If you’re a business owner, it’s essential to have a bank account specifically for your business. This will make it easier to keep track of your finances and separate your personal and business expenses.
Opening a business bank account is relatively easy, but there are a few things you’ll need to do first. In this article, we’ll walk you through opening a business bank account and provide some tips on what to look for when choosing a bank.
Benefits of Opening a Business Bank Account
There are many benefits of opening a business bank account, including:
1. Access to business financing
A business bank account can give you access to financing options, such as business loans and lines of credit. This can be helpful if you need to cover the costs of expansion or unexpected expenses.
Businesses need capital to grow, and a business bank account can give you the financial flexibility to make essential investments in your company. Plus, having a business bank account can help you build business credit, which can be helpful down the road.
2. Better budgeting and financial planning
A business bank account can also help you with budgeting and financial planning. Having separate accounts for your personal and business finances makes it easier to track expenses and income, which can help you make better financial decisions for your company.
3. Simplified tax preparation
Another benefit of having a business bank account is simplifying your tax preparation. When your business and personal finances are mixed, it can be challenging to track deductible expenses. However, if you have a separate account for your business, it will be easier to identify which expenses are tax-deductible. This can save you a lot of time and hassle come tax season.
4. Improved cash flow management
You can also take advantage of online bill pay and automatic payments when you have a business bank account. This can help you better manage your cash flow by ensuring that bills are paid on time and always have enough money in your account to cover expenses. This can help you avoid late fees and overdraft charges, eating into your profits.
5. Increased credibility
Another benefit of having a business bank account is that it can help you build credibility with vendors and customers. When you have a separate account for your business, it shows that you’re serious about your business and committed to its success. This can help you build better relationships with the people you do business with, leading to more favorable terms and conditions.
6. Separation of personal and business finances
This can help you avoid mixing personal and business funds, saving you time and money in the long run. Successful business owners know how to separate their personal funds from business funds, helping them remain financially disciplined and work their way up towards building successful businesses.
Another benefit of having a business bank account is that it can help you manage your expenses. When you have a business bank account, you can easily track your spending and see where your money is going. This can help you stay on top of your finances and ensure that your business runs smoothly.
If you’re thinking of opening a business bank account, shop around and compare features and fees before deciding. Don’t rush into it – a business bank account is a long-term relationship.
That said, let’s now look at some of the requirements when opening a business bank account.
Common Requirements to Open a Business Bank Account
Most banks require the following information and documentation to open a business bank account:
- The business’s Employer Identification Number (EIN): A business employer Identification Number (EIN) is also known as a Federal Tax Identification Number and is used to identify a business entity. You can apply for an EIN online through the IRS website. If you’re so tied up or don’t know how to do this, you can also hire a professional service like Incfile to get your EIN for you.
- The business’s formation documents: These could be the articles of incorporation for a corporation or LLC or a Partnership Agreement if you have partners. Articles of incorporation is a legal document that creates your corporation or LLC. On the other hand, a partnership agreement is a contract between business partners that outlines each partner’s rights and responsibilities.
- A government-issued ID: This is typically a driver’s license, passport, or state ID. This is important because the bank will verify your identity. To have a government ID or driver’s license, you’ll have to go to the DMV and apply. However, you’ll have to be 18 years old to apply for a driver’s license.
- A voided check or deposit slip from the business: This is so the bank can set up direct deposit for your business. A voided check has “void” written across the front and should have the business’s name and address printed on it. On the other hand, a deposit slip is a form with your account number and routing number when making deposits at the bank.
- A list of signers on the account: The bank will need to know who has signing authority on the account. This is important because these are the people who will be able to access and manage the account. Typically, the signers on the account are the business owner or owners and any managers or officers of the company.
If you have all of this information and documentation, you should be able to open a business bank account without any problems. However, if you have any questions, you should contact your bank or a professional service like Incfile for assistance.
How to Open a Bank Account: Step By Step
Step 1: Choose the Best Account
The first step to choosing the best bank account is to know what type of business account suits your needs. The most common types of business bank accounts are:
- A business savings account is an excellent option if you’re looking to grow your money while still accessing it. A business savings account is also a good option if you don’t plan on using the account for day-to-day transactions.
- A business checking account is ideal for businesses that have a lot of transactions. This account gives you the ability to write checks and use a debit card for purchases.
- A merchant services account is perfect for businesses that need to accept credit cards. This type of account comes with a Merchant ID number which allows you to process credit card payments.
- A business money market account is an excellent option if you’re looking for higher interest rates and the ability to write checks. A business money market account refers to a savings account offered by a bank or credit union.
Once you know what type of account you need, you can start comparing banks. When you’re comparing banks, there are a few things you should keep in mind:
- The fees: Every bank has different fees associated with their accounts. Some banks may charge a monthly fee, while others may charge per transaction. It’s essential to find a bank that has low fees so you can save money.
- The interest rates: If you’re looking for a business savings account, you’ll want to find a bank that offers high-interest rates. This way, you can grow your money quickly.
Step 2: Find the Right Bank
Finding the right bank for your business is an important decision. You’ll want to find a bank that offers your company the right mix of features, benefits, and services. Here are a few factors to consider when choosing a bank for your business:
- Support for future needs: if you are expecting more than just a bank account—maybe you’ll need small business loans down the road—you’ll want to make sure your bank can support those needs.
- Affordable costs: depending on the features you need, business bank accounts can have fees. Compare account options from different banks to find the most affordable account for your business.
- Excellent mobile experience: if you do a lot of business on the go, you’ll want to make sure your bank’s mobile app is up to par. Consider how easy it is to use the app, how quickly you can get support if you need it, and what features are available.
- Local or online: do you want to be able to visit a physical bank branch, or are you happy doing all your banking online? If you choose an online bank, make sure they have a good reputation and customer service in case you need help.
- Existing banking relationships: if you already have a personal bank account with a particular bank, it may be easier to open a business account. You may be able to get started faster and enjoy some perks, like waived fees.
Step 3: Consider the Typical Fee Charges
When you’re shopping around for a business bank account, consider each bank’s fees. Typical fees include monthly service charges, ATM fees, and account maintenance fees. You’ll want to find a bank that has low fees so that you can save money on your business banking costs.
Be sure to read the fine print on any bank account agreement to know what fees you’ll be responsible for paying. By understanding the fees, you can decide which bank is best for your business.
If you’re not sure what fees to expect, ask a banker for more information. They should be able to give you a breakdown of the typical fees associated with business bank accounts. With this knowledge, you can make the best decision for your business.
Step 4: Gather the Right Documents
To open a business bank account, you’ll need to provide some documentation. This includes your business license, your EIN, and any incorporation documents. You may also need to provide a voided check or bank statement from your current account. The requirements vary by bank, so check with your chosen institution in advance. Confirm from the bank of your choice what kind of documents they will require for you to open an account.
Step 5: Go Ahead and Open a Bank Account
You now have everything you need and have completed all the essential steps required—it’s time to begin signing up for your new business account. This will likely involve going into a physical bank branch and working with a banker.
Provide the banker with your business license, EIN, and other required documents when you’re ready. The banker will then help you fill out the necessary paperwork and set up your account.
You’ll need to deposit money into your new account to get it started. You can do this by transferring money from your personal account or making a physical deposit at the bank.
And that’s it! You’ve now successfully opened a business bank account. Be sure to keep track of your account activity and balance to avoid any issues down the road.
A business bank account is a breakthrough for your business. It will help you manage your finances better and keep track of spending. Having a business bank account gives you a better image of potential customers and investors. Overall, it is a great decision to open a business bank account for your small business.
Leave a Reply