Things to know before opening a business account
Starting a business requires making a ton of difficult decisions before you make your first sale. The location and kind of company bank accounts you choose to open are crucial decisions. You need a business account to separate your personal and corporate funds.
This article is for small- and medium-sized business owners who want to create a business bank account but are unsure of the requirements. I share details of what a business account is, the documents required to open a business account, and all you need to know before opening one.
What is a business account?
Your personal bank account should be used to control your own finances. You cannot and should not manage business money in a personal account; you must manage business money in a business account. It is also advisable to keep these accounts separate to make it easier for you to file your taxes each year and monitor the growth of your company. Business bank accounts make your company seem more professional to clients and the IRS.
What paperwork is required to create a bank account for my business?
The bank will want some documentation for your business account, just like when you open a personal account. The following papers may be requested by the bank:
- If you have a Social Security Number (SSN) or Employer Identification Number (EIN), please provide it.
- formation records
- ownership contracts
- business permit
- Identification documents
Check whatever documents are needed before you start the application so that you are prepared.
Different types of Business Account
Many commercial bank accounts are identical to those for personal accounts. These consist of:
- Savings accounts
- escrow accounts
- Bank cards
However, if a company uses an online payment system, it will only require one kind of account. You’ll need merchant services to account in order to accept debit and credit card payments from consumers if you run an online store or another type of business that accepts payments online.
Things to consider before opening a business account
There are several banking alternatives available to business owners, and each bank provides a somewhat different service. Till you locate the ideal bank for your company, take your time examining the available choices.
Always compare prices, advised Global Career founder and CEO Mike Swigunski. Use this to your advantage to receive better prices because banks are just as eager to attract new clients as they are to keep their existing ones.
Here are some things to think about (and inquire about) as you compare various banks:
- Fees: If you conduct more transactions than a specific amount in a given month, some bank business accounts may be subject to monthly fees as well as per-transaction charges. Cash deposit fees, ATM fees, and wire transfer costs are additional charges to find out before opening a business account. Consider which of these services the bank utilizes and how the associated costs can affect your bottom line.
- Requirements for account maintenance: Some banks usually require some fees for accounts with insufficient funds: If the balance in your account falls below a specified level, you may be charged a fee. And some require fees for early account closure. The bank could demand that you keep your account open for a specific amount of time. They may also impose fees if you close the account too soon.
- Qualities: Some banks integrate their customers’ business accounts with popular accounting software. As a result, you won’t need to manually search through your business bank account for information and enter it into your accounting software while monitoring your company’s finances and producing expenditure reports and balance sheets. Therefore, you should look out for some special qualities a bank offers before opening your business account with them.
- Bonuses: Some business accounts offer bonuses and higher interest rates than others. Business savings account interest rates are the most important, however certain checking accounts for businesses also pay interest. A higher rate is preferable, but you must consider it in conjunction with the other elements mentioned above
In conclusion, you should open a business bank account, whether you’re a corporation or a sole owner, to safeguard your personal assets in the event that your company is ever sued. It might be simpler to prepare for taxes if you keep your personal and company accounts separate.