The Ultimate Guide to
Opening a Business Bank Account
Opening a new bank account is a big decision for any business owner. That’s why we created an extensive, free guide to opening a business bank account. Read on to learn more about what to look for in a bank, who stands out amongst the rest, and hopefully help you make the best choice in banking for your specific business needs.
The Benefits of Having a Separate Bank Account for Your Business
Opening a business bank account is essential for managing your business finances effectively.
It provides a separate space to manage your business funds, transactions, and expenses, which
helps in keeping your personal finances separate from your business finances.
Some benefits of having a separate bank account for your business include:
Easier bookkeeping: A business bank account helps in keeping
your business transactions separate from personal ones, which makes
bookkeeping easier. This means you won't have to sort through personal
transactions when preparing your business's financial statements, tax
returns, or applying for a loan.
Professional image: A business bank account helps in building
a professional image and credibility. It shows you are serious about your business
and committed to responsibly managing your finances.
Payment processing: A business bank account makes it easier to process
payments from clients and pay vendors. You can receive payments through checks,
electronic transfers, or credit card payments, making it easier to manage cash flow.
Access to banking services: A business bank account provides access to a
whole range of services, such as credit cards, lines of credit, and loans, which can
help you manage cash flow, expand your business, and fund growth.
Legal and Tax Implications of Commingling Personal and Business Funds
Commingling personal and business funds can have legal and tax implications. It can lead to legal
issues if a business owner is sued, as personal assets may be at risk. Additionally, commingling
funds can make it difficult to track business expenses for tax purposes, potentially leading to
incorrect tax filings and penalties.
Separating business and personal funds can help protect personal
assets, avoid potential legal issues, and ensure accurate tax filings.
How a Business Bank Account Can Help You Manage Your Finances and Track Your Business's Performance
A business bank account can help you manage your finances by providing tools to track cash flow, manage
expenses, and reconcile accounts. You can also use a business bank account to create a budget, set financial
goals, and monitor your business's performance. By tracking your business's financial performance, you can make
informed decisions, identify areas of improvement, and plan for growth. Additionally, a bank account for
business provides access to financial statements and transaction records, which can be used to apply for
loans, prepare tax returns, and analyze financial trends.
Choosing the Right Bank
Factors to Consider When Choosing a Bank for Your Business
Choosing the right bank is crucial when opening a bank account for your business. Here
are some factors to consider when choosing a bank for your business:
Fees: Look for a bank that offers low or no monthly service fee for
business accounts, including transaction fees, monthly account fees, and ATM fees.
Services: Consider the range of banking services offered by the bank.
These services can include online and mobile banking as well as cash management
tools.
Customer service: Choose a bank that offers excellent customer
service, with accessible and responsive support options.
Location: Consider the bank's physical locations and whether they align
with your business needs. Do they have branches near your business, or are they
accessible online or through mobile banking?
Reputation: Research the bank's
reputation and stability, looking for a bank with a strong track record and good
reviews.
Types of Business Bank Accounts
Business Checking Accounts
A business checking account is a basic account that allows businesses to deposit and withdraw funds, write checks, and make electronic payments. Business checking accounts typically have higher transaction limits and fees compared to personal checking accounts, but they also offer more features designed for businesses, such as cash management tools and online banking services.
Business Savings Accounts
Business savings accounts are designed for businesses to save money and earn interest on their deposits. These accounts often have lower transaction limits compared to checking accounts, but they offer higher interest rates and help businesses with cash deposit build up their cash reserves.
Merchant Accounts
Merchant accounts allow businesses to accept credit and debit card payments from customers. These accounts are often offered by third-party payment processors and can be set up in conjunction with a business checking account. Merchant accounts typically have higher fees compared to other types of accounts, but they are essential for businesses that need to accept electronic payments.
Money Market Accounts
Money market accounts are similar to savings accounts but typically offer higher interest rates and more flexible access
to funds. These accounts are ideal for businesses that want to earn interest on their deposits while still maintaining easy access to their funds.
Certificate of Deposit (CD) Accounts
Certificate of deposit (CD) accounts are savings accounts that require businesses to deposit a fixed amount of money for a set period of time, typically
ranging from a few months to several years. In exchange for locking in their funds, businesses can earn higher interest rates compared to traditional
savings accounts. However, early withdrawal from a CD account can result in penalties.
Line of Credit
A line of credit is a flexible financing option that allows businesses to borrow funds up to a predetermined credit limit. Businesses can access the funds as needed and
only pay interest on the amount borrowed. Lines of credit are often used to manage cash flow or fund short-term expenses, such as inventory purchases or payroll.
