Running a business comes with its fair share of challenges, and managing cash flow is definitely one of them. To make your life easier and ensure smooth tax filing, it’s crucial to open a dedicated business bank account. But what exactly do you need to open one? And how do you choose the right bank for your business? Let’s dive in and find out!
Requirements to Open a Business Bank Account
Different banks and credit unions may have their own specific requirements for opening a business bank account. However, here’s a general list of what you’ll typically need:
Employer Identification Number (EIN)
To start with, you may need an Employer Identification Number (EIN) or a Federal Tax Identification Number (FTIN), which the IRS issues for tax purposes. The good news is that you can easily apply for an EIN online for free, and it is usually instantly issued. Depending on your business type, you may or may not need an EIN. Sole proprietors, for instance, can use their Social Security number instead if they don’t have employees.
Business Identification
Most banks will require certain paperwork to prove that your business exists legally. This may include business-formation documents, an ownership agreement, a copy of your business license, and, if applicable, your “Doing Business As” (DBA) name. If you haven’t registered your business yet, you’ll need to do so before opening a business bank account. Your local Secretary of State office or revenue agency can guide you through the registration process.
Personal Identification
To open a business bank account, you’ll also need to provide personal identification. Typically, banks require a government-issued ID such as a driver’s license, state ID card, or passport. Sole proprietors will also need to share their Social Security number.
Opening Deposit
Many banks have a minimum deposit requirement for new business accounts. The specific amount varies, so it’s best to check with the bank. You can make the minimum deposit via ACH transfer when opening an account online, or you can deposit a check or cash if you prefer to visit a branch.
How to Open a Business Bank Account
Opening a business bank account is similar to opening a personal bank account. Here’s a step-by-step overview of the process:
- Choose a business bank account that suits your needs.
- Complete the application for a new business account.
- Provide any required supporting documentation.
- Link an external bank account and make your initial deposit.
Opening a business bank account online can save time and hassle. You can easily transfer funds from your current bank to your new account using the bank account number and routing number of your existing financial institution.
Best Business Bank Accounts
Now that you know what it takes to open a business bank account, let’s explore some of the best options available:
Lili
Lili is a fintech platform that offers business banking services in partnership with Choice Financial Group, an FDIC-member bank. With Lili, you get a business checking account, bookkeeping tools, tax-planning tools, and various unique features:
- No overdraft fees or hidden charges
- No deposit or minimum-balance requirements
- Invoicing software
- Smart bookkeeping and tax-report generation
- Tools and resources for business growth
You can also add a business savings account to your checking account, and Lili offers a competitive annual percentage yield (APY) on balances. With Lili Premium, you receive priority customer support whenever you need it.
Revolut
Revolut is a fintech platform that specializes in business banking services for companies operating internationally. It facilitates secure money transfers across borders and allows access to funds in over 25 currencies. With Revolut, you can easily accept payments from different countries. Additionally, Revolut offers a team spending feature for businesses with multiple employees, allowing you to set spending permissions and limits while tracking expenses in one place.
U.S. Bank
If you prefer a traditional bank, U.S. Bank offers several small business checking options tailored to different needs. They have accounts for new and smaller businesses, mid-sized businesses, larger businesses with higher balances, as well as specialty accounts for nonprofits and businesses requiring premium features and support. While these accounts come with a monthly maintenance fee, there are ways to waive them. U.S. Bank also provides online account management and a user-friendly mobile app, along with in-person branch and ATM access.
Factors to Consider When Opening a Business Bank Account
Before making a final decision, consider these factors while comparing business bank accounts:
- Minimum opening deposit and ongoing minimum balance requirements
- Limits on deposit and withdrawal transactions
- Account fees
- Availability of multiple account types (checking, savings, money market)
- Need for branch banking access based on your business type
- Quality of mobile app and online banking platform
- Availability of dedicated business account support
Additionally, think about the specific features and benefits that would be most useful for your business. For example, if you have employees, look for a bank that offers payroll services, or if you operate in a specialized industry, find a bank that caters to that industry’s unique needs.
Opening a Business Bank Account: Easy-Peasy Lemon Squeezy!
Starting a business is an exciting journey. While it may seem overwhelming, opening a business bank account is nothing to stress about. Armed with the necessary information and documentation, you can easily find the right bank and kickstart your financial operations.
Remember, at Personal Finances Blog, we’re here to help you navigate the ins and outs of the business world. Whether it’s opening a bank account or mastering your finances, we’ve got your back. Visit Personal Finances Blog today to discover more juicy secrets to boost your financial success!
Frequently Asked Questions (FAQs)
Q: What are the different types of business accounts?
A: Business accounts can include checking accounts, savings accounts, money market accounts, and specialized accounts such as merchant accounts and credit card accounts. These accounts are designed specifically to meet the needs of business owners.
Q: Why can’t I open a business bank account?
A: If your attempt to open a business bank account has been denied, it could be due to insufficient documentation or information. Banks may also decline your application if they perceive your venture as too risky or if they are unfamiliar with your industry.
Q: Do you need a bank to start a business?
A: While it’s not mandatory to have a separate bank account for your business, it is highly recommended. A business bank account simplifies expense tracking, aids in tax reporting, provides liability protection, and makes it easier to secure small business loans or credit cards.