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Open Small Business Checking Account
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How To Open A Business Checking Account
Business bank accounts help your business look more professional to the IRS and your clients. Here’s a closer look at why you might want a business bank account and how to choose the best one.
Each stage of building a business presents unique challenges. When you finally get the money, you have to decide where to put it. For many businesses, from large corporations to sole proprietors, a business bank account is essential. But there are a few things you need to know before opening.
Below, we’ll explore why you should open a business bank account, what documents you need, and how to decide which account is right for your company.
If you use the account for both personal and business expenses, your personal savings may be at risk in a lawsuit. This means that if someone files a lawsuit against your business and the court pays them, your personal money can be a legitimate reward, even if the method you use has nothing to do with your business. A separate small business bank account protects your personal savings in these situations.
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Maintaining a separate business bank account makes it easier to track business income and expenses. This can save you a lot of headaches when you go to file your taxes and can help you avoid problems with the IRS. Separate personal and business expenses show the IRS that you are running a legitimate business and not a hobby business, which does not allow for a business tax deduction.
You cannot accept debit or credit card transactions through your personal bank account. If you have customers who regularly pay by card, you will need a business bank account to process them. However, you should limit your customers to paying by cash or check, and this may turn some away from doing business with you.
When you run a partnership or company, you probably won’t be the only person who needs to buy a business or access company funds. You don’t want your business partners to use their personal bank accounts, so a business bank account is the best plan for an LLC or corporation.
Your company will look more professional if you can write your vendors’ checks from the LLC’s bank account instead of your personal account. Individual clients may feel that written checks are more secure than your business name.
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Most banks require business customers to provide their Employer Identification Number (EIN) to open a business checking or savings account, although some may allow an owner to open a small business account with just their Social Security number.
You can get an Employer Identification Number (EIN) for most businesses by filling out a simple form on the IRS website. Image source: Author
If you don’t have an EIN, you can get one for free by filling out an application on the IRS website, as long as you have a valid Social Security number and your business does business in the United States or its territories.
For example, when you open a personal bank account, your bank will want to see a driver’s license, passport or other form of government identification to prove that you are who you say you are.
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Your bank will need a copy of the incorporation documents. For limited liability companies (LLCs), this means articles of incorporation; For the company, this is a matter of consolidation. These documents outline some basic information about your company, including its management structure, who is responsible for managing finances, and how your business will operate.
If you run a partnership or corporation, you and the other owners must enter into a partnership or operating agreement. It will outline the rights and responsibilities of each owner and how the business will operate.
Your bank needs proof that your business is properly licensed before they can allow you to open a business bank account. Requirements for obtaining a business license vary depending on where you live, so research what is required in your area.
If the name you use to market your business to your customers is different from the company’s legal name, you will need a valid name certificate, also known as a Doing-Business-As (DBA). Your bank will also require a copy when you open your account.
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Companies interested in opening a merchant services account to process debit and credit card transactions should provide their bank with a statement of their total monthly credit card income. Beginners may not have had credit card income before, but they should have an idea of how much to expect.
There are different types of business bank accounts and your company may need more than one. The most common are:
Once you know what accounts you need, you need to find the right bank. Please note the following:
Now that you know which business bank accounts you need and which bank you want to work with, you should gather all the necessary documents discussed above to be ready to apply. If you have any questions about the prerequisites for use, please contact the bank to ask them.
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Many banks allow you to apply for a business bank account online, although some may require you to visit a branch in person to do so. As long as you have all your paperwork in order, it shouldn’t take long to apply.
If you encounter any problem when applying online or have any questions about the application process, please do not hesitate to contact the bank. You want to make sure that everything is done correctly so that you don’t run into problems with the bank or the IRS later.
Once your account is set up, you can save money and start using it like any other bank account. Your bank may ask you to pay a deposit when you open your account. It can be cash or money transferred from another bank account by electronic or wire transfer. You can also write a check.
Opening a business account at a bank where you have personal accounts is tempting because then you can manage your money in one place, but it’s not always the best option. Compare bank accounts and fees at multiple banks and choose which account is best for your business, even if it’s a different bank account. You can always transfer money from one bank to another when you need it.
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USA Consider choosing a bank or similar financial institution that offers multiple tiers of business bank accounts so you can upgrade as your business grows. Image source: Author
Some commercial bank accounts impose transaction limits and charge you extra for crossing them. This can be expensive if you keep running into this limit. Review your business budget and estimate how your company’s future growth will affect how much you pay in fees each month.
If you think your current business bank account might be limited, check to see if the bank has any other accounts that offer free trades or other services you need.
Some business bank accounts integrate with popular accounting software. This can save you time managing your business finances and creating financial statements and balance sheets because you won’t have to manually find your business bank account information and enter it into your accounting software.
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Having a business bank account is essential if you are serious about turning your product or service into a profitable company. There’s a lot to consider when comparing the options available to you, but if you follow the steps above, you should be able to find the right tier for your business.
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Callie Hagen has written about small business and finance for more than 10 years, and her work has appeared on USA Today, CNN Money, Fox Business, and MSN Money. It specializes in personal and business bank accounts and software for small and medium-sized businesses. He lives on a farm almost to the north
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