What You Need to Open a Business Bank Account
Required Documentation and Information for Opening a Business Bank Account
To open a business bank account, you will typically need to provide the following documents and information:
Business name and address
Employer Identification Number (EIN) or Tax Identification Number (TIN)
Business type and legal structure
Business registration documents, such as Articles of Incorporation or Partnership Agreement
Identification documents for all authorized signers, such as driver's licenses or passports
Business licenses or permits, if applicable
In addition, you may need to provide information about your business's financial history, such as income statements
or tax returns. It's important to research the specific requirements of the bank you plan to use to ensure you have
all the necessary documentation and information.
Different Types of Business Entities and Their Unique Requirements
Different types of business entities have unique requirements when opening a business bank account. For example:
Sole proprietorships and partnerships typically require the owner's or partners' personal identification
documents and Social Security Number (SSN).
Limited Liability Companies (LLCs) and corporations require business registration documents,
such as Articles of Organization or Incorporation, as well as an EIN or TIN.
It's important to research the specific requirements for your business entity before applying for a business
bank account.
How to Register Your Business with the Government and Obtain Necessary Permits and Licenses
To register your business with the government and obtain the necessary permits and licenses, you will need to
follow a series of steps,
which may vary depending on your business type and location. These may include:
Registering your business with your state government
Applying for an EIN or TIN with the IRS
Obtaining any required business licenses or permits from your local government or regulatory agencies
Obtaining any required business licenses or permits from your local government or regulatory agencies
Research the requirements for your specific business type and location, and consider consulting with a lawyer or
accountant
to ensure you complete all the necessary steps for starting your business.
Managing Your Business Bank Account
How to Use Your Business Bank Account for Day-to-day Operations
To use your business bank account for day-to-day operations, there are several important actions to consider.
You should make deposits of your business's income, pay bills and expenses, transfer funds between accounts, and
monitor account balances regularly to ensure sufficient funds are available. It's crucial to keep accurate
records of all transactions and to designate specific, authorized signers for the account.
By consistently using your business bank account for day-to-day operations, you can keep your financial records
organized and easily accessible.
This can help you make informed decisions about your business's finances
and
track its performance over time. Additionally, regularly monitoring your business savings account activity can
help you identify potential issues or discrepancies early on, which can save you time and money in the long run.
Best Practices for Managing Cash Flow and Monitoring Account Activity
To reconcile your bank statements and ensure the accuracy of monthly transactions, follow these steps:
Compare your bank statement to your accounting records and identify any discrepancies
Verify that all transactions are accurately recorded and categorized in your accounting system
Investigate any discrepancies or errors and make necessary adjustments
Adjust your cash balance in your accounting system to match your bank statement balance
Regularly reconciling your bank statements can help prevent errors and identify potential issues early on.
Understanding Overdraft Fees and Other Potential Charges
Overdraft fees and other charges can significantly impact your business's financial health.
To avoid any potential unexpected payments, be sure to understand the bank's policies and fees regarding
overdrafts and other potential charges. It's important to constantly maintain sufficient funds in the account
to cover any expenses and avoid overdraft fees. It can also be helpful to set up overdraft protection,
such as a line of credit or savings account linked to the business account, that can help avoid your
account ever going into negative. As an extra form of protection, it's important to regularly review
all account statements and activity to identify and dispute any unauthorized or fraudulent charges.
Best Practices for Managing Cash Flow and Monitoring Account Activity
To reconcile your bank statements and ensure the accuracy of monthly transactions, follow these steps:
Compare your bank statement to your accounting records and identify any discrepancies
Verify that all transactions are accurately recorded and categorized in your accounting system
Investigate any discrepancies or errors and make necessary adjustments
Adjust your cash balance in your accounting system to match your bank statement balance
Regularly reconciling your bank statements can help prevent errors and identify potential issues early on.
Online Banking for Business
Benefits of Online Banking for Businesses
Online banking for businesses offers several benefits that can help streamline financial
operations and increase efficiency. One of the most significant advantages is the
ability to access account information and perform transactions remotely, at any time of
day or night. This can save businesses valuable time and resources by reducing the need
for in-person banking visits and allowing them to quickly and easily manage their
finances from anywhere.
Online banking also allows for faster and more secure transactions, with features such as electronic funds
transfer and automatic
bill payments. This can help businesses avoid late fees and other charges, and reduce the risk of fraud or
errors associated with paper-
based transactions. Many online banking platforms also offer advanced reporting and analysis tools that can help
businesses monitor
their cash, track expenses, and make informed financial decisions.
Online Banking Features to Look For
When choosing an online banking platform for your business, there are several key
features to look for. These may include the ability to view account balances and
transaction history, transfer funds between accounts, and make online bill payments.
Additionally, some platforms may offer more advanced features such as mobile
banking, remote check deposit, and customizable reporting tools.
