Opening a business bank account is a critical step in launching a business. Many new entrepreneurs, especially sole proprietors, may be tempted to use their personal bank account to accept payments and make business purchases. However, separating your business and personal finances is essential for keeping your finances organized and trackable for tax time.
Beyond the bookkeeping benefits, a dedicated business bank account makes your business seem legitimate and professional, and offers personal liability protection for businesses that are incorporated as separate entities.
Below, we’ve outlined what to look for in a business banker, and the step-by-step process for opening an account at your financial institution of choice.
What to consider when choosing a bank for your business
Every financial institution is different, and depending on your business’s needs, you may find that some banks or account types are better for your business than others. Some may find a larger, national bank best suits their needs, while others prefer to work with a local community bank.
According to the Wall Street Journal, here are a few things to look for in a business banker:
- Available financial products: Beyond a checking and savings account, you may want other products like a credit card, line of credit or business loan.
- Account features: Common features that a business bank account may offer include online banking, interest on checking or savings accounts, direct deposit, wire transfers, merchant services and more.
- Fees: Understand any fees involved with your account and whether the bank offers an opportunity to waive the fees when certain conditions are met (e.g. high account balance or a certain number of transactions).
[Read: Top 3 Ways to Improve Your Small Business Accounting]
Whichever bank you choose for your business, it’s important that you trust them completely.
Steps for opening a business bank account
While different banks may have slightly different requirements, the process of opening an account looks very similar no matter where you go.
1. Research your bank’s options to find the right account type.
Many institutions offer different business account options. The U.S. Small Business Administration recommends finding an account with low fees and good benefits. You can do research online beforehand, but speaking with a bank representative in person can help you find the best one for your needs.
2. Gather the required documentation.
Documentation requirements may vary depending on your bank and business structure, but generally, you will need these items to open an account:
- Employer Identification Number (EIN), or Social Security number for sole proprietors
- Business formation/registration documents
- Any ownership agreements
- Business license(s)
- Government-issued photo ID
The SBA notes that your bank may require additional documentation, so be sure to ask what you need to bring before you visit your local branch.
3. Fund your account.
Have cash or a check ready to make your initial deposit into your bank account. Ask the branch representative how much you will need to fund the account.
[For more, see: Top 3 Ways to Improve Your Small Business Accounting.]
4. Put your newly opened account to work.
After the bank processes your application and officially opens your account, there are a few follow-up steps you should take. First, if you received a debit card for your business checking account, activate it right away and set up your PIN.
Next, set up online and mobile access so you can manage your account from anywhere. Finally, if you have accounting software, integrate it with your new bank account to automatically import your transactions. You may also want to order business checks and set up online bill pay, if you anticipate paying for services this way.
Whichever bank you choose for your business, it’s important that you trust them completely. You are entrusting your business’s money to this institution, so make sure you’re comfortable with the bank and its policies.
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