You may handle your business finances professionally and keep them separate from your personal affairs with the use of business bank accounts. A commercial bank account must be opened with more effort than a personal account.
In creating a business bank account documents need to be gathered, names need to be determined, and licenses need to be organized. Discover the benefits of having a business bank account as well as the steps required to open one.
- Your articles of incorporation, employer identity number, and personal identification documents are required in order to open a business bank account.
- You can open a checking and savings account for your business.
- You need a business bank account to separate your personal and corporate finances.
What Is A Business Bank Account?
To learn about “creating a business bank account,” you should learn about what a business bank account is.
According to a poll conducted by Harris Insights & Analytics for Square, 71% of small business owners have a business savings account. Despite this, many of these accounts have little activity because small business owners frequently only maintain the bare minimum balance.
When you’re considering starting a business, business banking includes everything from the bank where your money is to business loans and other services. As opposed to any services you would require as an individual for personal use, these solutions and technologies are exclusively designed for enterprises.
Small business owners may have different objectives for their companies’ checking and savings accounts than they do for their own financial security.
63% of the surveyed small business owners opened a business account when they first launched their enterprise. This may be the ideal moment to think about opening a company checking and savings account if you are a small business owner just starting out.
Why Do You Need A Business Bank Account
1. Limited liability protection
By keeping corporate funds separate from personal funds, business banking helps to reduce your personal liability.
“No matter what type of business you own, you should always separate your personal and business finances,” said Chas Rampenthal, general counsel at LegalZoom.
2. Credit options
A line of credit option that you can utilize in an emergency is offered by some banks. Many also provide business credit cards that can be used to begin establishing credit history for your new company.
3. Purchase protection for customers
Merchant accounts are a common commercial banking option offered by banks. Because they offer your consumers purchase protection and personal information protection, merchant services are advantageous for the company.
Checks written in the name of the firm can be written using a business bank account, which is more professional than asking clients to do so. Additionally, your clients can pay using credit cards, and staff members can manage the company’s banking activities.
Types Of Business Bank Account You Should Know About
Creating a business bank account is easy when you know how many bank accounts are there to be taken under consideration. There are various sorts of corporate bank accounts, just like there are for personal accounts. Depending on your requirements, you might need to create multiple accounts.
The four most typical types of company bank accounts are as follows:
- Checking account: Keeping track of wages, expenses, and other routine financial responsibilities is easy with a company checking account.
- Savings account: To hold your profits, you’ll probably need a business savings account in addition to a checking account.
- Merchant account: Check with your bank to see whether you may open up a merchant account if you intend to take credit and debit card payments.
- Credit card account: You can use a company credit card to pay for unexpected expenses or other small business needs. The main advantage of a credit card for new business owners or those with poor credit is that it can assist establish or raise your company’s credit score.
How To Open A Business Bank Account Company Wise
With the exception of sole proprietorships, opening a business bank account is the same procedure as doing so for a personal savings or checking account.
The business license, DBA certificate, and personal identification documents are still required for sole proprietors.
Documents Required To Open A Business Bank Account
The following paperwork should be ready before you open a business bank account:
- Articles of incorporation
- Business licenses
- Doing business as (DBA) certificate
- Employer identification number (EIN)
- Identification documents
More details on each of the paperwork you’ll need to open a business bank account are provided below:
Articles of Incorporation
Your articles of incorporation outline the organizational structure of your company to the bank, and you also utilize these legal documents to register your company with the government.
The articles of incorporation that you filed with the state if you are the sole owner will be required to open a bank account if you form a business as an LLC, limited partnership, corporation, or other separate legal entity, according to Tiffany Wright, president of The Resourceful CEO and project director at Cogent Analytics.
According to Rampenthal, banks will probably request a copy of your most recent business license as evidence that you have the legal right to operate a business in the area.
This guarantees that your company is responsible for all acts, including paying taxes and handling money, he added. To find out if you need any licenses to run your business, check with your state, county, and municipal governments.
Doing business as (DBA) certificate
According to Deborah Sweeney, CEO of MyCorporation, a DBA, often known as a “fictitious name,” enables you to conduct business “such marketing or advertising, or collect money, under a name that differs from the existing name of your corporation.”
Since business owners aren’t permitted to utilize their personal bank accounts under their corporate names, Sweeney continued, most banks want a certified copy of a DBA in order to open a commercial bank account.
Employer Identification Number (EIN)
According to Levi King, co-founder and CEO of the credit solutions and monitoring company Nav, you’ll need an EIN, your Social Security number, and a driver’s licence or passport if you’re a sole proprietor.
EINs are also used to stop fraud, money laundering, and identity theft. Even if some banks permit a single proprietorship to open accounts without an EIN, King continued, it’s still wise to get one.
This is needed in creating a business bank account. Government-issued picture identification documents, such a driver’s license or passport, are acceptable forms of proof. This is used as confirmation that the business owner actually owns and/or manages the associated business.
Frequently Asked Questions
1. How do you set up a business bank account?
Ans. If the online application is unsuccessful, you can apply in person at a bank location. Gather the Know Your Customer (KYC) documentation needed to open the account. The bank will handle the necessary paperwork to open the new business account.
2. What is required to set up a business account?
Ans. You and your company must both provide identification verification in order to open a business bank account. Your state-issued driver’s license, passport, company license, or partnership agreements are a few examples. There may also be a need for extra materials from your company.
3. How much money do I need for a business account?
Ans. Some banks demand an initial deposit, which can be anywhere from $5 to $1,000, while others let you start an account with nothing.