No matter how good your idea, and no matter how innovative the product
or service you are planning to offer, there are a variety of steps to take
before your venture can prepare for pitch deck presentations that you may grab
from a great business templates site.
As you begin to develop your business idea, it is necessary to think
about the tools you will need to facilitate every stage of your venture. If
your venture is ready to make any expenses or accept any sort of funding or
revenue, you need a business bank account.
Transactions and receipts will be better managed through a separate
account. Additionally, you will be at a lower risk for identity theft if you
establish an employer ID instead of your personal Social Security number.
Other benefits of opening a business bank account include being able to
accept credit card payments, simplifying tax preparation, and having separate
documentation for when you choose to sell your venture.
Simply said, having an account exclusively for the business’ use will
protect you and allow the company to remain legally compliant.
Now that you know the benefits of opening a separate account dedicated
to your business, you are probably wondering which steps to take. The following
process will guide you to open a business account for your venture.
Choose a Type
The type of account you open will depend on the kind of
business you run. You can choose between a business checking account, savings
account, or a merchant services account. A checking account will help with
everyday expenses, payment receiving, and cash flow management.
The savings account, as its name implies, will work as a
piggy bank for leftover cash and will create interest. Certain accounts will
help you earn over a 1% annual percentage yield. The merchant account creates a
relationship between your business and a merchant service provider.
For starters, you should simply open a business checking
account. This will allow you to keep track of invoices and manage your
expenses. As your company grows, consider opening a savings account. If you
want to accept credit card payments, you will need to open a merchant services
account. The accounts can be opened online.
Most banks around the world offer options for business bank
accounts. But how do you know which is the right one for your team?
Every bank will offer different options. Before choosing,
take into account the introductory offers, transaction fees, early termination
fees, minimum account balance fees, and interest rates that each option
While opening an account in some banks is completely free,
they might balance it out by charging you on a monthly basis, imposing fees for
cash deposits, ATM transactions, and wire transfers.
Make sure to keep in mind every possible fee and whether
there is a possibility of waiving them after meeting some criteria.
Consider the number of locations the bank has in your area,
just in case of emergencies. Even the online and mobile experience the bank has
to offer is an aspect to consider. Do they accept virtual deposits and
Working with a bank where you or other team members have
previous relationships will facilitate the process.
If you are considering adding a merchant services account, a
payment processing company is a good alternative as they often offer other
Otherwise, make sure to check on the merchant services
account’s discount rate, transaction fees, address verification service (AVS)
fees, ACH daily batch fees, and monthly minimum fees.
The document requirements to create an account will depend
on the type of account you choose to open, but all entities are going to need
certain information pertaining to your business before working with you.
Every bank will require some sort of identification, be it
personal (often asking for two forms of ID) or business. The owner’s Social
Security number or a Federal Employer Identification Number (EIN) is commonly
You can only use a Social Security number if you are the
sole proprietor of the company. But getting an EIN is far more beneficial and
can be done after registering the business with state and local government.
The EIN works as your business’ federal tax ID and it is
necessary for employee hire, license and permit applications, and to pay your
taxes. If you have not done so yet, you can apply for an EIN through the IRS
Additionally, you will need any and all organizational
documents—like ownership agreements, the company’s fictitious or DBA
certificate, articles of incorporation, and any licenses needed to offer your
services. Check online or speak with someone at your bank of choice to make
sure you have everything you could need.
Once your documents are all in order, it is finally time to
open your business account. There are two options: you can open it online or in
person. Many banks offer both options. Online application could lead to a
faster approval window.
If the bank you have chosen solely offers online
applications, it means they have no physical branch locations for you to visit.
Still, they offer chat options and customer service numbers to connect with.
Consider whether this is a pro or a con for your venture
before proceeding. Visiting in person can help you create rapport, especially
if you decide to work with a bank with which you have no previous connection.
Either way, have your documents ready to present.
Next, make your first deposit. No matter the channel—cash,
personal account transfer or check—, once you receive the money you will
officially have a business bank account.
Now that you have a business bank account your endeavor’s
financial record will remain clean and uncluttered by personal funds and
expenses, and your savings can earn high interest. As your account grows you
will see that your venture has the SBA’s four Ps: protection, professionalism,
preparedness, and purchasing power.