Starting a new business takes time and dedication, but the most important aspect is money management. Most small businesses trying to kickstart this process will open a business checking account to make the legitimacy of a company more concrete.
The sooner you open a business account the better since this strengthens ties with your bank. As you develop this relationship you may find that your bank will be more willing to help with your business access credit so your company can grow.
“Setting up a business checking account ultimately helps clearly separate your business and personal funds, provides more protection to your personal assets and makes it easier to keep track of your business expenses throughout the year for tax purposes,” says Tony Pica, the vice president of business solutions at the Navy Federal Credit Union.
In order to open a business account, you must provide the proper documentation which varies from bank to bank. Some of the personal and company information you need to set up a business checking account is:
- Two forms of identification - Drivers license, passport, credit card, or utility bill
- Tax ID Number (TIN) - Ensure you have already applied for your TIN which is also your employee ID number (EIN)
- Business documentation - Showing you have paid the necessary fees and have gotten in touch with federal officials to register and license your company
- Assumed name certificate - This typically applies to sole proprietors
- Beneficial owner information - Banks require you to state those who have a stake of 25% or more in your company to determine how much equity each of you have in the company
- Cash - Most banks ask for a minimum initial deposit of $100
- A comprehensive understanding of your business plan
There are many forms of business accounts so prior to opening one, do some research and think about what kinds of services your company will need. Deposits, invoices, and authorizing who can sign checks are all things to consider before your account is active.
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For new and smaller businesses there are accounts with lower fees during the initial start-up of a company. These cost-effective accounts only include the basics, being a place to put your money and a debit card. If you’re looking for an account with expanded features, you may be able to avoid fees if you provide an accurate forecast of how much money you’ll be earning and spending on a regular basis.
You need to look into all available banking options and take pre-emptive steps prior to opening a business checking account. Pica says you should “shop around and see what kind of offerings are available in the market for a small business. Consider fees, interest, transaction limits, cash deposit limits, account maintenance requirements, and access to digital banking tools.”
Compared to a personal account, business bank accounts allow your business to secure loans, obtain a business credit card, and process large volumes of transactions. The advantages of a business bank account include better financial organization, access to specialized services like payroll management, and enhanced credibility by keeping personal and business finances separate. These accounts are also beneficial when dealing with complex revenue management and provide the ability to complete tax returns accurately.
By Surina Nath
