Banking for Businesses

person holding white and red card
by Advice Chaser
by Advice Chaser

Once you’ve founded a small business, the next milestone is opening a business bank account. While you could keep your business money in your personal account for a while, you’ll likely need a business account sooner or later. It makes sense to keep a separate account for your company from the very beginning. Here are a few tips about banking as a business that will help you get started.

person holding white and red card

Why Get a Business Account?

When you’re a sole proprietor, there’s no real legal distinction between you and your company. Its assets all belong to you, and when you pay taxes, all business income is reported on your personal filing. However, it can be much handier to keep that money separate. With a separate account, you can track business income and business expenses without getting it confused with your personal finances. That can save you money at tax time, since everything is already clear for your accountant. It can also show you much more easily if your business is turning a profit.

There are other advantages as well. Having company checks and a company card looks more professional to customers. Banking as a business can also protect your identity, since it’s set up in your company name and employer identification number (EIN) rather than your personal name and Social Security number. And it helps limit your risk if either your personal or business account is compromised.

In some cases, it’s not optional to have a business account. If you want to incorporate, you have to have one. And if you form a partnership, it will allow you and your partners to access company money equally.

Banking as a Business

A business account works in very much the same way as a personal account. You’ll likely want a business checking account, which allows you to write checks, use a debit card, and process ACH and wire transfers. They may even come with additional features, like integrations with your accounting software or the ability to categorize and track expenses.

You may also need a merchant account, which allows you to process customer payments. You’ll be able to accept credit and debit card payments without having to use a payment processing app. If you do a lot of transactions every month, this option may be cheaper.

You can expect a number of costs in a business account: setup fees, monthly fees, transaction fees, and chargeback fees. These tend to cost more than the same expenses for a personal account. You may also have different account minimums or maximums. For this reason, it can be worthwhile to compare the terms at different banks to find the best deal for your needs.

How to Open a Business Account

Just like with a personal account, you will need to provide identifying information to the bank. But the paperwork you will need includes additional business documentation.

In general, you will need:

  • Personal identification, such as a driver’s license or passport. You may need two forms. If your business is a partnership, all members of the partnership will need to supply identification.
  • Personal information such as your address, date of birth, and Social Security number.
  • Your employee identification number (EIN) if you have one.
  • Business name and address, business entity type, and industry.
  • Organizing documents, which depend on the type of entity the business is. This may include a business name registration certificate, partnership agreement, LLC operating agreement, and articles of incorporation.
  • Your business license.

Of course,  as with any account, you will also need an initial deposit. Depending on your bank’s minimums, that might be as much as $1000.

If you’re unsure, look up your bank online or give them a call to find out what documents you need to have. It’s possible you will need to wait to open your account until you receive more documentation of your business.

A Business Needs an Advisor

As you start your business, you may find your finances become a lot more complex. That’s a good time to find a financial advisor who specializes in businesses. They can help you draft a business plan, advise on next steps, pick a company structure, and do your business taxes. We can connect you with an experienced professional when you contact us.

Interested in more?

Your financial plan is as unique as you are. We partner with businesses all over the U.S., so that we can help you connect with the right options, all at no cost to you.