How To Open A Business Bank Account In 7 Easy Steps
CEO & Founder of Digital Accounting Rocks
STEP 1 – Choose a bank that fits your business needs. You need to ask yourself these questions. Do I already have a personal bank that I have a good relationship with? Can I utilize the existing goodwill relationship so I can benefit in terms of credit profile, line of credit, lower bank fees? How much is the service charge per month? What’s the minimum average monthly balance? Does the bank have a line of credit? Is it hard to get a business loan? Does the bank have many branches in convenient locations? Does the bank’s online banking integrate with accounting software?
STEP 2 – Choose to open the bank account online or in-person. Both processes are very easy.For the online process, you must fill out the application form online first and send the required documentation to the bank via email or fax. The bank will then verify if your business is legit. It usually takes 24 to 48 hours at least to get the account approved. For in-person, you bring everything to the bank and the account gets approved on the same day of application. The biggest advantage of in-person is that a real person can walk you through all the details so you don’t need to figure out by yourself.
STEP 5 – Fund the bank account.Prepare a check or cash to make an initial deposit in your account. Every bank is different. You can ask the bank representative how much it is minimum to fund that account.
Which Bank Should I Choose
There are an enormous number of national and local banks across the U.S., and if you already have an account with an international banking organisation that operates in America, you may be able to simply transfer your account across. If youre opening a brand-new account, its probably a good idea to stick with one of the Big Four banks:
JP Morgan Chase
Quick To Open Business Account Without Borders
If you’re a business who is tapping into the global market or simply needs to pay vendors and suppliers abroad, you could benefit from a money saving business account with Wise.
- Quick to open and fully online
- Receive international payments for free
- Up to 8x cheaper than banks
- Hold money in different currencies
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What Should I Consider When Opening A Business Banking Account
You have options and opportunities when you start shopping around for a new business bank account. The bank that works well for you as an individual might be a good fit for your businessâor it might not. This is where a bit of due diligence can pay off handsomely.
Banking feesYou can deduct banking fees when filing your business taxes, but that doesnât make them any more fun to pay. Read the list of fees carefully and consider how many fees youâre comfortable with. Some banks advertise zero account fees. Be sure to check how much the bank charges for other things like cash deposits, using debit cards, withdrawals, transfers and account maintenance.
Minimum balancesMany banks have minimum balance requirements, especially brick-and-mortar banks. This may or may not be a concern based on how you plan to save and use your funds. If you operate on a cash-in and cash-out basis, your minimum balance may fall below the threshold, creating additional fees for your business. If your account balance fluctuates frequently, it may be worthwhile to shop for a business bank account with no minimum balance requirement.
Interest rates and savings optionsIf you plan to build a bit of a nest egg in your business savings account, interest rates matter. Itâs good practice to check out the interest rates from different banks and choose one to help you make the most of your savings.
Your Right To Open A Bank Account
In Canada, you have the right to open a bank account at a bank or a federally regulated credit union as long as you show proper identification.
You can open an account even if you:
- dont have a job
- dont have money to put in the account right away
- have been bankrupt
To open an account, you usually have to:
- go in person to a financial institution
- provide an acceptable form of identification
Contact the financial institution to find out if there are other ways to open an account. Financial institutions that operate only online may require that you have an existing account with another financial institution before opening an account for you.
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Compare Accounts At Several Banks
It’s tempting to open a business bank account with the bank where you have your personal accounts because then you can manage your money all in one place, but this isn’t always your best option. Compare bank accounts and fees from several banks and make your choice based on which account is best for your business, even if that’s an account at a separate bank. You can always transfer funds from one bank to the other as needed.
Consider choosing U.S. Bank or a similar financial institution that offers several tiers of business bank accounts so you can upgrade as your business grows. Source: U.S. Bank.
For Businesses That Mainly Transact Electronically
Business One Low Plan
- No monthly fees for a year*. Pay no monthly plan fees for the first 12 months, when you open a new account online before 31 March 2022
- Unlimited electronic transactions1
- 25 free staff-assisted and cheque transactions per month
- Reduce the time you spend on accounting tasks by connecting your Bank Feed.
