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How to open a business banking account

Saturday, November 29, 2014

Considerations for partnering with a financial institution for your business banking needs

Separating personal and business banking is critical for any small business owner. Your personal account should maintain transactions and cash flows for personal needs, such as groceries, gas, and rent. For your business, it is important to have a way to keep transactions separate so you can see your business performance over time, especially with account balances, interest rates, cash deposits, and other tools that exist within online banking. This article will outline the benefits of business bank accounts, choosing the right account type, and the steps to open an account for your new business.

What are the benefits of business bank accounts?

Business owners can better monitor their business operations when they have a specific account for business operations. The account should be under the business name (or the doing business as name) and track all types of deposits, income, or expenses. The major benefits of managing a bank account for your business include:

  • Liability protection. When you work with a merchant services provider, you can access protection to your cash flow and lines of credit. In addition to the liability that is provided, many financial institutions have additional security policies that decrease the chance that your account information or funds could be accessed.
  • Professionalism. Payment processing becomes more accessible and streamlined for your business, whether via ACH, wire transfer, or a check deposit. Vendors, customers, or any other party that interacts with your business will be able to make payments directly to your business.
  • Tax support. By tracking all financial activity through your bank account, tax information is easier to access and evaluate. Electronic deposits, daily balance information, and transaction fees can all be accessed through report generation for your tax preparer.
  • Purchasing power. By establishing solid business credit, you will be in a better position to make larger purchases or apply for larger lines of credit in the future. This will help your company effectively develop strategies to achieve business needs.

What types of business bank accounts exist?

Just like with personal checking or personal savings accounts, banks offer several types of bank accounts that can work for your business. The most popular options include:

  • Business checking accounts. A business checking account is a great option for companies that want a practical account for everyday use. Whether running payroll or monitoring other expenses, this type of account exists with the expectation that there are regular movements of money for the business. Business checking accounts can often be tied to a business debit card for regular use.
  • Business savings accounts. Business savings accounts are a great fit for businesses working towards long-term savings. These account types may have different fee structures or minimum balance requirements that business owners should keep in mind.
  • Merchant accounts. If your place of business accepts credit or debit card payments, you will want a merchant account in place. Some banks provide merchant services for businesses, so this option is worth exploring. Merchant accounts tend to have low transaction fees and can be bundled with other services for payment processing needs.
  • Credit card accounts. Business credit cards can help businesses with an extra safety net or to build up credit for future lines of credit or other business loan opportunities. Having a business credit card may be a supplemental option to our business's other account types.

What considerations should I keep in mind when choosing a bank account type?

Here are the main considerations to keep in mind when shopping around for the right bank account for your business.

  • Fee structures. Some bank accounts will charge a monthly service fee, monthly maintenance fee, or charge fees for transactions. Understanding the types of fees is important to know so that you don’t have any surprises after you set up your bank account. You will want to review any partnership agreement before signing.
  • ATM access. If you set up a checking account and would like ATM access, it is important to know what type of card is issued and what withdrawal amounts you are limited to taking out of an ATM.
  • Online and mobile banking opportunities. Online banking is a desirable feature for many businesses, especially when wanting to access account information instantly. Asking questions about what mobile banking options are available (such as depositing checks with a mobile app) may help you gauge the best fit for your business. It is also worth checking to see what types of information (such as a statement cycle) can be accessed electronically.
  • Payment capabilities. Understanding the process of payments with your bank account will help you see how the account can support cash flow concerns. Can your account receive (or send) wire transfers? Can your account integrate with a line of credit or lender accounts? How long does it take for cash deposits to be fully processed?

Opening up a business bank account

With the proper documentation, you can open up a business bank account seamlessly and without hassle. Of course, you need to know what bank account you would like and have the necessary information with you. The most common documents required for opening a bank account with a financial institution include:

  • Personal identification (such as a driver’s license or social security number)
  • Employer Identification Number (EIN) that verifies the existence of your business operation within the Internal Revenue Service (IRS)
  • Business details (this can include your articles of incorporation, articles of organization, business license, dba certificate, and other organizing documents or agreements that show your business operations)
  • Deposit in place (cash or check that you want to start with as your initial deposit into the account)

Once you have the necessary documentation you can begin the process of opening the actual bank account. With the innovation of technology, you can now apply for a bank account online. You may still prefer to go in person; if that’s the case, you will want to determine which financial institution you will be using and identify the best location to visit (typically located near your place of business). When visiting, it may be best to work with a business banker to answer any other questions or concerns that you may have during the process. If you are opening a bank account for a non-profit, you still will want a business type account since the transactions are not related to personal expenses or income.

Bank account applications will have you submit information about you, your business, and your desired account. Once the paperwork is processed, you will have a unique account number with personal access to the account via online banking and business debit cards or business credit cards. It is important to keep PIN information or account information as secure as possible.

As you move through the process, you may want to consider overdraft protection, special considerations for business startups, and learn if the bank is a member of FDIC (meaning that funds are secured and protected by the federal government). As you navigate this process, you can begin to benefit from having an official business bank account and continue to generate revenues through your business model.

Next steps

Are you ready to set-up an official business banking account? Are you ready to optimize financial tools for funds security and more control of your cash flows? Are you ready to find the right financial institution for your business?

Heartland is ready to help.

Heartland helps nearly 1,000,000 entrepreneurs make and move money, manage employees and engage customers with human-centered technology solutions that allow them to rise above the daily grind and lead their businesses into a brighter future. Learn more at heartland.us