Almost all businesses have separate personal and business bank accounts. Separating accounts helps companies maintain financial records, prevent overspending, and file taxes correctly. You can decide to open a business account or savings account, payroll account, or business tax account.
Why would you open a bank account for your business?
Opening an account will help you to manage and expand your company.
You will be able to 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 to build a small business budget and cash flow for your project.
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. For more details, watch the below video:
Open a bank account for your business
Opening a business account is an important part of keeping finances in order. Know how to set up a business bank account using the following four steps.
1. Select a bank
Selecting a bank is the first step to setting up a business account. You need to find a bank that fits the requirements 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. Find out what are the minimum criteria for balance at each branch.
You should also decide whether you are required to receive interest on the funds in your account or not.
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 business 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. It depends 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
Record filing with the company name
Employer Identity Number
Employer identification number or social security number
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. Open the account in person or online
You can open the account after you've collected all of the necessary documents. To set up the account you can either visit the bank or open it online.
Keep in mind that if you are in one of the following fields, you are required to open your business bank account in person:
Do you have someone who can go through the process and open the account for you, 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 have to access the account in person.
4. Verify that everything is OK
You can set up your business bank account once you have reached this stage, You need to ensure 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. Track the funds going in and out of your account to ensure that everything is running smoothly.