Opening a business bank account is an important first step if you’re beginning a new business. Even if you’ve been in business for a while, you’ve probably noticed that excessive fees and low interest rates are prevalent, so you’re probably rethinking your alternatives.
The specifics of opening a company bank account are a little more complicated than opening a personal one, but it’s manageable. We’ll go over everything you need to know.
You may wonder why you need a business bank account when starting. Please avoid using your personal accounts. Every sincere business owner will tell you that having a business account is essential to success.
How come? Here are some of the reasons.
You’ll need to go through each transaction to see how much money came in and went out if you maintain your personal and company accounts combined. It’s a tiresome chore that takes up time that could be better used to grow your company. For the same reason, launching a business credit card is wise. Keeping an eye on your company’s cash flow becomes quite difficult if your personal and business funds are combined.
You may eventually require a loan for your company. Hopefully, you’ll consider expanding in a few years. Having an established bank relationship brings you one step closer to obtaining money. This relationship and a strong business plan will assist you in getting the capital required to expand.
You want to have all your numbers in one location during tax season. Giving an accountant access to bank statements related only to your company is far simpler. An experienced accountant can search those statements for tax breaks and incentives. An account specifically for your business will be useful, even if you want to file your taxes yourself.
There are numerous solutions available to you. Which bank should you choose—a credit union, a regional bank, or a large corporate bank? It’s a difficult choice, and it all depends on your search parameters. Here are some things to think about:
Bank Charges: There are fees at every bank, varying in amount. Make sure to enquire about costs and their breakdown. You may incur fees if you fail to maintain a minimum balance in your account. ATM costs can mount up. In certain cases, banks even impose a “maintenance fee” in order to maintain an account. Large banks frequently have lower fees since they serve more clients. Find out whether there are often fee increases or if any deals are time-limited promotions.
Ability to Lend: Find out if you can lend money. Is it necessary for a small business loan to pass through sixteen tiers of corporate executives before it can be approved by the lender you work with? You should be aware of this upfront. Regional banks and credit unions typically have greater latitude in this regard.
Online Attributes: Most business owners desire internet functionality, and banks generally provide it. Make inquiries about the precise features you require, evaluate rates with other banks, and ask questions about everything from online bill payment to the ability to move money from your company account to your personal account.
Customer Satisfaction: Working with your local branch can occasionally bring you personal satisfaction, but large banks rank higher in this category than smaller ones, per a J.D. Power customer satisfaction survey. You will need to consider this for yourself.
Online Banking: Many online banks are available, and some business owners are drawn to their benefits. Digital services that are optimized, such as banking apps and intuitive dashboards, are typically provided by online banks. Naturally, there is no in-person interaction, which may or may not be advantageous for your business. Depositing cash can also be difficult if your company has a physical location.
The most time-consuming aspect of the process is finding the appropriate bank. Examining the features and functions of each bank for your company will take some time.
Opening a personal bank account has shown you that it’s relatively easy. A few more details are needed to open a business bank account, but these are usually things you should already have on hand.
Personal Data: Banks must verify that you are legitimate and qualified to open an account. They will request personal information from you and any other owners of businesses. The details that you may be required to submit could be:
- Full Name
- Date of Birth
- Nationality status
- Address and phone number
- Social Security Number
- A duplicate of your official identification document, like a passport or driver’s license
Documentation and Business Data: The bank will require certain documents to verify your identity and confirm the legitimacy of your company. Some documentation may be needed depending on your business structure, such as whether you’re a sole proprietorship or an LLC, for example. These prerequisites could consist of:
- Name of business and any additional DBA (“doing business as”) names that are registered
- Company authorizations
- Business Enrollment
- Articles of organization for LLCs and other business formation documents
- Operating agreements for businesses
- Ownership agreements for businesses
EIN: For your company, an Employee Identification Number (EIN) is comparable to a Social Security Number. It is used in IRS correspondence and other business finance-related transactions, such as creating a business bank account. You may quickly and easily apply online for a free EIN from the IRS. Generally speaking, an EIN is optional if you are operating your business as a sole proprietor. However, it’s a good idea to have one so that you don’t give out your personal Social Security number while conducting business.
Minimum Deposit at Bank: A minimum deposit may be required by certain banks in order to open a new business account. If this is a prerequisite, find out ahead of time, and if it is, ensure you have the money on hand to make the transfer and get things going. Remember that the minimum monthly amount required to avoid paying maintenance fees may or may not be the same as the minimum opening deposit.
Here is the detailed step-by-step process to open a business banking account
It’s important to pick a small business bank account that suits your needs. Examine nearby banks to assess costs, employee support, online banking options, loan options, and ATM availability.
Most banks need the same paperwork to apply, which we’ll go over in greater detail below. It’ll go much more quickly if you collect and arrange these in a beautiful folder in advance. In order to open an account, you often need to provide certain paperwork. This could include records like your driver’s license or tax identification number (EIN), proof of business ownership, a voided check from one or more of your existing business accounts, etc.
Step 3: Submit Your Application
After gathering the necessary paperwork, fill out and apply at the bank of your choice. In some cases, you can do this online. You might have to schedule a face-to-face meeting depending on the kind of account and the bank you select.
Following the approval of your application and the activation of your new account, make any initial deposits that the bank may require to cover processing costs and minimum balance requirements.
To remain competitive in today’s market, small businesses rely on mobile banking solutions like digital wallets and payment apps. Inquire about the bank’s mobile products to access practical features like automated payments and spending-tracking tools.
Do You Want to Open a Business Banking Account?
By Following the above steps, you can open your business banking account quickly. It’s a smart idea to review your banking options at least once a year. Make sure you aren’t getting charged for anything else by reviewing the fees. Call your bank to discuss the issue if you see anything unusual.