Wednesday, May 29, 2013

Starting A Business: Getting a Business Checking Account

After you have your business name and entity set-up, it is advised that you open a business bank account.  Even if you are a sole proprietor and will be filing your business's taxes along with your individual return, it is a good idea to set up a separate account specifically for your business expenses, paid-in capital, and revenue.

The beauty of a business bank account is that it will:

1. Aid you in tracking your business costs and revenue streams.
2. Separate your personal finances from those of your business.
3. Add an element of legitimacy to your business.

Business banking accounts come in a variety of flavors.  For the most part, banks will have several levels of business checking accounts and you should select the one that fits your business depending on several factors.  Included among the factors you should consider are: 

* The number of transactions (deposits & withdrawals) you will complete on a monthly basis, also, how many of these will be cash deposits.
* The minimum amount of cash you plan to keep on-hand in your account.
* The number of checks you will be writing.
* Other account needs - whether personal, other business accounts, or lines of credit.
* The physical presence of your bank is important especially if you conduct business outside of your home city, state or country.  This will be helpful in avoiding ATM fees and finding branches when you need them.
* The other personal or business accounts you already have.  If you already have accounts, you may either want to consolidate your accounts by staying with one bank, or spread them out if you aren't happy with the banks that run your existing accounts.

Monthly maintenance fees for business accounts can range from $0 - $25 and up, depending on your needs.  If you anticipate needing more transactions and checks you'll want to consider a premium option, as these provide more free transactions (and smaller fees for transactions after your free maximums) and less expensive or even free checks.  Banks will also frequently lower maintenance fees if you have existing services through them (including personal accounts), or if you are able to maintain a minimum cash balance or have a certain level of deposits per month.  Also, be sure to properly weigh the costs of opening an account, even if the bank waives the account maintenance fees for the first few months.  Having them waive $25 for you upfront isn't a great savings when you consider that you may end up paying maintenance fees on this account for years to come.

As you shop around for the bank that's right for you, don't forget to consider other benefits you may receive like multiple debit cards and online banking services.  Also, I personally value when banks are forthcoming about the details of their plans online or over-the-phone.  In today's world, I consider it an unneeded inconvenience if the bank requires me to physically come in to get the details about their business account offerings and prices.   You may have your own pet peeves that you discover during the process, and we'd love to hear about it in the comment section.

As you prepare to open a bank account be aware that there are certain items you may need to furnish in the bank's office.  You should bring the following documentation/information.

* Your TIN (tax identification number) - ie, EIN or SSN for sole proprietors without an EIN.
* Documentation showing registration of your business name (if applicable)
* Formation documents for your business (depends on business entity, but this can include articles of organization, or articles of incorporation)
* Personal Identification (bring two forms of state or federally issued identification, just to be safe).
* If you are a sole proprietorship running a home-based business, you may need a proof of address (a recent utility bill or bank statement).
* If you have a business entity with multiple members you may need to show proof that you have authorization to sign on behalf of the business (if the other members are not present at the bank) in order to open an account.  Check out this helpful article for more general info, or contact your potential banks  for specific information on what you'll need.

If you have any additional tips or have had a different experience, please let us know in the comments section!  

Below are links to several large banks that offer business banking solutions:

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