One of the first steps you will take as a beginner entrepreneur is to open your business bank account.
Having a business bank account is a vital tool to run your business. It physically separates your business expenses from your personal accounts.
Do not make the mistake that many beginning entrepreneurs do and run your business through your personal account. You will be making it harder on yourself since it will be tougher to manage transactions, reconcile checking accounts and prepare your tax returns. Top business experts and the Internal Revenue Service recommend the separation of business and personal bank accounts. By opening a business account, you make this possible.
Additionally, having a business bank account is an important credibility factor to make your business idea a legit company and not just a dream.
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Steps to Take BEFORE You go to the Bank
Consult Your Accountant
Speak to your accountant and get their recommendation on whether you need to open multiple bank accounts. Depending on the size of your firm and industry, your accountant may suggest you open separate bank accounts for payroll, taxes and retail merchant accounts.
Pick Your Bank
Your personal bank may not be the best choice for your small business bank account. They may not offer the services you need such as lines of credit, credit card processing, merchant accounts, and business credit cards. Compare banks options to your needs to make the best selection of a bank where you will open a new business bank account.
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Decide Local Bank or Online
You can either open a bank account locally, go in person meet your bank manager, or you can open one online, both options have advantages. Research small business banking comparison sites to start your decision-making process. You may find local banks offer business bank accounts with no fees which can be a good option for budget minded businesses.
In-Person – Opening your account in person allows you to begin an important entrepreneurial relationship, that with your banker, that will help you in the future to help you run your business effectively and also help you to discuss your individual needs and get expert consultation for your firm’s benefit
Online – Going online and opening up an account saves time and is ideal for busy executives. However, you may be limited as to the type of banking transactions you can conduct online. These types of industries are prohibited from opening online business accounts by the US government; issuance of money orders, currency exchange, telemarketing, gambling and precious metal dealers.
Determine Forms of Payment Acceptance
Review how your customers will pay for your goods and services. If you are accepting paper checks, you may want to select a bank that offers check scanning for automatic deposit. If you are opening a retail business, whether brick-and-mortar or online, you will want to research credit card merchant accounts and point-of-sale POS payment systems. We highly recommend Intuit Gopayment for an integrated system of online accounting, mobile card reader, and online credit card processing.
You will want to have begun this research before you open your bank account to be sure that the bank will integrate your account smoothly, sync transactions and make deposits automatically.
Checklist for Opening Your New Business Bank Account
If this is your first business bank account here some tips on what to bring to your bank manager account appointment:
Personal ID – Identification
Don’t wrongly think that because you are opening a business account it does not require personal identification such as a drivers license or Social Security card. US law requires that you provide the bank documents to confirm your identity. The bank manager will make copies of the ID of all the account holders, business owners with more than 10% shares and check signers to be held in their files.
DBA Doing Business As
If you are a sole proprietor and will do business under a company name, such as John Doe doing business as Doe Construction, you will need to obtain a DBA, doing business as, a license from your state. Bring a copy of this document for your bank’s records.
Employers identification number EIN
Dependent upon your business structure, you may need to bring your tax identification number or EIN. There are still some banks that allow sole proprietors to open bank accounts without the employers’ identification number; it is wise to obtain one and included in your business banking file to protect against identity theft. You can register for an EIN number easily online at the IRS website HERE
Business Licenses
Bring the originals of all licenses you’ve obtained from your state and the federal government. If you are unsure if your business requires specialized licensing, check your state’s licensing requirements for new businesses here
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Incorporation Papers LLC
For new companies that have incorporated, or formed LLC and also limited partnerships need to bring your Articles of Incorporation that have been filed with your state. If you are one of many owners, you will need to have a banking resolution, which is a document that gives you the right to conduct financial transactions for the company. If you do not have this document copy many banks have sample agreements you can use to create one for your firm.
Projected Financial Transactions
At your initial bank account set up, it is wise to advise your bank on your projected financial volume. Business bankers suggest that you create a document indicating your projections for bank balances monthly including your low and high dollar limits.
This can also be a useful time to discuss with your business banker your anticipated cash flow needs and review any credit options available to the future.
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Good work. Now you are ready to get your venture started and open your business bank account!
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.
