As an entrepreneur, one of the first things on your to-do list should be to open a business bank account for your newly formed business. Even if you’re not yet making money, you’re likely investing at least a small amount in getting things up and running. A business bank account isn’t just a place to hold the millions of dollars you’re sure to make, it’s a record of transactions that will become invaluable to you as you carry on your new business venture. A business bank account helps you track expenses, show proof of transactions if you were to be audited by the IRS, and find deductions for your small business you may have otherwise missed. We’ll walk you through the steps of choosing a bank that’s right for you, getting your account set up, and using your bank statements to help with bookkeeping and accounting tasks.
5 Steps to Open a Business Bank Account
1. Choose the bank that’s right for your small business. The decision to go with a large corporate bank, credit union, or regional bank for your small business account can be quite overwhelming. All offer a plethora of loans, credit cards, fees, etc. and all would be happy to house your money for you. Here are a few points to consider when choosing the right bank:
- Fees. All banks have them, and there is really no escaping them for a business bank account. Depending on the size and needs of your business, your bank fees should be manageable. Larger corporate banks normally offer lower rates to start up businesses because of their volume of clients. When choosing a bank, be sure to ask about ATM fees, checking and savings account fees, maintenance fees, and any fees that may increase in the future. Make sure if you sign up during a promotional period, your bank fees won’t skyrocket when the promotion ends.
- Minimum Balances. Some banks require that small business owners keep a minimum balance in their account at all times. Be sure to check what this fee is for each bank–whether it is $25 or $1,000, it’s best to be in the know before making a commitment.
- Lending Opportunities. If you need a small business loan, this will be especially important. Ask several banks about their small business loans and the availability of them. A loan officer can help determine if you qualify for a small business loan, interest rates, and how much they are able to offer you. Typically, regional banks and credit unions are able to offer more flexibility in small business loans.
- Online Accessibility. In our increasingly mobile world, online features and ease can be a huge relief to small business owners. If online banking is important to you, be sure to compare and contrast features offered from each bank. Mobile check deposits, withdrawals, transfers, and online bill pay are a few of the most commonly offered features small business owners take advantage of.
2. Gather the necessary documents to open a business bank account. Here’s a quick checklist on what you’ll need to bring with you to the bank when you go to open your account.
- EIN. You should have requested an Employer Identification Number from the IRS that identifies your business in the tax world. If you don’t have this number yet, you can request one here and receive it immediately.
- Identification. Bring your driver’s license or another form of ID to prove that you’re you.
- Certification of Business Identity. After you’ve filed paperwork to establish your business with the state, you’ll need to bring this proof to the bank. If you set up an LLC, you’ll need Articles of Organization. If you set up a proprietorship, you’ll need your DBA (Doing Business As) papers. If you set up a corporation, you’ll need to bring your Articles of Incorporation. Have questions about how to choose an entity and establish your business with the state? We can help.
- Business License. Many states require a business license to operate. If it’s required in your state, the state will let you know, instruct you on how to obtain one, and the bank will need to see it before you can open your business bank account.
3. Fill out your business bank account application. Each bank has their own specific application, but all will require paperwork to be filled out with basic information. You can pick up the application beforehand and fill it out at home so you’re sure to do it correctly.
4. Sit down with a banker to open your account. After you’ve chosen a bank, gathered all the necessary paperwork, and filled out your business bank account application, you’re ready to sit down with a banker and open your account. They’ll walk you through the process, check your credit score, advise you on best business banking practices, and provide you with a bank account number and any other information relevant to your account. The banker will be able to help you choose the right account to meet your small business needs.
5. Receive a check card and temporary checks. The bank will likely provide you with a temporary ATM or debit card, in addition to temporary checks that can be used immediately after your account has been opened. They will then mail you an official check card and checkbook shortly thereafter.
A business bank account will not only help you track expenses and income throughout the year, it will act as a second record in addition to your small business bookkeeping tasks. Any transaction you may have forgotten to record will show up on your bank statements. A business bank account will also help you avoid these common business accounting mistakes.
Any experienced small business owner will testify that it’s best to keep your business and personal bank accounts separate to avoid confusion. Read here and here for more accounting tips on tracking and separating business and personal expenses while your business is in its infant stage.
