A business checking account is almost a necessity if you are a small business owner. You need a way to keep your business and personal funds separate for taxes and for tracking your company's financial performance.
Before you open an account for your business, GET.com recommends the 4 things to know when choosing a business checking account.
Opening An Account
Opening a business checking account is more complicated than opening a regular checking account. To open a business checking account, you typically need to have an Employer Insurance Number (EIN) for your business. This is a tax registration number that the IRS uses to keep track of businesses. You can apply with the IRS and get an EIN for free.
If you run your business as anything other than a sole proprietorship, like an LLC, Corporation, or partnership, you will also need to present the formation documents that you received when you set up these business entities. If you have business partners who own part of your company, you will also need them to sign a resolution giving you permission to open a bank account on behalf of the business.
Services For Business Accounts
A business checking account gives you a place to store your money and pay your bills. Most banks let you access your account online so you can keep track of your income and expenses. Online business banking often includes software to help you track cashflow, manage payrolls for your employees, and predict your future business performance based on your past history.
You can also order checks for your account to pay for your expenses. Depending on your business credit score, you may also be able to set up a credit card and/or business loan along with your checking account. If you can't qualify now, opening your account will help you build a relationship with the bank so that you can qualify in the future.
Business checking accounts can charge a variety of bank fees. Most accounts require that you keep a minimum average monthly balance in your account or you'll need to pay a monthly maintenance fee. Accounts also have a maximum number of transactions that you can make per month.
There is also a limit to the amount you can deposit in cash every month without paying a fee since large amounts of cash create more work for the bank tellers. Finally, if you need to use an out-of-network ATM to make a withdrawal, you'll likely need to pay a fee.
Picking The Right Account
Your business checking account needs to find a balance between the services and the fees. If you run a smaller business where you don't deal with many transactions, you should look for a more basic account so you can avoid running into fees for having too small a monthly balance. If you want extra services, like checks, it would make more sense to buy them separately rather than upgrading to a more expensive account.
If you run a larger, more complicated business, especially one where you regularly need to make many transactions, you would be better off with a more sophisticated account with higher limits for transactions. When you meet with your bank, they should have a representative who specializes in business planning who can help you review their products.
If you have an existing relationship with a bank, like for your personal checking account, you may want to start with them to make it easier to manage all your accounts. One other point to consider is whether the bank has many locations close to your business. Not only would this be more convenient, it would also help you avoid out-of-network ATM fees.
Your business checking account should be there to help your company, not create more problems. By keeping this information in mind, you can find the account that best fits your needs and your business.