Guide to setting up a business bank account

How do you keep your business and personal finances separate? What happens when you need to file your taxes? How do you build a healthy credit score for your business? Opening a company bank account should be a priority, and it’s much easier than you think.

What Is a Business Bank Account?

A business bank account differs from a personal one since it’s specifically developed to support companies. The account is in the business’s name and can have several signatories, and the service is less limited. It also keeps company transactions separate from personal expenditures, making it easier to monitor your business’s finances, cash flows, and calculate your business’s tax liabilities.

A business account enables companies to carry out many of the same transactions, such as deposits, withdrawals, transfers, lines of credit, and more. However, business bank accounts often include more features designed for businesses, such as integrating with your accounting software, the ability to upload receipts, and some even offer integrated invoicing tools.

There are a few different types of business accounts to choose from. The main types include a company checking, a merchant, a business savings, and a business credit card account. Depending on your needs, you can use only one or a combination of these.
 

It’s advised that all businesses should open a company bank account as soon as they receive their employer identification number (EIN) from the IRS and before they start accepting payment and money from customers. This will make it easy to track and monitor the entire financial history of your business. It also gives you more time to build your company’s credit score, making it easier to apply for business credit cards and lines of credit when needed.

Pros and Cons

Let’s take a look at some of the pros and cons of opening a business bank account.

Pros:

• Keeps personal and business finances separate
• It’s easier to monitor income, expenses, and cash flow
• Makes calculating your company taxes easier
• Liability protection
• It looks professional
• You can build your credit rating
• They offer services specifically for businesses

Cons:

• More expensive than a personal one
• Require more information to set up

Documents Needed To Open a Business Account

Setting up a business account does require a few more documents than opening a personal one. However, many of these are already part of starting and registering a company, so you should have most of them or be in the process of getting them. 

Having the necessary docuoments on hand can streamline the process of setting it up, and it can be done within an hour or so. The documents you’ll require for setting up a business bank account include the following:
 

• Registered business details (name, address, and contact details)
• Names of all signatories (except in the case of sole proprietors)
• Identification documents of all signatories (driver’s license or passport)
• Articles of Incorporation
• Current business licenses
• DBA certificate (Doing Business As)
• Employer Identification Number (EIN)

Prices of a Business Bank Account

Account charges are typically slightly higher than those of a personal one. However, each bank sets up its own fees, and some may offer better fees on certain transaction types, such as low or zero costs on electronic transactions. Make sure you consider your company’s needs when looking at different banking options and choose one with the best fees for your business.

The opening deposit of most banks ranges between $5 - $1000, depending on the type and extra features you require. However, there are a few that offer free setups with no deposit. Make sure when considering one of these that they offer decent interest rates.

Most banks will also have a monthly maintenance fee for you to pay, which typically ranges between $10 - $50 per month. However, most will waive the monthly maintenance fee if a minimum daily balance is maintained. 

How Long Does It Take To Set up a Business Account?

Opening up a business account doesn’t have to take months once you have all the required documents and information. Some banks allow users to apply online or through an application. This can be very convenient, but it can take a little longer for them to process your information and set everything up. Typically your account will be set up within 48 hours. Alternatively, you can also apply in person. This might take some more effort, but the process is faster, and it can be set up within a few hours