Almost all businesses have separate personal and corporate finance bank accounts. Separating accounts helps companies maintain financial records, prevent overspending, and file taxes correctly. You can decide to open a general business check or savings account, payroll account, or business tax account. No matter what sort of account you need to learn how to open a business bank account.
Why would you open a bank account for your business?
Opening an account will help you manage your company and expand it. Not to mention that businesses that are independent legal entities are expected to open bank accounts for the business.
You will determine how your company is doing when you split your business and personal assets. You'll get an idea of exactly how much money your company has, which helps you build a really small business budget and cash flow for your project.
It is difficult to track revenues and expenditures when you have mixed funds. But when
you open a bank account for companies, you can use your bank statement more accurately to create a paper trail. However, through a comparison of bank statements, you can equate your accounting records with your bank statement without having to browse through your personal funds.
When you seek tax deductions for a company, you'll need reports to back up your statements. It is difficult to prove which expenses are business and others are personal and can prompt an IRS audit by combining personal and business finances.
How to open a bank account for the business?
Establishing an account with a business bank is an important part of keeping finances in order. Learn how to set up an account with a business bank using the following four steps.
1. Select a bank
Deciding on a bank is the first step to setting up a business account. You will find a bank that fits the needs of your company, which means that you need to decide what you are looking for in a business account.
At certain banks, opening and maintaining an account is free, as long as you hold a certain balance. Ask around to see what are the minimum criteria for balance at each branch.
You should also decide whether it is important to you to receive interest on the funds in your account or not. And, some banks may be providing cash incentives.
If you open a business bank account at the same bank which manages your personal accounts, you could get special offers. Managing a single bank's personal and company accounts often simplifies your duties so you don't need to go from bank to bank.
2. Prepare articles
The next step to open a company account is to get your papers in order. The materials you will need to depend largely on the structure of your company.
To open a business bank account, all companies require a taxpayer identification number (i.e., Social Security number, or Employer Identification Number). You are eligible to apply for an Employer Identification Number when you own a company or organization, or if you have employees.
These are the records you need to provide depending on your company arrangement, according to the Small Business Administration:
- Employer Identification Number (EIN) or Social Security number
- Report filing company license or trade name
- Amount of Employer Identification
- Partnership Contract
- Record filing with the company name
- Employer Identity Number
- Corporate News
- Employer identification number or social security number
- Organizational Documents
Before you try to open a business bank account, make sure you get taxpayer-identification numbers, business licenses, business name filing documents, Articles of Incorporation or Articles of Organization. You may also carry additional documents that display your cash-flow forecasts.
3. Enable the account in person or online
You can open the account after you've studied banks and collected all of the necessary documents. To set up the account you can either go to the bank or open it online.
Keep in mind that if you are in one of the following fields, you are expected to open your business bank account in person:
- Precious metals
Whether to open a company account depends on your choice for all other companies. Could you rather have someone walking you directly through the process, or are you confident enough to open it online?
If you prefer the convenience of opening your own business bank account, you can opt to explore the option online.
If during the process you want to verify details or ask questions, you might want to access the account in person.
4. Verify that everything is OK
When you have reached this stage, set up your business bank account! You need to ensure, though, that everything went through successfully. Once you have opened a business checking account, make sure that the names on the checks match the legal name of your company, not the name of your company as (DBA). Verify that the deposits move through. Track the funds going in and out of your account to ensure the smooth running of everything.