No matter how good your idea, and no matter how innovative the product or service you are planning to offer, there are a variety of steps to take before your venture can prepare for pitch deck presentations that you may grab from a great business templates site.
As you begin to develop your business idea, it is necessary to think about the tools you will need to facilitate every stage of your venture. If your venture is ready to make any expenses or accept any sort of funding or revenue, you need a business bank account.
Transactions and receipts will be better managed through a separate account. Additionally, you will be at a lower risk for identity theft if you establish an employer ID instead of your personal Social Security number.
Other benefits of opening a business bank account include being able to accept credit card payments, simplifying tax preparation, and having separate documentation for when you choose to sell your venture.
Simply said, having an account exclusively for the business’ use will protect you and allow the company to remain legally compliant.
Now that you know the benefits of opening a separate account dedicated to your business, you are probably wondering which steps to take. The following process will guide you to open a business account for your venture.
1. Choose a Type
The type of account you open will depend on the kind of business you run. You can choose between a business checking account, savings account, or a merchant services account. A checking account will help with everyday expenses, payment receiving, and cash flow management.
The savings account, as its name implies, will work as a piggy bank for leftover cash and will create interest. Certain accounts will help you earn over a 1% annual percentage yield. The merchant account creates a relationship between your business and a merchant service provider.
For starters, you should simply open a business checking account. This will allow you to keep track of invoices and manage your expenses. As your company grows, consider opening a savings account. If you want to accept credit card payments, you will need to open a merchant services account. The accounts can be opened online.
2. Find your Bank
Most banks around the world offer options for business bank accounts. But how do you know which is the right one for your team?
Every bank will offer different options. Before choosing, take into account the introductory offers, transaction fees, early termination fees, minimum account balance fees, and interest rates that each option proposes.
While opening an account in some banks is completely free, they might balance it out by charging you on a monthly basis, imposing fees for cash deposits, ATM transactions, and wire transfers.
Make sure to keep in mind every possible fee and whether there is a possibility of waiving them after meeting some criteria.
Consider the number of locations the bank has in your area, just in case of emergencies. Even the online and mobile experience the bank has to offer is an aspect to consider. Do they accept virtual deposits and transactions?
Working with a bank where you or other team members have previous relationships will facilitate the process.
If you are considering adding a merchant services account, a payment processing company is a good alternative as they often offer other functionalities.
Otherwise, make sure to check on the merchant services account’s discount rate, transaction fees, address verification service (AVS) fees, ACH daily batch fees, and monthly minimum fees.
3. Prepare your Documentation
The document requirements to create an account will depend on the type of account you choose to open, but all entities are going to need certain information pertaining to your business before working with you.
Every bank will require some sort of identification, be it personal (often asking for two forms of ID) or business. The owner’s Social Security number or a Federal Employer Identification Number (EIN) is commonly used.
You can only use a Social Security number if you are the sole proprietor of the company. But getting an EIN is far more beneficial and can be done after registering the business with state and local government.
The EIN works as your business’ federal tax ID and it is necessary for employee hire, license and permit applications, and to pay your taxes. If you have not done so yet, you can apply for an EIN through the IRS assistance tool.
Additionally, you will need any and all organizational documents—like ownership agreements, the company’s fictitious or DBA certificate, articles of incorporation, and any licenses needed to offer your services. Check online or speak with someone at your bank of choice to make sure you have everything you could need.
4. Open your Account
Once your documents are all in order, it is finally time to open your business account. There are two options: you can open it online or in person. Many banks offer both options. Online application could lead to a faster approval window.
If the bank you have chosen solely offers online applications, it means they have no physical branch locations for you to visit. Still, they offer chat options and customer service numbers to connect with.
Consider whether this is a pro or a con for your venture before proceeding. Visiting in person can help you create rapport, especially if you decide to work with a bank with which you have no previous connection. Either way, have your documents ready to present.
Next, make your first deposit. No matter the channel—cash, personal account transfer or check—, once you receive the money you will officially have a business bank account.
Now that you have a business bank account your endeavor’s financial record will remain clean and uncluttered by personal funds and expenses, and your savings can earn high interest. As your account grows you will see that your venture has the SBA’s four Ps: protection, professionalism, preparedness, and purchasing power.