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You’ve decided to start your own business. Now, you need a bank account for the cash flow and accounting of your new venture. From opening an online bank account, to setting up direct deposit payments from customers or payroll services providers, here’s how to get started with six simple steps.
For those who are looking to open a business bank account, you will need to provide many documents. This is because the bank will want to make sure that they can trust you and your company. The first step in opening a business bank account is finding out what documents are required to open a business bank account.
When launching a new firm, it’s essential to open a business bank account. You may be more organized and keep track of your funds by separating your company account from your personal account. It just takes a few minutes to open an account, but you should be prepared by knowing what sort of account you should open, where you should open it, and what papers you’ll need.
1. Select the Most Beneficial Account
Choose the most appropriate account type for your requirements. Banks, credit unions, and internet banks all have comparable accounts, but their services and prices vary. A few companies provide free accounts with no minimum balance, while others provide different options to avoid paying a monthly cost. Online accounts, in general, do not impose fees and are a preferable solution for firms who do not accept cash deposits. Traditional bank accounts provide access to a broader range of banking goods and services. You may also wish to create a business savings account to keep your operating cash separate from your savings.
A free business bank account is available.
The majority of banks will charge you between $12 and $29 a month to keep your account, however there are a few that will not. Some, like Chase Bank, our top pick for the best overall free checking account, may eliminate the cost if you keep a certain amount of money in your account.
Remember that just because you have a free business checking account doesn’t mean you won’t be charged any fees. Transactions, wire transfers, and overdrafts, for example, may still be charged.
Checking Account for Small Businesses (Traditional)
A personal checking account is identical to a standard small company checking account. It allows you to make deposits and withdrawals, write cheques or make electronic financial transfers, and use a debit card to make purchases and cash withdrawals. Maintenance costs, transaction fees, ATM fees, and deposit fees are all common. Bank of America is a great alternative, having branches and ATMs all throughout the country.
Business Checking Account on the Internet
Because these accounts often do not allow for cash deposits, they are an excellent solution for firms that don’t need to visit a physical bank or handle daily cash transactions. In addition, most online-only accounts have no monthly fees or enable you to avoid them by maintaining a monthly minimum amount.
The best small business checking account for 2021, according to Newsweek, is First Internet Bank, which charges no monthly service fee and just $25 to create an account on its website. During normal banking business hours, First Internet’s relationship bankers are accessible via phone or email if you want help.
Savings Accounts for Businesses
A savings account provides a safe haven for your money while earning interest. To select the best business savings account for your needs, compare account parameters such as annual percentage yield (APY), account fees, and minimum balance restrictions.
2. Select the Correct Bank
When there are so many possibilities, choosing the appropriate bank might be difficult. When deciding where to register a business bank account, keep the following points in mind:
- Existing banking connection: It may be more easy to create a business bank account with the same bank with which you already have a relationship. You may establish a credit history, get individualized service, collaborate on company objectives, receive product suggestions, and have access to small business resources.
- Consider the fees you may be charged by the bank, such as monthly maintenance, deposits, transactions, and ATM usage. Consider if they will refund you for ATM costs incurred outside of their network.
- Convenient network: Confirm that the location of the branches and the number of ATMs meet your requirements.
- Confirm that your bank provides a strong online/mobile experience, such as online bill pay, electronic money transfers, and mobile deposits. Check to discover if there are any extra costs and how long it will take for transactions to post if your company accepts payments using payment applications like Zelle.
- Easy accounting integration: Check to see whether your bank account and bookkeeping software are compatible.
- If you plan to require more than bank accounts in the future, check sure your bank provides small company loans, lines of credit, and credit cards.
3. Examine the account’s expenses
The majority of banks levy fees. Banks usually waive these if certain conditions are satisfied, such as holding a minimum balance, utilizing bill pay, or staying within transaction restrictions. Check to see whether there are any transaction fees, early termination fees, or minimum account balance costs associated with the account.
Fees for business checking accounts
- Fee per month ($0 to $29 per month): If certain requirements are satisfied, such as maintaining a minimum balance, a flat charge is waived.
- Fee for each transaction (40 to 50 cents): If the number of transactions exceeds the monthly limit, which usually begins at 100 transactions per month, a fee is charged.
- Fee for cash deposits (between 2% and 3% per deposit): If your cash deposits exceed your monthly allotment, which usually begins at $5,000 per month, you’ll be charged a fee.
- Charge for ATM transactions at out-of-network ATMs ($2 to $3 per transaction).
- Fee levied on local and international incoming and outgoing wire transfers ($15 to $45 per transaction).
Fees for business savings accounts
- Monthly cost (ranges from $0 to $15): Flat charge that is eliminated if you satisfy specific requirements, such as maintaining a minimum balance or connecting your savings and checking accounts.
- Fees for balance transfers ($5 to $20 per transaction) are charged on a monthly basis. If you make more than six balance transfers each month, you’ll be charged a per-transaction fee.
- Fee for cash deposits (between 2% and 3% per deposit): If cash deposits exceed the monthly allotment, which normally begins at $5,000 per month, a fee is levied.
- Fee levied on local and international incoming and outgoing wire transfers ($10 to $45 per transaction).
4. Gather the Documents You’ll Need
The documentation required to create a business bank account differ depending on the financial institution. You’ll usually be requested to provide your employment identification number (EIN), your company’s founding documentation, and any federal or state licenses, which differ by state. We’ve put up a free printable checklist of essential papers by business structure to assist you make sure you have all you need.
