When you operate your own business, you don’t give much thought to business banking, especially your business checking account. You probably use your business checking account in much the same way as you would your personal checking account. You may have even used your personal checking account to start your business and decided it’s time to move to a business bank account. When you open a business account, it pays to take the time to shop around and look for a bank or credit union that offers a full range of business banking services that can help you build your business.
Opening a business bank account is often the first step when you start your own business. There are a number of reasons to open a separate business bank account:
When shopping for a business checking account, you want to look for many of the same benefits you get from your personal checking account, as well as additional features that can serve your business.
As with any type of financial service, you want to look for a business checking account that offers a wide range of benefits with low or no fees. The Small Business Administration (SBA) suggests you consider:
Some banks and most credit unions require you to open a business savings account in addition to a checking account, which can be useful for setting aside funds for quarterly taxes or planned expenses.
You may want to consider other beneficial features, such as a debit card. If you are making purchases for the business or traveling and want to draw cash from your business checking account, then a debit card could be extremely valuable.
You also want online and mobile banking. Remote access to your checking account makes it easy to monitor cash flow and can be invaluable if you need to transfer funds at the last minute or pay bills online. Online and mobile banking also gives you the ability to remotely deposit checks, which can save time and trips to the bank.
You also should consider whether to get an interest-bearing checking account or regular checking. If you anticipate plenty of money flowing through your bank account, then interest checking will help you earn more. Most interest-bearing accounts require you to maintain a minimum balance and have other restrictions, but the benefits are often worth it.
Other considerations when you open a business account include whether you need to authorize a partner or employee to use the account. Do you need to make nightly deposits? What about overdraft protection? Consider what features might be beneficial to your operation and consult with your financial advisor.
If you are selling goods through a store or online, you also need to be able to process customer payments. That means opening a merchant account, which can accept payments such as credit cards. The money is deposited into the merchant account and then transferred to your business account once the transaction clears.
When shopping for a merchant account, look for:
If you plan to run an e-commerce site, you will need a separate internet merchant account to process online credit card transactions. The biggest difference between a conventional merchant account and an internet merchant account is the fees; the internet account fees will be higher because the risk of fraud is higher.
When you open a business account, you have to present specific documentation to prove you are a business. Depending on how your business is structured—sole proprietorship, limited liability company, corporation, and so on—you will need different documents. Look at our Business Member Required Documentation checklist to get an idea of what you might need.
At the very least, you will need a Federal Tax Identification Number (TIN) or Employer Identification Number (EIN), which you can get from the federal government. Do not use your social security number as a tax ID number; that defeats the purpose of separating your personal assets and liability from the business. You also will need a photo ID, and in most cases a business license. Other documents may be required, depending on the financial institution.
Above all, when you start a business, you want to find a bank or credit union that will support you as your business grows. As you build your business, you will need business credit cards, lines of credit, business loans, payroll services, and other financial services. Credit unions often are more business-friendly than larger banks because they want to promote local business growth and have more flexibility in working with members.
If you are looking for business banking services, stop and talk to one of our financial advisors or review this helpful checklist. iQ Credit Union offers comprehensive business financial services, and we are committed to helping our members succeed.