A business banking account is vital to helping your business prosper and grow. When you start your business, make it a priority to begin investigating the banks in your area that offer business banking services. You will find a range of services and a range of fee structures. What follows is a discussion of business banking accounts and how they can be beneficial to your business.
Why Have a Business Banking Account?
One of the most important reasons to have a business banking account is to help keep business assets separate from your personal assets. Keeping your assets and liabilities separate is vital to putting your business on sound footing, as it will help protect you from personal liability for your business debts. Also, mixing your business spending and deposits with your personal activities will create havoc for you at tax time. A separate business account will avoid this issue as well as help you prove to the IRS that the business is not merely a hobby.
In addition to helping you keep your business records clean and separate from your own, a business banking account gives you access to a myriad of banking services that are designed exclusively for businesses. Some of those services include:
Business bank financing is a key source of business capital. It provides funds to support business expansion strategies, equipment purchases, or to cover certain operating expenses. Often, the bank will work with you to develop financing programs customized to help ensure your business succeeds. It can offer credit on terms tailored to your company’s needs, whether short- or long-term loans, lines of credit, or other forms of financing.
Cash and Payment Management
Cash management services help your business manage its receivables, payables, cash on hand, and liquidity. The bank can develop a system to help your business streamline its cash management operation, helping your business keep its costs lower and have more cash on hand.
Automatic Money Transfers
Business banks can set up your accounts to automatically transfer money in and out of your company’s checking accounts. Your business will always have its cash surplus working for it without worrying whether its checking account has enough of a balance to cover the day’s payments.
What You Need to Open a Business Banking Account
When you establish a business bank account, you will name your company as the owner of the account. The documentation your bank will require depends on the organizational structure of your company and the nature of its business.
In most cases, you will need:
Employer Identification Number
An EIN is a unique number issued to businesses located in the United States by the IRS for tax purposes. The EIN gives your business a tax status that is independent of your personal social security number. If you have not already applied to the IRS for an EIN number, you need to do it before you establish a business account. You can apply online at no cost.
Your Social Security Number
In some cases, the bank will accept your social security number in lieu of an EIN if you are operating as a sole proprietorship. The bank will nonetheless need your social security number to verify your identity and the authority to act on behalf of your business.
Personal Picture Identification
You need to be able to show the bank that you are an officer or owner of the business. Valid forms of personal identification include a driver’s license, state-issued identification, or passport.
DBA Name Registration
If your business will be operating under a name other than its legal name, you will need to file for a fictitious business name. For example, a specialty grocery store that is organized as an LLC under the name “Maria’s Italian Food, LLC,” may operate its store under the name “Maria’s Italian”. In such a case, a fictitious business name registration must be filed with your state’s Secretary of State or equivalent. The bank will want a copy of your DBA registration documents.
Business Formation and Operational Documents
If your business entity is a partnership, LLC, or corporation, you or your attorney created documents that you filed with your state’s Secretary of State. Your bank will need a copy of the organizational documents filed with your state. Also, if your business is a partnership, you will need a copy of the partnership agreement. If it is a corporation, you will need the bylaws, and if it is an LLC, you will need the operating agreement.
A business license is issued by a state or local governmental body. Depending on the nature of your business, you may need a business license to conduct your business. Check with your local government and determine whether your business needs a business license. If so, you will need it to open your business bank account.
Merchant Account Review
If your business will apply for a merchant services account, the bank will want to see your estimates of your monthly credit card volume. If you already have a merchant account, the bank will want to know about your processing history and average volume of monthly credit card revenue.
A business development officer can help you determine what type of account(s) you need. You should consider what your business will need in the way of business banking services when opening an account and deciding which bank is right for your business. A couple of examples are:
Your Business Will Operate Online and Handle Very Little Cash
You may want to inquire about whether the bank has any accounts with no fees and no minimum balance requirement. If so, be sure to find out about any limits on monthly transactions, the availability of mobile deposits, and digital invoicing services.
Your Business Can Easily Manage Its Cash Flow
A new business that is ready to grow and can manage its cash flow may need a more traditional bank account. You should expect to pay low service fees, but they may be waived if your business maintains a minimum daily balance. Be sure to inquire about fees on transactions above a set amount each month and any limits on non-wire electronic deposits.
Cash Deposit, Withdrawal, and Transaction Limits
Some business checking accounts limit the amount of cash an owner can deposit, withdraw, or transact within a defined period. If you exceed the limits in a month or a billing cycle, you could end up paying additional fees. Before you open an account, make sure you know about any limits and potential additional fees for exceeding them.
Speak to the Business Banking Experts at FVCbank for more information
Get your new business off to a good start. Whether you are a new business customer or one that is looking for better business banking solutions, a business development officer at FVCbank can help you succeed. They can work with you to tailor business banking services to meet your business needs to improve efficiency and profitability. For any questions or to ask about our services, give us a call.