You have made the decision to start your business. What’s next? You need to open your own small business bank account. It is important to keep your personal and business finances separate for taxation and legal purposes. There are a few things you will need in order to open a small business bank account depending on where you live.
For example, if you live in the United States, you will usually need two important things to get started with most banks.
Your Federal EIN number:
EIN stands for Employer Identification Number. Even if you are a company of one and have no intention of hiring anyone, this number is essential for business tax purposes and I don’t know of any state that will let you open a small business bank account without one.
It also helps protect you online. For example, if you work as a service provider such as a virtual assistant, you really don’t want to give everyone your social security number, which businesses would need to have in order to pay you. It is far safer to include your EIN of your business on your invoices.
You can easily get your EIN on the IRS website => https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
Your corporate documents:
There are a number of different choices when it comes to the structure of your business. The most common is the LLC, which stands for Limited Liability Company. As the name suggests, the liability or legal responsibility related to a company rests with the company, not with any one individual. If you ever get into a situation with a dissatisfied customer who threatens to sue you, your own personal property will be protected. This may sound scary, but it is better to plan ahead for any eventuality than to get caught off guard.
You can also form a corporation, but this will usually cost more and the business must be run according to certain standards and practices. It will also usually cost more to file the paperwork.
No matter what legal structure your business takes you will need to file documents with your state. Here in Louisiana, we have to file as a new business and pay the fee to be recognized by the state as an entity. We also need to have a business operating agreement. This document describes who is running the business and who the partners are if there are any, and what will happen to dissolve the company if need be.
Presenting your documents to open your small business bank account:
Once you have your EIN and your certificates of good standing for your business as well as your operating agreement, you will be just about ready to open your small business bank account. You should also bring along a photo ID like your driver’s license and/or passport.
If there are others involved, they should also bring ID.
Choosing the right small business banking account:
There are a number of ways to choose the right small business banking account for your company. You might wish to start with the same bank where you have a personal account, provided that you find their level of service good.
Next, consider what you will be using the account for. Are you going to be processing credit card transactions? Will you open a merchant account with this bank or a different institution?
Compare interest rates, monthly fees, and credit/debit card deals if available.
Also, I have had clients in different states experience bank rejection. Most banks now require credit checks before you can open an account. If you are not accepted, don’t give up. Simply try different banks until you find the right one for you.