Opening a business account constitutes the first item on any business’ startup checklist. This means that the process is very vital if any business to succeed. An account is an important tool to help business owners manage and grow their businesses. It is quite easy and practical to set up a separate account from personal accounts to establish a boundary between personal and business funds plus it is generally a good accounting practice. This article will cover all the processes involved in setting up an account from how to choose business bank to the reasons why you need a business account.
How to Choose Business Bank
There are a variety of banking options available in the market that will offer you an account for your business. Selecting or a choosing your business bank is a simple but complex process that entirely depends on what you are looking for. You could either choose a credit union, a regional bank or even a big corporate bank. Here are some key considerations to help you get started:
- Banking fee: Different banks have different fees, some more than others. It is important that you find out by asking for their fees and structure. Some of these associated fees could include maintenance fees, ATM fees or being charged for not keeping the minimum balance in your business account. Big banks often offer lower fees because of their volume of clients. It is important to find out all these things including how often these fees increase or if some of them are promotional or not.
- Customer satisfaction: In some cases, you might find that it might provide you satisfaction just working with your local bank branch but this is something that you have to consider by yourself since in most cases big banks tend to outrank other smaller banks. It will be a matter of personal opinion on the bank that appeals to you.
- Online features: It is important to consider a bank that has put in place frameworks for online banking since most entrepreneurs want access to online features like online bill payment or transfers and withdrawals. Be sure to ask about some of these features.
- Lending ability: Find out if the banker can easily authorise a business loan or if it has to go through a number of signatories to authorise a loan for you. Credit unions and regional banks often have flexibility in authorising business loans as compared to bigger banks where authority has to come from above.
Finding the right bank for business means finding a bank account that will give you access to online banking experience, reasonable fees or introductory bonuses among other things. It will be upon you to make the decision. It is important to open an account for your business because :
- You will alleviate tax headaches: When the tax period comes around, you will need to have all your affairs in order. This means that you should have all the numbers with you to help in preparing for tax filing. Having a bank account will help you in just requesting for a bank statement and handing it to the accounts office to look out for any tax incentives or deductions and prepare a full report for submission.
- You can track your business expenses: Separating your business and personal accounts will help you track your expenses swiftly to see how much money went into the business versus how much came out. This makes it less tedious in monitoring the business’ cash flows.
- You can initiate a lasting relationship: Opening a bank account will be the beginning of a new relationship. This relationship will help you expand your business in just a few years if you are looking to expand by applying for a business loan. This relationship gets you a step closer to getting extra funding to help your business grow.
Requirements for Opening an Account for your Business
These requirements include the necessary documentation to help with setting up of an account for business. It will call for putting all your business’ documents together depending on your business’ structure. Some documents like taxpayer identification number are necessary for every business regardless of the structure. The number is vital because it helps the government to keep track of tax requirements and the business in general. Other documents you need depending on the structure include:
- Sole proprietorships: If you are in business alone, you will need a taxpayer identification number and a business name filing document or business license.
- Partnerships: You would need a business filing document, partnership agreement and a taxpayer identification number.
- Corporations: You would need Articles of Incorporation and taxpayer identification number.
- LLCs: You would need Articles of Organisation and taxpayer identification number.
Additional Tips for Account Opening
Here are some of the top tips to consider while opening your bank account:
- A checking account should be your first account to ensure that you start on the right foot in separating your finances.
- Look out for fee-free accounts to help you save your business from account fees.
- Opening a business credit card is just as important because it will go a long way in streamlining your day-to-day cash flows.
Maintaining your Bank Account
Once you are fully set up and you are good to go, it is important that you check with your bank at least once or twice a year to just review your choice. You can look at the fees or generally looking out for anything new you might have not been notified about when you were opening a business account and make a call to your bank and discuss with them the way forward.