It's also important to consider the security features of the online banking platform,
such as multi-factor authentication, encryption, and fraud detection. These can help
protect your business's sensitive financial information and prevent unauthorized access
or activity.
There are often a number of fees associated with the online banking platform, such as a
a monthly service fee, maintenance fee, transaction fees, and ATM fees. Be sure to
compare fees and features across different platforms to find the best fit for your
business's needs and budget.
Best Banks for Small Business
When it comes to choosing the best bank for your small business, there are several
options to consider. Many big-name banks, such as Chase, Wells Fargo, Bank of America,
and Capital One, offer specific small-business banking services. In addition, there are
also smaller, regional banks and credit unions that specialize in working with small
businesses.
Criteria to Consider When Choosing the Best Bank for Your Small Business
Some of the criteria to consider when choosing the best bank for your small business
include fees, account features, accessibility, customer service, and reputation. For
example, you'll want to look for a bank that offers low or no fees on their small
business accounts, as well as features that are tailored to the needs of small business
owners, such as online banking and mobile check deposit. Accessibility is also
important, especially if you need to visit a physical branch to make deposits or speak
with a representative. Finally, you'll want to choose a bank with a reputation for
excellent customer service and a track record of working well with small businesses.
Chase Bank is known for its comprehensive business banking
services that cater to businesses of all sizes. They offer a range of
business checking accounts, merchant services, lending solutions, and cash
management services. Some of the pros of banking with Chase include their
wide network of branches and ATMs, 24/7 customer service, and user-friendly
mobile and online banking platforms. However, some of the cons of banking
with Chase include high monthly maintenance fees on some of their business
checking accounts and the possibility of long wait times at their branches
during peak hours.
Wells Fargo offers a variety of business banking products
and services, including business checking and savings accounts, merchant
services, and lending solutions. Their banking services also include cash
management tools that allow businesses to easily manage their cash flow. One
of the benefits of banking with Wells Fargo is their wide range of locations
and ATMs, which makes it easy for businesses to access their funds. They
also offer a mobile app that enables businesses to manage their accounts
on-the-go. However, Wells Fargo has faced some negative publicity in recent
years due to their banking scandals, which may make some businesses hesitant
to bank with them.
Bank of America is another well-known bank that offers a
range of business banking solutions, including business checking and savings
accounts, credit cards, merchant services, and lending options. They also
offer online and mobile banking options that enable businesses to manage
their finances from anywhere. One of the advantages of banking with Bank of
America is their strong rewards program for business credit cards. However,
some of the downsides of using business banking accounts with Bank of
America include their high fees on certain accounts and their reputation for
poor customer service.
Capital One is a bank that has made a name for itself in
recent years with its business banking offerings. They offer a range of
small business checking accounts and savings accounts, as well as merchant
services and lending solutions. Their Spark Business checking account, in
particular, has received positive reviews for its low fees and rewards
program. Capital One also offers a mobile app that makes it easy for
businesses to manage their accounts on the go. However, one potential
downside of banking with Capital One is their relatively limited physical
branch network compared to some of the larger banks.
Business Credit and the Revenued Business Card
The Revenued Business Card: Features, Benefits, and How to Apply
The Revenued Business Card is not a credit card, it’s a purchase of future receivables and utilizes
revenue-based financing to provide a prepaid debit card. Although not a credit card, the Revenued Business
Card can be used for purchases in store or online similarly to a business credit card. Funding is
delivered on a just-in-time basis as card transactions occur. Instead of looking at traditional factors
like a personal credit score or business credit score, Revenued looks at your business revenue to determine
eligibility. Because of this, it can be an excellent option for business owners who have a limited business
credit history or a poor or fair personal credit score.
The Revenued Business Card is an ideal solution for small businesses that have limited credit
history or a fair credit score. The card offers a $500 sign-up bonus when $5,000 is spent on eligible
purchases within the first three months. It also provides a flat 3% cashback reward rate and does not
charge any setup, a monthly fee, or annual fees. Revenued does, however, charge a factor rate which
may end up being more expensive than a conventional credit card.
The card has a low entry barrier for credit scores, making it an accessible option for small business owners who have a
less-than-good business credit score or limited credit histories. The card's spending limit increases with a business's
revenue, making it a great option for businesses experiencing rapid growth.
The application process is easy and quick and can be completed online on Revenued's secure website. Approval takes as
little as an hour, and login information and funds become available after 24 hours. The decision is solely based on a
business's revenue and cash flow, so no hard credit inquiry is required.
To qualify for the Revenued Business Card, a business must be operating within the United States for 1 year or more, have
business account with at least $20,000 in monthly deposits, and have never had their account go negative for more than three
days in any given month.
