Types of Business Accounts and Requirements for Application
Answers to Common Questions (FAQs)
Opening a company bank account is a crucial first step in managing your finances and should happen as soon as you decide to begin taking or spending money as a business. Checking, savings, and merchant accounts—the latter of which enables you to take payments from clients using debit and credit cards—are common forms of business accounts.
Even though opening a business account requires a few steps, the application procedure is usually simple, and you can have an account open in a few minutes (although checks and debit and credit cards may take a few business days to arrive). Certain large financial organizations allow you to apply and submit your documentation online, such as Bank of America. To expedite the procedure and open a business bank account as soon as you need it, select a bank that accepts online applications.
Find out more about business banking’s advantages, the different kinds of business accounts available, how to open an account, and other related topics.
Important lessons learned
- Checking, savings, and merchant accounts are among the different kinds of business bank accounts.
- A business bank account can offer you purchasing power, tax advantages, liability protection, enhanced cash flow, and customer debit and credit capabilities.
- You can open a business account online with several banks in a matter of minutes.
- The process of opening a business account entails selecting the account type, supplying the required documentation, and depositing money.
- Different Business Bank Account Types
- Checking Accounts for Businesses
- Small business checking accounts are perfect for companies that need to send or receive money electronically, create checks, and make debit card withdrawals.
Take note
Business checking accounts, which offer several withdrawal options and few limitations on how you manage your money, can be the most flexible bank accounts available to businesses.
An ATM, wire transfer, check deposit, or electronic transfer can all be used to fund a company checking account. In order to facilitate the management of reports and transactions, checking accounts can be integrated with widely used accounting software and business tools. Additionally, some banks provide Positive Pay, a cash-management solution that deters check fraud.
Accounts for Business Savings
Business savings accounts are the best option if you want to earn interest, set aside money for unforeseen expenses like equipment purchases, or save for large purchases. Depending on your account balance, many banks usually offer high-yield savings accounts with competitive interest rates and little to no monthly fees. There may be different minimum criteria for opening deposits.
Accounts for Merchant Services
If you intend to take payments from customers using debit and credit cards you need a business merchant account. When a consumer uses a card to make a payment, the funds are automatically moved from your merchant account to your business account. Each merchant account has a different set of fees, so when you sign up, make sure you understand what it will cost.
A Business Bank Account’s Advantages
In addition to offering limited liability protection, small business bank accounts can help you maintain the financial separation between your personal and business affairs, organize your company’s documents, and give your enterprise more legitimacy and professionalism. For instance, merchant accounts let your clients use credit or debit cards to pay for products and services. They can also provide purchase protection, which keeps client data safe.
Additional advantages that company bank accounts can offer include the following:
Precise taxes: Since business and personal transactions are kept apart, your business account can assist you in filing precise tax reports.
Greater interest: In comparison to a checking account, you can earn more interest on the balance of a business savings account. Over time, this can help you optimize your cash flow.
Purchasing power: Your company can build credit and make greater purchases with the aid of a corporate credit card account.
Being ready: If your business bank account has a line of credit, you can utilize it to pay for new equipment or to cover unexpected expenses.
Business expense deductions: A business account statement that can be used as documentation of spending makes it simpler to deduct business expenses from your company’s tax return.
A Business Bank Account Is Needed by Whom?
Although opening a business bank account isn’t legally necessary for contractors, freelancers, sole proprietors, or limited liability corporations, it can be helpful come tax time. You may find it simpler to locate deductions and file taxes if you can easily identify capital expenditures, rent charges, insurance costs, and any interest on business loans by keeping a separate business account.
For organizations looking to establish their credit history or apply for a credit limit, business accounts are also essential.
Take note
Two important strategies to raise your company’s credit score to creating credit with suppliers and vendors is opening a business account with a business credit card. After determining your credit score, you may find out if your company has a credit file by contacting a credit reporting company like Experian. If so, you can then request a credit report.
How to Open a Business Bank Account
Choose a bank first. A business account may be opened at the same bank as the personal account of a business owner. Take account limitations and account fees into consideration when comparing various banks and financial organizations.
You will need to present certified business papers while opening a business bank account. For example, if you are a sole proprietor, you may need to register your trade name and obtain a company license. Depending on the form of partnership, partnerships may also need to submit a statement of qualification or partnership agreements.
Here are some general pointers for creating an account.
Go to the Bank Branch or Website
By going to the financial institution’s website, you can open a business bank account the simplest method possible. Online account opening can be done from anywhere at any time. You can go to the bank’s location during business hours if you would rather do this task in person.
Select Your Account
Examine the various bank account options and select the one that best suits your needs. If you want more financial flexibility, go for a typical company checking account; if you want to save business profits for the future, go for a business savings account.
Take note
In order to open a merchant account You must first have a business bank account
Before opening a business bank account, take the time to finalize your company plan. Depending on your ambitions, you might need one account or all three.
Give Your Details
Once you’ve decided on the kind of account you require, opening a business bank account is simple. You will need to supply particular information for the following stage of the process, like:
- Your documentation pertaining to business formation
- Your business permit
- The number that identifies your employer (EIN)
- If your business is a sole proprietorship, your Social Security number
- If your company is a partnership, a partnership agreement
- Put Money Down
You must make a deposit as soon as your business account is opened. You can deposit cash, write a check, or use an electronic funds transfer to accomplish this.
Take note
With the help of some banks’ remote deposit capture (also known as remote deposit) feature, you can deposit checks by taking a picture of the check with your smartphone.
Answers to Common Questions (FAQs)
How do foreigners get a bank account in the United States?
While it is feasible for non-residents or foreigners to open bank accounts in the United States, the process is more difficult because most banks require that you have a U.S. address and a Social Security number (or, if you are a resident or nonresident alien, an Individual Taxpayer Identification Number). Your company must be registered in the United States and have an EIN in order for you to create a business bank account as a nonresident.
How much time does it take to open a business account?
Although the bank may need several business days to verify your papers and issue the required checks and cards, you can open a business account online in a matter of minutes.
What is the minimum amount required to start a business account?
The amount of money needed to start a business bank account varies. While some banks might not demand any deposit at all to begin, others might have minimum balance requirements, such as Wells Fargo’s $25 requirement.2. Make sure you check the website of a bank’s fine print.