Opening a business bank account may seem a straightforward task and not so essential to a business’s success.
However, opening a business bank account makes a company looks professional and can help qualify for financing and separate personal and business funds.
The requirements for opening a business account tend to vary depending on the business structure.
Also, the bank you use and the type of bank account you need can cause this variation.
Why Every Business Needs a Business Bank Account
One of the key reasons to sign up for a business bank account is to separate personal and business finances.
Mixing the two can make it harder to maintain books of accounts and handle taxes.
Also, mixing up personal and business funds can expose you to legal issues.
For example, a limited liability company or corporation owner risks losing their liability protection if they don’t separate their business and personal finances.
It means that debtors could auction your assets if your business becomes bankrupt.
Opening a separate business bank account offers many more benefits.
For example, a business checking account can make a corporation or LLC look professional.
It may also make it easier to file taxes.
You are also entitled to a dedicated company debit card and customized checks once you open a business checking account.
Opening a checking account is also a step to building your company’s credit profile.
In short, a merchants account can help you get suppliers and qualify for financing.
The benefits that come with opening a business checking account are by far greater than the complexity of the process.
Types of Business Bank Accounts
The next step after understanding how beneficial a business bank account can be is to decide what type of bank suits you.
Business bank accounts are categorized into; merchant service account, business savings account, and business checking account.
A business checking account works as a personal account.
It can be used for accepting payments from clients and checking day-to-day expenses.
Your business savings account, on the other hand, can be used for accruing a little interest in non-liquid funds and storing your surplus cash.
A business checking account allows you to do the basics, including managing cash flow, collecting invoices, and paying for expenses.
Once the business gets established and accumulates enough money in the checking account, consider opening a savings account that can help you store any surplus money and build your interest.
A business savings account allows an entrepreneur to hoard their money while generating interest.
Businesses accepting credit card payments may be required to open a merchant account.
Merchant accounts are designed to front a sales payment before a customer deposits into their card.
However, banks require a business or company to have a checking account before opening a merchant account.
Any funds paid through a credit card by the merchant account provider are deposited into the savings account.
No all traditional banks offer the option of opening a merchant business account.
Requirements for Opening a Business Bank Account
There are requirements for opening a business bank account.
Documents required for opening a merchant account may not be similar to those required for opening a checking or savings account.
Also, the requirements may vary depending on the state in which you live and the type of business entity.
The state in which you established the corporation or LLC may also cause a variation.
Some banks also tend to ask for more information than others. But either way, it is simpler to open a bank account online.
Here are the basic requirements for opening a business bank account.
Requirements for a business structure vary a bit by state.
However, their core role is to spell out the components of a company, including the registered agent, management structure, address owners, and business name.
The organization document of a limited liability company is known as the articles of the organization while a for a corporation is known as the articles of incorporation.
Be sure to keep these documents in a safe place because the bank might ask you to provide them when opening an account.
It is a legal requirement for a business with more than one owner to sign a partnership agreement.
Partnership agreements for LLCs are also known as operating agreement while for a corporation are known as bylaws.
The document covers critical issues that the company may encounter, including how it will carry out its activities, and each owner’s responsibilities and rights.
Doing Business As or Certificate of Assumed Name
The law allows companies and businesses to operate under a trade name that could be different from the legal name.
However, a business must file a doing business as name or fictitious business name with its secretary of state before it is allowed to operate under a trade name.
Banks may ask for a copy of a DBA document before you are allowed to open a business bank account.
Employer Identification Number EIN or Social Security Number (SSN)
Banks will ask for EIN or SSN as proof of your business identity.
Some banks may ask you to provide the details that the IRS sent you after the approval of your EIN.
Sole proprietors can be allowed to use their SSN instead of EIN, but obtaining an EIN comes with several benefits.
Applying for the EIN on the IRS website is fast and simple.
EIN lets a limited liability company or corporation have a tax presence that is independent of the owners.
However, business owners must first obtain a valid social security number and agree to file taxes on behalf of their USA-based company.
Be to keep your EIN confirmation letter at a secure place because the bank might ask you to provide it when applying for a business bank account.
Any bank will ask for a business license before it allows a company to open a business bank account.
The process of obtaining a business license can differ by locality or state.
So, confirm the requirements for obtaining a business license with the local authorities before proceeding to open a bank account.
Options of Opening a Business Bank Account
Business bank accounts can be opened online or at a physical location.
However, not all banks offer both options, so confirm the options that your bank offers.
Most banks that offer online-only accounts don’t have physical locations.
You can opt to open an account in-person or online.
However, be ready to submit the required documents on the bank’s website or at a physical branch location.
Opening an account online can be a convenient option since you don’t have to queue at the customer desk.
However, someone may opt to open a bank account at a branch location so that he or she can receive one-on-one customer service.
Most online-only bank accounts offer a live chat feature, email, or phone call services.
Opening a business bank account could be a wise decision for virtually every business.
However, it is advisable to find the right bank and the suitable account type before deciding to open a bank account.
Opening a bank account could be tricky and complex, but it is a pain a business owner has to endure once.