Using The Revenued Business Card to Grow Your Business Credit Score
Using a business card can be an effective way to grow your company and achieve your goals. For example,
taking out a loan to purchase new equipment or inventory can help increase productivity and revenue. Similarly,
using a business card for business expenses can help track expenses and build business credit. However, it's important
to use the card responsibly and have a solid plan in place for timely delivery of collected receipts. Before taking
on any debt of any kind, businesses should carefully evaluate the potential costs and benefits.
Although the Revenued Card is a purchase of future receivables and not a loan, Revenued can help build your SBFE business
credit score by reporting timely performance on your Revenued Card to the credit bureaus. The SBFE is the industry
clearinghouse for business credit reporting used by Dun and Bradstreet as well as other business credit report companies.
If you do not have an existing business credit profile, Revenued can provide information to you on how to register your
business with Dun & Bradstreet to get access to your free business credit report. Once you are a Revenued account holder,
you’ll also gain 24/7 access to your SBFE score through the Revenued app and online dashboard.
With a wide range of variety in the banking needs of small businesses, it can be difficult to find a one-size-fits-all financial solution. As a small business owner, you want…
The first thing on a new business owner’s to-do list should be opening a business bank account. An account in your company’s name provides a separation between personal and business…
When it comes to filing your taxes, no business expense is too insignificant to consider. Even the smallest fees — such as overdraft fees — are important to reducing your…
Importance of Separating Business and Personal Finances As a small business owner, managing finances efficiently is crucial for the success and sustainability of your venture. One fundamental aspect that demands…
As online banking has become more prevalent, financial technology (fintech) apps like Revenued need to be able to access your financial accounts to provide their services. This is where Plaid…
FAQs About Business Banking
You will typically need to provide a few documents to open a business bank account, including a valid business license, proof of business ownership, and identification for all authorized signers on the account. Depending on the bank and your business type, additional documentation may be required, such as articles of incorporation or an EIN (Employer Identification Number) issued by the IRS.
While you can technically use a personal bank account for your business, it is generally not recommended. Mixing personal and business finances can make accounting and tax preparation more difficult, and can also affect your personal credit score. Additionally, using a personal account for business purposes can put your personal assets at risk in case of a lawsuit or other legal action.
Consider the specific needs of your business when choosing a bank account. Look for a bank that offers low fees, convenient locations, and online banking options. Also, consider the size of your business and your transaction volume, as some banks offer different account options based on business size. Compare the features and benefits of different accounts, such as interest rates, overdraft protection, and rewards programs, to determine which is the best fit for your business.
To avoid fees, make sure you understand the fees associated with your account and take steps to minimize them. Keep accurate records of your transactions and balances to avoid overdraft fees or other issues. Also, consider signing up for online banking and automatic alerts to help you stay on top of your account activity. Finally, regularly review your account and transactions to ensure that you are not being charged any unnecessary fees.
While it is technically possible to use a personal bank account for your small business, it is highly recommended to have a separate business bank account. Separating your personal and business finances offers numerous advantages, including clearer bookkeeping, simplified tax filing, and improved credibility with customers and suppliers. A dedicated business bank account also provides access to specialized services and features tailored to the needs of businesses, such as merchant services, business credit cards, and business-specific account management tools.
Legally, you are not required to have a separate business bank account for a sole proprietorship. However, it is highly advisable to open one. Maintaining separate accounts for personal and business finances helps in organizing your transactions and simplifying tax preparation. Additionally, it enhances your professionalism, as clients and suppliers prefer to deal with businesses that have dedicated bank accounts. It also allows you to track business expenses and income more effectively, providing a clear financial picture of your sole proprietorship.
The amount of money you should have in your business bank account depends on your specific business needs and financial circumstances. It is generally recommended to maintain a comfortable cushion to cover ongoing expenses, such as payroll, bills, inventory, and emergencies. A good practice is to aim for a minimum of three to six months' worth of operating expenses in your business bank account. This ensures that you have enough liquidity to handle unexpected situations and maintain business continuity.
The required capital for a small business varies widely based on factors such as industry, business model, location, and growth plans. It is essential to conduct a thorough financial analysis and develop a comprehensive business plan to determine your specific capital needs. Your capital requirements should consider startup costs, operating expenses, marketing expenses, inventory, equipment, and any other relevant financial obligations. Seeking professional advice from an accountant or business advisor can help you estimate the capital required to start and sustain your small business.
Having multiple business bank accounts can offer several benefits for small businesses. It allows you to separate funds for different purposes, such as operating expenses, taxes, savings, or specific projects. Multiple accounts can streamline your financial management, making it easier to track cash flows, monitor specific expenses, and allocate funds efficiently.
Segregating funds can also provide better clarity when assessing your business's financial health and can simplify reporting for tax purposes. However, it's important to consider any associated fees and ensure that managing multiple accounts aligns with your business's specific needs and goals.