Requirements for a Sole Proprietorship Business Bank Account
- To create a business bank account, you’ll need your Social Security number as well as two kinds of personal identification. A driver’s license, passport, or Social Security card are all acceptable forms of identification.
- Fictitious business name certificate: If your firm runs under a name other than your own, you may require a fictitious business name certificate, also known as a doing-business-as certificate (DBA certificate).
Requirements for a Business Bank Account in a Partnership
- Business identification: You’ll need your federal EIN and a copy of your articles of incorporation to create a business bank account.
- Your business partnership agreement and any other organization papers you may have written when you founded your partnership are included in this category.
- You may also be asked to present a written statement of unincorporated business as well as any relevant business permits. Healthcare and food enterprises often need business licenses.
Business Bank Account Requirements for S Corporations (S-corps)
- Business identification: You must present your federal EIN when creating a business account.
- Articles of incorporation and corporate charter: Your approved articles of incorporation, as well as your corporate charter, are required.
- You may also be required to provide a corporate resolution signed by all of your officials, as well as a signature card signed by the account signers.
- Businesses that need a license, such as restaurants, must also present documents for their licensing.
Requirements for a Limited Liability Company (LLC) Business Bank Account
- Business identification: You’ll need your federal EIN and a copy of your articles of incorporation to create a business bank account.
- Organizational papers: You must supply the paperwork that were utilized to incorporate your S-corporation or partnership.
- Other documents you may be needed to supply include a signed declaration of unincorporated business and any applicable business licenses; business licenses are often requested by healthcare and food firms.
Business Bank Account Requirements for a C Corporation (C-corp)
- Business identification: To open a business bank account, you’ll need your federal EIN, much like an LLC.
- Articles of incorporation: You will also need your certified articles of incorporation, which you will get as part of the incorporation procedure.
- If your articles of incorporation do not include enough information about who is allowed to sign, you may need to produce an extra corporate charter that does.
- You may also be required to provide a corporate resolution signed by all of your officials, as well as a signature card signed by the account signers.
- Businesses that need a license, such as healthcare facilities or restaurants, must submit their licensing papers.
- Additional criteria for nonprofits: If your organization is a nonprofit, you’ll need to provide your IRS 501(c) letter or other tax-exempt papers.
Requirements for a Business Bank Account for Startups
- Personal or business identity: For a sole proprietorship, you must give either personal identification, such as a driver’s license or Social Security card, or an EIN for other company kinds.
- Documentation needed to form your firm, such as a fake business name certificate, LLC operating agreement, or articles of incorporation, is also required.
- If your beginning company requires a license, you must also supply your licensing papers while creating a business account.
5. Register for an account either online or in person.
Most banks allow you to create a business bank account either in person at a branch or online. Because they don’t have any physical branches, internet-only banks will only accept online applications. You must have the appropriate documentation for your unique business structure ready to exhibit or submit on the bank’s website whether you apply online or in person.
You may opt to obtain face-to-face customer care by visiting a branch. Customer assistance is usually available by phone or live chat for online-only accounts.
6. Make a Cash Deposit
The last step once you’ve setup your business account is to deposit money. This may be accomplished by sending a check to your company from another account, such as a personal account, transferring money electronically between bank accounts, or depositing cash. After that, your account will be ready to use.
If your company accepts checks, most banks provide mobile deposit (also known as remote deposit or remote deposit capture), which may be done using a smartphone and a mobile banking app. If you expect to handle a lot of checks, look into obtaining a check scanner so you can scan many checks at once. You may be charged a monthly fee by your bank to use the scanner.
The Advantages of Having a Business Bank Account
- Separate your personal and business finances: Keeping your personal and business bank accounts separate will help you manage your cash flow and monitor your company’s financial health.
- Develop a business banking connection: Having a personal relationship with your bank or credit union allows you to get tailored assistance in achieving your company objectives.
- Maintain a clear financial record: When it comes time to file taxes, a business bank account may assist in keeping a clean and organized financial record.
- To avoid being held liable for your own accounts, take the following steps: A corporate bank account, rather than a personal account, may insulate limited liability companies (LLCs, C-corps, and S-corps) from liability.
Using Other Business Products to Open a Business Bank Account
For a more streamlined and effective approach to manage their funds, company owners may wish to consider creating a business bank account with extra business products. Combining your company bank account with your business credit card and merchant processing, for example, enables you to obtain a complete picture of your revenue and expenses.
Additional Resources and Articles to Assist Your Business
- Best Banks for Small Businesses: If you’re not sure which bank to select, have a look at our top five small business banks.
- Separating Business and Personal Finances: One strategy to keep your business and personal finances separate is to open a business bank account. Review the nine principles and best practices in this article to protect your personal funds from your company activities.
- What is Annual Percentage Yield (APY)? Understanding the differences between APY and annual percentage rate (APR) and how they effect your bank accounts will help you determine which bank is best for your company.
Conclusion
When launching a new firm, it’s essential to open a business bank account. You may be more organized and keep track of your funds by separating your company account from your personal account. Look for introductory deals from your bank or credit union, and compare rates for savings and checking accounts with other financial institutions.
The “how to open a business bank account for llc” is a guide that discusses the steps one must take in order to open up a business bank account. The article also includes a checklist, which can be used as a reference during the process.
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