Having a business bank account is absolutely essential and most definitely the most crucial part for a new business owner. Even if you are good at managing your expenses, a business checking account acts as a safety blanket that keeps check of your records which organizes and separates your personal and professional finances.
This article will act as your to-go guide towards opening a brand new business bank account. To learn more, be sure to read the full article for detailed instructions on how to open a business bank account.
How to Open a Business Bank Account
Opening a business bank account is a five-step process that includes determining the right type of bank account, selecting the right bank, knowing what you have to pay, providing the required documentation, and depositing funds. Having a business bank account makes it easier to keep your business and personal cash flow separate.
We all have our own reasons to expedite our day-to-day finances. However, no matter what the reasoning is, the experience should be an effortless and swift process. So here are instructions on how to do it wisely. There are plenty of different business accounts to choose from. First, you have to decide between a free online checking account, which is fine for most businesses. They don’t need cash deposits, or bank accounts with traditional banks. Normally, theses will come with more fees but also a wider variety of products and services. Before opening a business account, it wouldn’t hurt to ask for any professional advise as well.
Pick your Bank
There are tons of different banks to pick from, so which one is the better option for your business? A good bank will provide you with valuable expertise to a line of credit, a balance transfer credit card, or need cash management. One great solution to go by is to compare your current banking experience with an ideal option you have found. However, when doing so, do not count out other options that may be a better fit for your business needs.
In addition, when researching, be aware that some credit unions out there may not offer a business checking solution at all. Make a checklist with all your banking wants and needs. Plus, if the bank you’ve picked meets all your personal requirements, you’ll benefit very well.
In some states, specific business depending on your field would require a business license to operate. After legally establishing your business with the state, you will be notified of the license. Or the bank will need to see whether the business you are operating is legitimate. If you are DBA, doing business as a fictitious name, you are required to register that name with the state of which you are operating in by visiting the U.S. Patent and Trademark Office’s trademark search tool. Photocopy the registration and keep it as a record, as it is essential in starting a business banking solution.
Organizing Your Paperwork & Documents
Now that you have legally registered your business with the state, the next step is gathering all your paperwork and documentations. The documentation requirements for a business bank account would vary depending on the type of business. Sole proprietors are viewed similarly to a consumer, so required documents should be pretty minimal. Corporations on the other hand, would require further documentations such as articles of incorporation and a certificate of good standing with the state.
When opening a business bank account, you will need to provide and verify the name and nature of your business. With the documentations provided, you are proving that one, your business is legitimate and two, that your business is registered with the IRS.
If you are not sure on which documents are needed to open a business bank account based on your situation, I have provided a list below:
If you are a sole proprietorship meaning you are the sole owner, and have not filed papers to be a Limited Liability Company (LLC) or Corporation, I would advise you to do so immediately. You will need your social security number as well as 2 separate forms of personal ID in order to open a business bank account. Valid types of IDs would be a driver’s license, passport, and social security card.
You might also need a “Fictitious Business Name” certificate known as a “doing business as” certificate (DBA certificate) if your business operates under a different name from your own.’
Limited Liability Company (LLC)
Your business would be considered an LLC if you have filed articles of organization with the state and are in good standing. With LLC, you would typically need to have an LLC operating agreement. To successfully open a business bank account under LLC, you will need your Federal Employee Identification Number (EIN) as well as a copy of your articles of organization. On top of that, you might also have to provide a signed operating agreement or a Declaration of Unincorporated business, such as what you would see with restaurants ownership.
C-Corporations have to file articles of incorporation with the state and stating that you are in good standing. Similar to LLC, you will need to provide your Federal Employees Identification Number (EIN) to open a business account. In addition to the EIN, you will need your Certified Articles of Incorporation and Corporate Charter. You’ll receive these documents as part of your incorporation process.
In some cases, your articles of incorporation might not provide sufficient information regarding who is authorized to sign. In cases like these, you will need to provide an additional corporate documents such as your 501C letter from the IRS or other tax-exempt documentations.
Similar to C-Corporation, S-Corporation would require you to have file articles of incorporation with the state and stating that you are in good standing. The difference is that you will have selected S-Corporation status instead. You will need to show your Federal Employee Identification Number (EIN) and either your certified articles of incorporation or corporate charter. To prevent any insufficient authorization, you might also want to show a signed corporate resolution by all your officers as well as a signed signature card by the account signers.
Start Fresh and Start Accepting Payments
After you have successfully researched and opened a new banking solution, secured your business name and met all the required documentations for your type of business, you can now allow your business to start accepting payments by setting up a merchant account. Having a merchant account is a necessity when it comes to accepting credit card payments online.
Systems such as PayPal would allow you to receive large volume of e-commerce transactions. All while providing you with a safe and effective solution through an established email address. However, in-store or POS transactions would work well with applications such as Square Register. Your business would allow credit card payments as well as working effectively with its excellent features.
If you would like to better your financial future for your business, then definitely keep the checklist above in mind. If you don’t have the proper documentation, opening a new business account can be a hassle. Plus, it would help if you know what your business would be categorized under. Opening a new business can be difficult, but make your process easier with the right account.
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