Setting up a business bank account is a natural part of growing your company, but the process may feel intimidating and overwhelming. Very few small business owners have the time or inclination to spend hours at a bank branch before ending up with an account that doesn’t meet their needs.
The good news is that opening a business banking account doesn’t have to be complicated or time-consuming. Many banks have offered online banking products and services, including opening a business bank account. With some research and some preparation, you can have a dedicated business account within minutes.
The benefits of having a business bank account
Many small business owners wonder whether a business banking account is necessary, especially if they’re sole proprietors. Yes, having a business account is an essential consideration, especially as your business grows, and here are some of the best reasons to consider opening one.
To keep your finances separate
One of the biggest challenges of a small business is drawing the line between your personal life and the business. A business account makes it easier to keep your business expenses and incomes separate, making accounting significantly easier and protecting you if you’re an LLC.
To keep track of tax deductions
If you keep all of your business expenses in one place, a business account, it’s much easier to identify business deductibles such as vendor and contractor payments, equipment supplies, inventory purchases, and even travel and marketing costs.
To build up a business credit score
Credit bureaus monitor business accounts and assign a business credit score just like personal bank accounts. Having a separate business account is the first step toward building a credit score that can net you better interest rates on business loans, credit cards, and lines of credit.
To incorporate advanced merchant services
It’s much easier to tie higher-level services such as PoS systems and cash flow management to a business bank account than a mixed-use personal/business account.
Project an image of professionalism
Customers who can write out checks to your business instead of your account will view your business more favorably than if they were paying into your account. It also allows your employees to conduct routine banking transactions without personal banking details.
Factors to consider when choosing a business banking service
Not all business accounts are equal, and doing a bit of initial research can save you a lot of money and hassle in the long run. Before shopping around, take an honest look at how your business handles money and what you need from a bank account.
For instance, if your business has more capital than it needs for day-to-day operations, consider opening a business savings account so that this excess cash can accumulate interest over time.
However, if you’re looking for something more accessible, you’ll probably want a checking account. These accounts let you access your funds easily through checks, debit cards, and online banking services and are the typical workhorse of a normal small business.
As with deciding between a savings and checking account, consider the features that you need from your business banking options. Many checking accounts come packed with features that you may not need, but you’ll still pay for, so step back and consider which of these features are truly essential to your business needs.
Common considerations when choosing a business banking service include:
- Digital banking: While almost all commercial banks provide online banking, consider the experience from a desktop and mobile perspective. If making a payment to a new beneficiary takes more than five minutes, it may be too slow for businesses that rely on a constant stream of new vendors and suppliers.
- Business-focused services: Some banks offer valuable features such as revenue analytics, cash flow management, and sales forecasting. If you don’t have a dedicated accountant, this information may be beneficial.
- Integration options: If you work with digital business tools such as Venmo, PayPal, Shopify, or QuickBooks, check that your bank account integrates smoothly with these tools.
- Monthly transaction limits: While many banks may advertise free transactions, these usually tend to come with a monthly limit, after which you’ll need to pay an additional fee per transaction, which can quickly add up. Make sure to find an account that meets your current transaction volume and still has scope for growth.
- Service fees: While it may seem like a chore, be sure to review the fine print of your account, which often contains all the fees and costs associated with the account. Having a realistic picture of what you’ll spend each month is vital when finding the best business checking account.
Opening a business banking account
Necessary documents
Getting your documents ready in advance can streamline the entire application process and ensure that you establish your banking service as soon as possible. Standard application documents include:
- Social security number for sole proprietorships or employer identification number (EIN) for registered businesses
- Business formation documents (not necessary for sole proprietorships)
- Ownership agreements
- Business license or Doing Business As documentation
Some banks may ask for financial records or other documentation, so read the application thoroughly before starting the process. Also, make sure that you have enough money available for the minimum opening deposit.
The general process
While banks may vary in the details of an online banking application, the general process remains similar.
The first step is to choose the correct business banking account for your company’s needs. Once you’ve found the account you want, click on the application button to guide you through the rest of the process.
You will need to upload electronic copies of all required business documentation and then provide the necessary authorizations to open the account. Most banks will check your credit history and verify your identity before issuing your bank account.
Once the bank approves your application, you’ll be able to set up your account and take advantage of the numerous benefits of commercial banking.
