If you are starting a business, you’re probably going to want to open a bank account. You can do this easily enough. However, you should be aware that there are some differences between personal and business bank accounts.
Let’s look over some of the most critical points that you need to understand if you’re considering opening a business bank account anytime soon.
Open One When Your Business is Ready to Start Spending and Accepting Money
When you open up an account for your business, it could be a merchant account. There are also savings, checking, and credit card business accounts.
Most business accounts don’t offer quite the same benefits as personal ones. However, they do offer:
- Purchasing power
With a credit card business bank account, you can establish a credit history and make the large purchases you need. You can prepare yourself with a line of credit if there is ever an emergency.
You can also use a business bank account to authorize your employees to make day-to-day purchases. Customers can then make checks out to your business and pay the company with credit cards, rather than yourself.
They Protect You
A business bank account can separate your finances from those of the business, which is vital. This way, if the company goes bankrupt or someone brings legal action against you, your assets apart from the business will not be at risk.
Business bank accounts also protect your customers. They ensure that your customers’ personal information is secure when they do business with you.
You Should Still Look for Introductory Benefits and Perks
Just because a business bank account is different from a personal one does not mean that you shouldn’t still shop around and figure out which one is going to give you the best deal. You should look at:
- Whether there are minimum account balance fees
- If there are early termination fees
- How much the transaction fees are, or if there are any
- What the interest rate is for your credit line
Apart from all that, you should look into the interest rate for your business savings or checking account, if you’ve determined that’s the kind that will serve you best. You should also look for any introductory offers.
Sometimes, if you let a bank know that you’re shopping around, they will let you in on a deal that they aren’t advertising to win your business.
You’ll Need Certain Documents Before You Open the Account
Much like with a personal one, you’ll need detailed documentation to open a business bank account. Those documents will vary depending on what bank you’re using, the exact nature of your business, and what kind of account you’re opening.
However, at a minimum, you’ll need the following:
- The business license
- Any applicable ownership agreements
- Your business’s formation documents
- Your EIN, or employer identification number
If you are the sole proprietor, you’ll need your social security number rather than the EIN. You should bring along your social security card if that’s the case.
You Might Need LLC Documents as Well
LLC means a limited liability company. Usually, you set up one of these by yourself or with your business partners as a way to distinctly separate your financial business dealings from your personal ones.
In other words, if you take the time to set up an LLC, if there are ever any lawsuits or liens brought against the business, then their limitation would be to the business assets themselves. It is another much-needed protection layer between your company and your personal holdings, like land or property you own, for example.
If you formed an LLC before you started the business, and you’re connecting the two, you’ll need extensive documentation of that when you open any type of business bank account. Exactly what you need varies according to the state in which you’re setting up the company.
In some instances, you might elect to form an LLC in a different state from where the physical location of the business is. The reason is that in some states, forming an LLC is much more expensive than in others. Delaware is a favorite state for LLCs because they’re so cheap as compared to some other states.
There’s quite a lot to think about as you look into what kind of business bank account makes the most sense for you. However, if you take care to do the necessary research first, then everything should work out fine.