Every startup founded on really serious business goals cannot overlook the importance of opening a business bank account. In the first place, a business bank account for your business helps you to legitimize the business idea that went into creating the company. It makes your business a real one. Also, it is a critical consideration for the taxes you will have to pay. If you have separate personal and business accounts, it will be very easy to report the income and expenses. You will be in a better position to separate business and personal finances. Also, you do have the advantage of items labeled as write-offs.
About 70% of entrepreneurs maintain separate bank accounts for their personal and business finances. There are many benefits of a business bank account. It lets you keep track of your expenses. You can easily manage your employee pay, deliver the funds to investors, send and receive payments, deposit payments, and make the budget planning accurately. By separating accounts, you can organize your accounting records meticulously, prevent over-spending, and file the taxes accurately.
There are many types of business bank accounts namely a general business checking account also called a savings account, payroll account, business tax account. Irrespective of the form, creating a business bank account is rather very simple. You just need to follow these simple steps to get started.
Here is how you can open a business bank account
If you wish to get your finances in order, the best way to do it is to set up a business bank account. Here are the different steps to opening a business bank account.
Choose your bank
Choosing the bank is the first step in opening a business bank account. It is essential that you find the bank that will adequately meet your typical business needs. To do this, you must first know what you wish to achieve through your business bank account.
Decide on aspects like if you want a bank that can provide you with a line of credit. You must decide if you want features like cash management, deposit reconciliation, and mobile check deposit services. You must figure out the immediate needs of your business and also take into account the requirements you will face eventually as your business grows.
Most banks can open a business account for you free of cost. They keep your account free of charges as long as you can maintain the minimum balance. You must do some research to find out the minimum balance requirements of the banks you wish to operate with. Also, decide whether earning the interest on the funds you have in your account is an essential criterion for you to choose the bank. Some banks provide cash bonuses, which can be an attractive option for you.
Some banks provide special deals when you choose to maintain personal as well as business accounts in the same bank. Also, managing personal and business accounts in a single bank is a good option as it makes your job easy and you will not have to go from bank to bank in connection with your account management and transactions.
The bottom line in choosing the right bank is this. You must be clear of what your bank account must do for you. Hence it is necessary that you check with a handful of banks before settling with one for your business bank account needs.
Get ready with the necessary documents
Once you have chosen the bankers, you will then proceed to prepare all the documents required for opening a business bank account. The materials you will need during this step will largely depend on your business structure.
Irrespective of their structure and format, every business will need a taxpayer identification number for sure to open a business bank account. In some cases, this can be the Social Security number or Employer Identification Number. If you own a partnership business or a corporation, on in case you have employees, you must apply for and get an Employer Identification Number. The Small Business Administration requires that you need the following documents depending on the structure of your business.
- Sole proprietorships will need Social Security number or Employer Identification Number (EIN) in addition to the Business license or the document filed for a business name.
- Partnerships will need Employer Identification Number, a document filed for a business name and Partnership agreement.
- Corporations will require Employer Identification Number, Articles of Incorporation and LLCs in addition to Social Security number or Employer Identification Number and Articles of Organization.
Banks will also require businesses to submit the documents talking about the cash-flow projections.
Open the account
You can open an account either online or by visiting the bank in person. To open business bank accounts for businesses connected to the industry domains of Telemarketing, expensive metals, gambling, and governmental organizations, you will need to visit the bank in person. Other companies can choose the mode of opening the account as per their choice and convenience. If you pay a visit to the bank for opening an account, you can also enjoy the convenience of getting a few of your essential questions clarified.
Check how it works
Now that your business bank account is set up and ready to operate, you must ensure that things are working well and there are no mishaps. Ensure that the names on the check match the legal name of the business. Find out if your deposits are getting through. To make sure everything runs smoothly, you must track the funds coming in and out of your account.