What Do I Need to Open a Business Bank Account? Running a business involves a lot of financial activities on a regular basis. You might need to withdraw, deposit, and transfer funds multiple times in a day. For this, you need the right bank account because a personal bank account is not suitable for this.
A business bank account is very convenient for running any type of businesses, whether it’s small or large. In fact, it’s essential. It has its unique benefits over any other type of bank accounts.
A business bank account provides you with protection that limits your personal liability, by separating your personal fund from your business fund. In case of any transaction, your customers will be able to pay your business through a credit card instead of your personal fund. Business accounts also give you access to overdraft that you can use anytime when needed.
Opening a business bank account is not a simple process. However, it’s not super complicated either, you just need to be patient. The processes are described below as simply as possible.
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Choose a Bank
This is the first and one of the most important steps because you need to choose the right bank. Different bank offers different services and has different policies, so you need to find out which one is the best for you.
Different types of banks have expertise in different fields, some of them are good for small businesses, while some offers the best convenience for large businesses and industries. Hence, in this case, you need to pick the bank that will serve the best purpose of your business.
You can also open your business bank account in the same bank you opened your personal account to keep it all centralized and organized. But it’s always better to do a bit of research to find out which bank will be more suitable for your kind of business.
There are many things that you should consider before choosing a bank. They are:
- Introductory offers
- Transaction fees
- Interest rate
- A monthly waiver on the payment of a certain amount
- Discount rate
- Minimum account balance fees
- Minimum monthly fees
Choose Account Type
There are different types of business accounts that you can open for your business. And you are likely to need several accounts for income, payment, and taxes. Some of the essential business bank accounts that you need are:
- Business checking account: This is the first and foremost account you will need to run a business. This account will help you to cover your everyday expenses, accept payment, and keep your business running.
- Business savings account: The extra amount of money that you don’t need in your business checking account, you can save that amount in the business savings account.
- Merchant services account: As soon as you get your business running, you will be receiving payments. Credit card is a popular payment method and if you accept credit card payment, you will be needing a separate account for it. This account will handle all the payments, including credit card transactions of your business organization.
Business Name Registration: Your business needs a name. If you already have a name fixed and registered, you don’t need to follow this step. But if you haven’t, you need to pick a business name and get it registered. Make sure that your business name is unique. You can check the patent and trademark database and search online to be sure about it. After you have chosen a suitable name for your business following the steps above, you need to get it registered which won’t cost you more than $1,000.
Banks require different information, including personal information which is a pre-requisite of opening any type of bank accounts. And for business bank accounts, you are required to provide certain documents to the bank, without which you cannot open a business bank account. They are discussed below:
- Employer Identification Number (EIN): You need to provide a valid EIN that proves the identity of your business. If you don’t have an EIN, you don’t need to worry. You can apply for EIN for your business easily and get it fast from the IRS website. To apply for EIN, you need a valid Social Security Number. After applying for it, you can get the EIN confirmation as soon as 30 minutes, which you need to show to the bank. Some banks accept Social Security Number instead of EIN.
- Personal ID: Now you need to prove your identity through personal identification. If you want to open a business bank account, you must represent yourself as the owner or an officer of the organization or company. You can use a passport, driver license, or national ID card for personal identification.
- Certificate of Assumed Name/DBA: If your business is likely to operate under a different or short name, you need to file a DBA with the name you will use apart from your legal business name. And you will have to show the DBA for proof of your trade name.
- Ownership/Partnership: You need to show the Ownership/Partnership, according to the structure of your business to the bank for the proof of incorporation.
Set up a Merchant Services Account
This is the final step which will allow your business to receive payments. There are merchant accounts that will allow your business to receive credit card payments. Therefore, it’s best to set up a credit card merchant account, because most people prefer credit card payment method. Before opening a merchant account, you need to consider the transaction fees, discount rates, whether it’s featuring Address Verification Service (AVS) to prevent fraud or not, and the minimum monthly fees. You can also set up an alternate payment processing method if your business is online-based to receive payments from PayPal and other online payment methods. After you successfully follow all these steps, your business bank account is ready to roll for your business.