How to Open a Business Bank Account

How to Open a Business Bank Account

Opening a business bank account is essential for your new business. Wherever you choose to open an account, you’ll likely use that bank or credit union for years to come. It’s not just a place to hold your money; it’s a partner as your company grows, especially if you seek a loan or line of credit.

This guide will walk you through the process of setting up a business bank account. We’ll help you find the right bank, weigh banking features, and go over the setup process.

3 reasons you need a business bank account

If you’re starting out, you might wonder why you need a business bank account. Why not use your personal accounts? Any serious entrepreneur will tell you that a business account is vital to your success.

Why? Here are a few reasons.

1. To track your expenses

If you keep your personal and business accounts together, you’ll have to sift through each transaction to see how much money came in and went out.

It’s a tedious task that takes away from improving your business. Start a business credit card for the same reason. It’s hard to monitor your company’s cash flow if it’s mixed with your personal money.

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2. To alleviate tax headaches

When tax time rolls around, it’s easier to turn over bank statements solely based on your business.

From those statements, a skilled accountant can look for tax deductions and incentives. Even if you do your own taxes, a dedicated business account will be a lifesaver.

3. To start a relationship with a bank

At some point, you might need a loan for your business. Hopefully, in a few years, you’ll look to expand.

If you already have a relationship with a bank, you’re one step closer to getting funding. This connection, combined with a solid business plan, will help you secure the necessary funds.

Considerations to help you pick the right bank

You have various options to choose from: big corporate banks, regional banks, or credit unions. It all depends on what you’re looking for.

Here are a few points to consider.

Bank fees

Every bank has fees, some more than others. Ask about fees and their structure.

In some cases, you’re charged for not maintaining a minimum balance in your account. ATM fees can add up. Some banks even charge a “maintenance fee” just to keep the account open.

Big banks generally offer lower fees due to a higher volume of clients. Ask about the likelihood of fee increases and if any rates are promotional and expire quickly.

Lending ability

Inquire about lending ability. Can the banker you work with authorize a small business loan, or does it have to go through numerous corporate executives first? It’s something you’ll want to know upfront.

Regional banks and credit unions often have more flexibility in this area.

Online features

Most entrepreneurs want online features, and most banks offer them.

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From online bill pay to transferring money between accounts, ask about specific features you need and compare prices.

Customer satisfaction

In some cases, working with your local branch provides personal satisfaction, but according to a J.D. Power customer satisfaction survey, big banks outrank smaller ones in this area. It’s something you’ll have to weigh for yourself.

Online banks

There is a growing number of online banks, and some entrepreneurs find their features appealing. Online banks tend to offer optimized digital features, like banking apps and user-friendly dashboards.

Of course, there’s no face-to-face connection, which can be a pro or con depending on your business. Depositing cash can also be challenging if you have a brick and mortar location.

Finding the right bank is likely the most time-consuming part of the process. Spend time investigating what each bank offers and how it aligns with your business.

What you need to bring when opening an account

When you’re ready to open a business bank account, gather the necessary paperwork. Here’s a quick list.

Employer identification number

Before setting up an account, you need an employer identification number, or EIN. Apply online through the IRS website.

Proper ID

Have your driver’s license as proper identification. Bring an official ID for any business partners as well.

Certification of business identity

You’ll have to file paperwork with the state for your business. The bank needs this information on your business structure.

Depending on your business type, bring articles of organization, DBA papers, articles of incorporation, or a partnership agreement.

Business license (if required)

Some states require specific businesses to have a license. The bank will need to see it to ensure your business is legitimate.

Bank application

Each bank has a different application. Fill it out at home in advance for a smoother process.

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What to expect when opening the account

Sit down with a banker to discuss your business needs. They will go over different account options with you and review your paperwork. Fill out a signature card for transaction verification.

The bank will check your personal credit score. Expect them to consider it if you plan to ask for a line of credit or a loan.

The process generally takes an hour or longer if you discuss additional products like savings accounts, business credit cards, or lines of credit.

You’ll receive a temporary checkbook and a temporary ATM/debit card. Your official checkbook and debit card will arrive by mail.

Maintaining your bank account

Review your banking choice at least once a year. Check for any new fees and contact your bank if you notice anything unusual.

Overall, opening a business bank account is an important step for any new company. Take the time to find the bank that suits your needs and set yourself up for success.

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