Opening a bank account for your business comes with an abundance of benefits for yourself, your business, and your clients. We have created a list of benefits to opening a bank account for your business, what to consider before opening a bank account for your business, and steps to opening a bank account--whether you are a brick-and-mortar operation or an online business.
Benefits to opening a bank account for your business
Opening a bank account for your business can add credibility and respect to you, the business owner, and your business. It shows your level of commitment and dedication, and you take your business seriously. When you take yourself and your business seriously, others will begin to do the same. Business transactions are also more professional when payments are made to your business than you personally.
Clean Financial Record
Separating your business and personal finances is beneficial when it comes to tax season. Having to determine your business expenses and your personal expenses is a huge headache and is something you want to avoid.
In addition, a clean and accurate financial business record is crucial for a less stressful IRS audit. You want every business invoice and expense to be accessible through a clear trail.
Limited Liability Protection
Limited liability protection, simply put, protects your personal assets if your business encounters and obtains legal liability. Having a separate bank account for your business prevents creditors, such as the IRS, from taking your personal assets to settle debts you may have incurred over time.
Option for a Line of Credit
In the world we live in, you never know what is going to happen. To help business owners stay prepared for what might come, most banks offer business owners the option to open a line of credit that can be used for emergencies or other expenses, such as new equipment.
Having the option to open a line of credit is favorable to you as a business owner, so you do not have to use your personal finances for emergencies and other expenses.
Earn Rewards and Interest Rates
Everyone likes the sound of rewards. Opening a bank account for your business has its perks. You can earn travel discounts and rewards or cashback for certain purchases made with a business credit card.
Another benefit to having a bank account for your business is an interest-bearing account. Interest-bearing means you get money back for the money you keep in your deposit for your business.
Banks offer different interest rates, so you want to make sure you choose a bank that caters to your business.
What to consider before opening a bank account
There are some important factors to consider before opening a business bank account. First, you want to have an understanding of your needs and the needs of your business. Opening a bank account for your business is no small task, so make sure you educate yourself on a bank's policies for business accounts.
Minimum Deposit to Open a Bank Account
Before opening a bank account, determine if the bank you choose has a minimum deposit requirement to open an account with them. Knowing the minimum deposit requirement helps you be more prepared when you are ready to take the step of opening a bank account for your business.
Minimum Balance to Avoid Bank Account Fees
The next thing you want to note is whether or not a bank requires a minimum balance in your account. You do not want the bank charging you a fee -- such as monthly maintenance fee -- that you were not expecting to pay. Banks will have different policies, and policies can differ between bank accounts, like a checking account and a savings account.
Third, consider and compare each bank's monthly fees to choose one that best fits your budget for the business and your business's needs. Monthly fees can include transaction fees and monthly minimum fees.
Banks often offer alert notifications so that you can avoid being charged extra fees. Most also offer notifications that will alert you when your account isn't meeting minimum balance requirements.
You should also consider accessibility to your finances. It would not make sense to choose a bank that did not have an ATM or a branch office in your location.
Being able to access a physical location to meet people is also an important aspect to think about when it comes to choosing a bank. It is always a good idea for a business owner to build a relationship with a bank so that when needs arise, banks can meet your needs for your business--especially if you're a small business owner with few partnership agreements.
Consider the different features a bank offers, such as online banking and mobile money management. Most banks now offer business account holders the ability to use their business banking account online. You can access your business account on the go--no more need to make in-person appointments to do tasks like requesting a business debit card.
Future Financial Needs for Your Business
Last, you want to consider your future financial needs in making this decision. If you are looking to expand in the future, then consider banks that offer business loans to aid in your goal for expansion. If an expansion means hiring employees to help with your business's success, then consider banks that provide payroll services, such as Chase or Bank of America.
Steps to opening a bank account for your business
Choose the Best Type of Business Bank Account for You
There are many types of bank accounts that you can choose from for your business. The different options are Business Checking Account, Interest-bearing Checking Account, Business Savings Account, Certificates of Deposit, and Money Market Account.
Do some research on each type of bank account to develop a deeper understanding of how it can benefit you and the growth of your business.
Find the Right Bank to Open a Business Account
Chances are, you already have a relationship with a bank for your personal finances. When it comes to your business bank account, choose a bank that feels right for you. We recommend having a good working relationship with the people handling your business's finances.
You can always feel free to reach out to different banks, meet people, and see if they would be a good fit based on your needs and wants for yourself and the business.
Gather the Required Documents
Once you decide on the type of bank account you want to open and the right bank for your business, it is time to pull together all the required documents to open your business bank account. Though this isn't personal banking, you will still need some of the same information you would normally need for opening personal accounts.
Each bank will have different documentation requirements, but most banks will require you to bring a business license, an employer identification number, personal identification such as your social security number or driver's license, and your articles of organization.
Be prepared. Make sure you take the time to gather all the necessary documents to open your business bank account.
Open a Business Account Online or In Person
Now that you have everything you need to open a business bank account, it is time for you to open one. It is more common to set up a business bank account in person; however, some banks may now offer business owners to create one online.
One thing to consider before opening a bank account online is the processing time. Setting a bank account online may take longer to review and process your documents, so depending on whether you prefer to open a business bank account sooner, going in person might be the better option.
Deposit Your Funds into Your Business Bank Account
The last step is to deposit funds and start using your business bank account. Use your account for anything business-related, and use it responsibly.
Another option is linking your business bank account to Venmo. Chances are, in the digital world we live in, people you are doing business with have a Venmo account.
Opening a bank account for your business has many benefits. Before opening a business account, you need to consider what your needs and wants are for a business bank account.
Along with that, take time to do in-depth research on different types of bank accounts to be able to choose the right bank to open an account with for your business.