While there are a few steps involved in opening a business account, the application process is usually straightforward and you can open an account in a matter of minutes (although it may take several business days to receive debit and credit cards and checks). Some major financial institutions, like Bank of America, let you apply and submit your documents online. Choosing a bank that allows for an online application can speed up the process and help you open a business bank account as soon as you need it. Learn more about business bank accounts, types of business accounts, the benefits of business banking, and the steps you’ll take to actually open an account.
Types of Business Bank Accounts
Business Checking Accounts
Small business checking accounts are ideal for businesses that need to write checks, withdraw money with a debit card, and receive or transfer money electronically. You can deposit money into a business checking account with electronic transfers, wire transfers, check deposits, and ATM deposits. Checking accounts can also integrate with popular business tools and accounting software to make reports and transactions easy to manage. Some banks also offer Positive Pay, a cash-management tool helps prevent check fraud.
Business Savings Accounts
Business savings accounts are ideal if you want to save for major purchases like equipment, create an emergency fund for unexpected events, or earn interest. Many banks typically offer competitive interest rates on high-yield savings accounts with little to no monthly fee depending on your account balance. Minimum requirements for opening deposit amounts may vary.
Merchant Services Accounts
If you plan on accepting debit and credit card payments from customers, you’ll need a business merchant account. When a customer pays with a card, the money goes directly into your merchant account and then gets transferred automatically to your business account. Merchant accounts have their own fee structure, so make sure you familiarize yourself with the costs before you sign up.
The Benefits of a Business Bank Account
Small business bank accounts can help you separate your personal and business finances, keep your business records organized, give you limited liability protection, and add a level of professionalism and credibility to your business. Merchant accounts, for example, allow your customers to pay for goods and services with a credit or debit card and can offer purchase protection for customers, ensuring that their personal information remains secure. Here are some other benefits that business bank accounts can provide:
Accurate taxes: Your business account can help you file accurate tax returns as business transactions are separated from personal transactions. Higher interest: With a business savings account, you can earn more interest on the account balance compared to a checking account. This can help maximize your cash flow over time. Purchasing power: A business credit card account can help your business make larger purchases and establish a credit history. Preparedness: If your business bank account comes with a line of credit, you can use this for new business equipment or in the event of an emergency. Business expense deductions: You can deduct business expenses from your business’s tax return and this is easier to do with a business account statement that can serve as proof of expenses.
Who Needs a Business Bank Account?
While sole proprietors, freelancers, contractors, and limited liability companies aren’t legally required to open a business bank account, it can be beneficial during tax season. A separate business account can allow you to clearly identify capital expenditures, rent expenses, insurance costs, and any interest on business loans, which can make it easier to find deductions and file returns. Business accounts are also critical for entities that want to build their credit history or apply for a line of credit.
How To Open a Business Bank Account
Start by choosing where you want to bank. Some business owners choose to open a business account at the same bank they use for their personal bank accounts. As you compare different banks and financial institutions, be mindful of account restrictions and the fees associated with the account. When you open a business bank account, you will need to provide certified documentation to verify your business. If you’re a sole proprietor, for instance, a business license and a registration of your trade name might be required, while partnerships may need to bring in partnership agreements or a statement of qualification depending on the type of partnership. Below are some general guidelines to opening an account.
Visit the Bank Website or Branch
The easiest way to open a business bank account is to visit the financial institution’s website. The advantage of opening an account online is that you can do it at any time and from anywhere. If you prefer to do this in person, you can visit the bank’s branch during business hours.
Choose Your Account
Compare the different types of bank accounts available and choose the one you need. Choose a traditional business checking account if you are looking for more flexibility with your finances, or a business savings account if you plan on setting business profits aside for the future. Depending on what your business goals are, you may need just one account or all three, so take the time to solidify your business plan before you open a business bank account.
Provide Your Information
Opening a business bank account is easy once you’ve chosen the type of account you need. The next step in the process will require you to provide specific details such as:
Your business formation documentsYour business licenseYour employer identification number (EIN)Your Social Security number (if you are a sole proprietorship)Partnership agreement (if your business is a partnership)
Make a Deposit
Once you’ve opened your business account, you’ll need to deposit funds. You can do this by an electronic funds transfer, writing a check, or depositing cash.
