If you have your own business, you need to operate a company bank account to make sure your personal money, and the cash flow and profits of your business are kept separate.
This makes accounting easier, and helps to make sure that you’re filing your taxes correctly. You’ll also often find that a small business account comes with different features compared to your personal account — including perks which make it easier to run your company smoothly.
This article will cover all you need to know about getting a new business account, including:
- How to choose the right bank for your business
- What to look at, to ensure you choose the right account type for your business needs
- Why you need to check the business bank account's fees closely
- How to get the documents needed to open a bank account
- Final steps to open the account and deposit your funds
We will also highlight an alternative to traditional banks — online multi-currency business accounts from Wise. More on that — and how a modern online account can save you time and money — later.
Getting yourself a business banking account will offer a range of benefits, and can make running your company much easier.
In effect, if you run an LLC, partnership or any other type of business apart from a sole proprietorship, having a business bank account is mandatory. But even as a sole proprietor, a small business checking account can make it easier to run your business and manage your personal finances, not to mention making tax season simpler, and presenting a more professional image to your clients.¹
Not sure whether it’s worthwhile? Here are some common reasons for opening a small business account, which are well worth considering:
- Customers can pay your company account directly by wire, credit card or cheque — far more professional than using a personal account
- A business bank account keeps your personal and business funds separate, making accounting simple, and limiting personal liability
- Business bank accounts often have features and perks you won’t be able to access with a personal account
- If you have employees, you’ll be able to give them company debit cards, credit cards or cheque books, and allow your staff to do day to day banking tasks on your behalf
- Many business bank accounts come with an option of arranging credit, so you can invest in your business when you need to
The US Small Business Administration recommends you get a company bank account as soon as you need to spend or accept money on behalf of your business. ²
Depending on the bank you choose, you may need to have your EIN — employer identification number — from the IRS before you can get your small business account up and running. If you don’t yet have an EIN, and think you might need one, you can complete a simple test online via the IRS website to check whether it’s time to get your own EIN, and get your application started.³
Getting your own business bank account isn’t too complicated. You’ll need to invest some time in finding the right bank and account product for your needs, but the application process is usually straightforward. Here’s what you need to do.
Many business owners and entrepreneurs open a business bank account with the same bank they use for their own personal finances. In some cases, banks will offer favorable terms for customers who hold both their personal and business accounts with them, so it’s not a bad idea to check the terms on offer from your current bank.
However, you’ll find a huge range of different banks out there offering business accounts — as well as some modern alternatives, like the multi-currency borderless account for business from Wise.
Different banks have different benefits — and of course, different disadvantages — so it’s a good idea to think about what services you really need. For example, calling into a local bank branch to carry out business transactions may feel familiar, and seem like an obvious choice. But you’ll often pay more for over the counter services, and you’ll be limited by the opening hours of the branch, too. Thinking through the way you’ll need to manage your business funds can help you choose the right bank for your company.²
Once you have narrowed down your choice of banks, you’ll need to look more carefully at the products available for small businesses. There are often tiered account products on offer — ranging from a simpler account with lower fees, but a limited range of features, through to more complex options, which cost more but also come with a suite of perks for business owners.
Have a think at this stage, about how you intend to use your business account. Some key questions to consider include:
- What is your daily average balance likely to be?
- How many transactions are you planning on carrying out per month, and of what type?
- Will you manage your money in cash, or will you mainly be making electronic payments and deposits?
- Do you need to integrate your small business bank account with your existing accounting software?
- Will you be making more complex transactions like batch payments, or international wire transfers on a regular basis?
Working out the way you’ll use your account will help you find business account products which can meet your needs, and ensure you’re not paying for services you never use.
It’s helpful to know that the account products, and the features and fees available can vary depending on the state you live in. Once you have a few favorite accounts, take a closer look at the fees you’ll need to pay — and make sure the information you have is valid in your state.
