If you’re starting a business, you’ll need more than a business card to get potential customers to take you seriously. That’s where business bank accounts come into play. Opening a business bank account is an important step on the road to success. This can help you manage your cash flow, build valuable relationships with banks, and ultimately help your business gain credit for growth.
“Setting up a business checking account ultimately allows you to clearly separate business and personal funds, providing greater protection for your personal assets and making it easier to track business expenses throughout the year for tax purposes. ” said Tony Pica, Senior Vice President. At Capital One.
What do I need to open a business bank account?
Opening a business bank account is not as easy as opening a personal bank account. You will need the appropriate documentation, which will vary depending on the type of business.
“The documents required to open a business account may vary depending on the structure of your business,” Pica says. “For example, a sole proprietorship requires a federal tax identification number (TIN) letter and a business license or proof of fictitious name, while an LLC or corporation also requires beneficial ownership information and a certificate of good standing. is required.”
Documentation requirements may also vary depending on the location of your business.
“Each state has its own rules for each (corporate) structure, so consult a trusted advisor, such as a business attorney or accountant, to ensure you are collecting all necessary personal and company information. Please,” Pika said. Say. “This is an important step to make the process as smooth as possible.”
Here is an overview of the most common materials needed to open a business bank account.
- Two forms of identification
- Taxpayer identification number (TIN)
- Business documents (certificate of excellence)
- title certificate
- Beneficiary information
- cash
- Thoroughly understand the business plan
1. Two types of identification documents
Please bring your government-issued identification (a state driver’s license or passport is sufficient) and another form of identification, such as a credit card bill or utility bill with your name on it.
2. Tax ID number
Your business is not official until it is registered to pay its fair share to the government. Make sure you apply for a federal tax ID number, also known as an employee identification number (EIN), from the IRS.
3. Business identity verification documents
In addition to dealing with the federal government, you will need to contact authorities in the state where your business is headquartered to verify your business’ legal existence. This may require you to register your business with state and local governments and obtain a business registration certificate and applicable licenses.
If your business is a corporation or LLC, you may need a certificate of good standing. This shows you have paid all the required fees and checked all the boxes, and is usually secured through the Secretary of State’s Office or your state’s Department of Corporations. The bank may also request meeting minutes, articles of incorporation, or other articles of incorporation.
4. Title certificate
This item generally applies to sole traders and limited liability companies. Let’s say your name is Tim Ryan, but you plan to operate as “Tim Ryan Painting.” This is your pseudonym and may also be referred to as a DBA (doing business as), fictitious name, or business name certificate. This usually applies to sole traders. It will probably be available through your county office.
5. Beneficiary information
Banks need to know who owns more than 25 percent of your company. This is the magic number that makes you a “beneficial owner.” If you own a business with other people, you need to determine how much equity each person has in the company. Your bank will likely ask you to fill out a simple form.
6. Cash
Like personal checking accounts, many business checking accounts require a minimum deposit to open. The amount varies depending on the bank. For example, Wells Fargo requires just $25 to open a business account, while U.S. Bank requires a minimum deposit of $100.
7. Thoroughly understand your business plan
Be prepared to share a detailed overview of the nature of your business, expected annual sales, supplier and vendor locations, and other information to establish your business’s credibility.
Choosing the Business Bank Account That Best Fits Your Needs
Business bank accounts have one important thing in common with personal bank accounts. That means you have a lot of options. First, you need to decide what type of business bank account you need, or whether you need multiple accounts to organize your finances. The account types you can choose from are:
- Business checking account. Use a business checking account to access the funds you need for your daily operations. Please note that many business checking accounts, especially those from brick-and-mortar banks, limit the number of transactions you can make.
- business savings account. Use a business savings account to build a reserve fund for emergencies or later to buy new equipment or expand your business. Business savings accounts may require higher minimum balances than personal savings accounts.
- Seller Services Account. A merchant services account allows you to accept debit and credit card payments from your customers. To make sure you’re getting the best deal, you should compare the transaction fees (usually charged per transaction) of different merchant service accounts.
Once you’ve chosen the type of business bank account you need, you can compare different banks to find the right one. First, think about what kind of service you need. Do you want to send branded invoices? Do you plan to give other leaders in your company the ability to sign checks? Want to connect your account to software like Quickbooks or NetSuite? Make deposits Do you need to go to a physical branch or can your business easily function without interacting directly with a teller?
There are many business bank accounts for new businesses that offer owners low or no fees in the early stages. These accounts include just the basics like a place to keep your money, a debit card, and little else. However, to take advantage of an account with enhanced features while avoiding fees, you may need to accurately predict how much income and expenses you will incur on a regular basis.
For example, consider Bank of America’s two business check options: “Fundamentals” and “Relationships.” To avoid the $16 monthly fee on your Fundamentals account, you must pay $250 each month on your business debit or credit card and maintain a monthly balance of $5,000. Relationship accounts offer more benefits, including fee-free payment suspension, fee-free incoming wire transfers, and the ability to customize access for employees, but they come with a hefty monthly fee of $29.95. To avoid this additional cost, orders would need to be much larger than the fundamental threshold ($15,000 monthly balance).
Other major banks, such as Capital One, have adopted a similar model, offering lower-cost business bank accounts in exchange for fewer features.
“Do your research before opening a business checking account,” Pica says. “Explore and see what products are available on the market for small businesses, considering fees, interest rates, transaction limits, cash deposit limits, account maintenance requirements, and access to digital business banking tools. please.”
conclusion
Opening a business bank account is easy if you have the right documents on hand. The bank will likely need proof of your identity, proof of business establishment, and a form for each beneficiary of the business. You may also be required to open an account with a certain minimum cash deposit. Before opening an account, compare several business bank accounts side by side and see which bank account offers the best features, such as free transactions, and the lowest fees, such as no monthly service fees if you maintain a minimum balance. It’s good to understand what’s going on.
—Freelance writer sarah george Contributed to updating this article. Former bank rate writer Rene Bennett Contributed to previous version.
