaways and how to verify firm-specific rules

In short, opening a brokerage account typically requires identity verification under CIP rules, tax documentation such as Form W-9 or W-8BEN depending on residency, and a funding method like ACH, wire, check, or ACATS for transfers. These are standard practices, but exact minimums, timelines, and additional checks differ by firm and account type SEC investor.gov brokerage accounts guide.

Before you apply, review the broker’s account-opening disclosures and verification FAQ, keep copies of submitted documents, and contact the firm’s support if you see unexplained holds or requests. When in doubt about tax or residency questions, consult official IRS guidance or a tax professional IRS about Form W-8BEN. You can also compare brokers to pick a platform that fits your needs.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.