You can expect to find a monthly maintenance fee, which may include a fixed number of free transactions per month. The maintenance fee might be waived if you fulfil other conditions, such as holding a minimum balance in the account over the statement period. Make sure you look at the small print, including the cost per transaction if you exceed the monthly free figure, and which transaction types are excluded.
There may also be other limits you need to look at. For example, some accounts offer a fixed value of cash deposits per month for free, but start to charge above this amount. If you’re expecting to be depositing your profits in cash into your account via a bank branch, this could make a big difference to the account’s costs.
The exact documents you need will vary depending on the bank you choose, the account type, and even the state you live in. In some cases it’s possible to open your account entirely online, but usually you’ll have to go along to a bank branch to present your documents and get started.
Before you go to your appointment, check the documents required. Here’s a rundown of the common paperwork needed, split by business type.
- Officially recognised personal ID such as a driver’s license or state ID card
- Personal information, including name, address, date of birth and nationality
- Social security number, or EIN if you operate a partnership
- Business license and business filing documents
- Doing Business As — DBA — certificate if your business operates under any name other than its legally registered name
- Personal details of all partners, and partnership agreement documents
- Business license and organizing document
- Personal details of all company owners — usually those with above a specified stake in the business, for example, 10% or more
- Articles of Organization or a Certificate of Formation
- Organizing documents, including filing details
- Personal details of all senior managers and company owners — usually those with above a specified stake in the business, for example, 10% or more
- Certificate of Formation or Articles of Formation
- Organizing documents, including filing details
- Company balance information
Depending on the account eligibility rules you might also have to provide more details about your business. For example, you may have to show your company meets certain turnover requirements, or has been trading for a specific period.¹ ⁴
Sometimes it’s possible to open a business checking account online, and make an electronic deposit to get your account up and running. With traditional banks, this is more likely to be the case if you’re a sole proprietor, or already hold a personal account with the same bank.
However, most company owners will need to visit their local bank branch in person to open their account, and make an opening deposit.
If you’d rather get your account set up online, there are alternatives, including the multi-currency business borderless account from Wise. Details of this smart new account, next.
If you can’t find the right type of small business bank account for your needs — or if you’re looking for a cheap and flexible way to manage your money across different currencies — it’s worth comparing the features and fees of the business borderless account from Wise.
This new type of account can be opened and operated online, and comes with a range of perks designed to make life easier for business owners and entrepreneurs. Check out these great benefits:
- Open your account online and manage it on the go via an app
- Make batch payments and automate workflow with the Transferwise API, to save admin time
- Integrate with your existing accounting solutions, including world-leading small business accounting software from Xero
- Hold multiple currencies — over 40 — in one account
- Get local bank details for the US, UK, Australia, New Zealand, and the euro area, to receive fee free payments in these regions
- Send and receive international payments for a low transparent fee, and using the google exchange rate
The borderless account is built for businesses which operate on a global stage, with a focus on saving you time and making it easier to send and receive payments all over the world. See if you could save money with a borderless account for business, today.
Nearly ready to get started? Here are a few final tips and tricks to make sure everything goes smoothly.
- When choosing an account, don’t forget to check the costs of transactions if you exceed those included in your monthly package. As your business grows, the number of transactions will, too
- Make sure your account is fully operational by transferring out, and depositing a small amount, before you start invoicing using your new business bank account
- If you’re opening a business account with bad credit, it’s worth talking to a range of banks to see which accounts match your needs. Many banks have small business advisors who can run through your options with you
- Have the name on your checks match the name your business is legally registered under — not the DBA name if this is different
- Check out the costs and features of Wise Business, to see if you can get quick and secure payment services for your business, for less
Finding the right business account for your specific needs can seem a little daunting. There are many different options out there, with different packages and costs to consider. Investing an hour or two in research can pay off, and ensure you get an account which meets your business needs and saves you time and money in the long run.
All sources checked 13 May 2019
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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