If you are looking to take your business to the next level, you probably want to open a business bank account. Business bank accounts help keep track of your expenses and income. It is also the best way of legitimizing your business. A business bank account proves that your personal finances are separate from your business’s finances. However, opening a business bank account can be problematic if you are unaware of its features, services, and, more importantly, your needs. Hence, in this article, we will analyze each step you need to take to open a business bank account.
Select the Account Type
There are two kinds of business accounts: the first is a checking account, and the other is a savings account. Before opening your own business account, you must be aware of what kind of facilities both offer and select the one that is suitable.
A checking account can easily let you access your money. From depositing checks to getting paid to make payments, a checking account offers unlimited monthly transactions. However, checking accounts often have no or a very low-interest rate. Checking accounts are preferred mainly by small business owners. On the other hand, if you have gathered a small pile of money and are looking to earn some interest from it, then a business savings account would be a better choice. While it gives you a higher interest rate, access to your money is often limited. According to the rules of the Federal Reserve Bank, a person can only perform six transactions per month on a savings account. While these rules are no longer applicable since April 2020, banks still put some limitations on transactions from a savings account.
If you feel that you do not have any use for your money for a while and want to earn more through it, then you can opt for a certificate of deposit or CD. Under it, you cannot access your money until the end of the mentioned period.
Now that you are aware of the basic features of both these kinds of accounts, it will be easier for you to decide.
Look for Suitable Features
Banks always encourage you to open business accounts and offer various features to entice you. However, it is up to you to select the one which provides features that can help you in your business. For example, if you are looking for a checking account, you might want to select the one with the smallest opening deposit. Or, if your cash flow is highly variable, then you must look for the one that does not charge monthly fees for maintaining a low balance.
Online banking facilities, the number of ATM locations, high-interest rates, low transaction fees, etc., are some of the other features you must consider before making your decision.
Select the Appropriate Bank
Once you have figured out the needs, it will be easier for you to select a bank. Apart from the features, you must also be careful about various fees associated with your business bank account. Often, banks lure you in with lucrative offers and features but hide their high transaction fees. Therefore, make sure to understand all the hidden charges before finalizing a bank.
Keep The Necessary Documents Ready
Before you head out to open an account in the bank of your choice, you must keep all the important documents you may require to open an account. Your employer identification number (EIN), social security number (SSN), business license, and other documents related to your business are some of the most common documents that the majority of banks need. Some banks require even further documentation. Therefore, you must be prepared with everything that the bank may ask for.
Open The Account
Even after possessing all the necessary paperwork, a bank may still reject your application. This usually results from your past banking record. Most banks like to go through your banking history before allocating an account, and if they find that you have a record of overdrafts or bouncing checks, then there is a high possibility that they may reject your application. However, if you have a clean record, then your application will be approved, and you can successfully open your new business account.
These are some steps that would help you open a business account. While it is not difficult to open a business account, most people tend to get confused over the facilities offered by the bank and their own needs. If you are specific about what kind of features you need and how they would help develop your business, then opening a bank account would be a piece of cake for you.