- 60 free staff-assisted and cheque transactions per month
- Reduce the time you spend on accounting tasks by connecting your Bank Feed.
- Pay as you go fee structure, meaning you only pay for the transactions you make.
- Reduce the time you spend on accounting tasks by connecting your Bank Feed.
Apply online, then complete an in-branch ID check to access funds.
Send, receive and hold currencies in one place and convert funds when it suits you.
- No monthly account maintenance fee
- Make and receive payments in another currency without converting to AUD
- Accounts available in a range of foreign currencies
- Make and view transactions in Online Banking.
- Our no-fees everyday account for not-for-profit organisations.
- Special bank accounts that comply with statutory requirements for those holding funds on behalf of clients.
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Prepare Your Required Information And Documents
The details and documentation youll need to open a business bank account can vary depending on what type of business you operate and what kind of account you seek. There are several documents and pieces of information business owners need to gather before opening a business bank account.
If you operate a limited liability company or corporation, some things you may be asked to provide in your application include:
- Your companys address, phone, email, and other contact information, as well as your industry and business type
- Your federal Employer Identification Number , which is a nine-digit number assigned to your company by the IRS. If you dont yet have an EIN, you can apply for one here. If you are a Square Banking customer, you do not need an EIN for a Square Checking account.
- A copy of your articles of incorporation
- A certified copy of your doing business as certificate.
- Your DBA is the name your business is referred to both legally and by consumers
- Proof of your business license if you operate a restaurant or other licensed business operation
- A copy of your ownership agreements i.e., your business partnership agreement or any other organization documents that detail company ownership
- Personal information such as your name, phone, address, Social Security number, birthdate, and ownership stake in the business
- Proof-of-identity documents such as your drivers license or passport.
Pros Of Keeping Business And Personal Finances Separate
Business accounts work in a very similar way to personal accounts you’ll be able to set up payments, have people pay you and make debit card transactions. Setting up a separate account has a lot of positives going for it, through there are a few downsides too.
If you’ve decided to go for it, read on. If you just want a personal account, read our Best Bank Accounts guide.
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Types Of Business Accounts To Open
There are a variety of different business bank accounts to choose from, depending which bank you go for. Most fall under the following categories:
- Startup business bank accounts. These are usually for new or small businesses, or for freelancers and sole traders. Some come with a fee-free period and business support tools, to help you get your venture off the ground.
- Business bank accounts for growing and established companies. These accounts are often categorised by turnover, with limits and charges based on the size of your business.
- Community and not-for-profit accounts. If you run a charity, social enterprise, club, school or other non-profit, most UK banks offer a dedicated everyday account with low or no fee banking.
Many banks also offer multi-currency accounts, for businesses wanting to trade overseas. And if youre worried about bad credit, you can find a number of digital/mobile banks that offer business bank accounts with no credit checks required.
How Can You Open An Hsbc Business Bank Account
To open a Start Up business account with HSBC, you can complete the application form online, call to talk to customer services, or visit a branch. If youre looking to open, or transfer an existing larger business account to HSBC you will need to talk to a relationship manager to get advice about the products available to you, and how to process your application.
In each case youll be asked to provide some documents to get your account up and running, including the following:
- Proof of identity – this can be a current passport or photo ID such as a driving license, or a national identity card
- Proof of your address – a current bank or building society statement, utility bill or council tax bill which shows your full name and registered address
- The address of your business, including contact details and Companies House registration number if relevant
- The turnover, or estimated turnover of your business, and the amount invested in it
- Information about yourself and any other director or partner in the business, such as your full names, and birth dates, contact details, and details of your existing HSBC bank accounts if youre already a customer. If youre opening a large business bank account, youll need to provide details of anyone owning 25% or more of the business
To get a specialist account such as a Client Currency Account, you will also need to provide further details such as your FCA registration and information about the type of work you do.
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Verify Everything Is Correct
Once you reach this step, your business bank account is set up! However, you need to make sure everything went through successfully.
If you opened a business checking account, make sure the names on the checks match your businesss legal name, not your doing business as name.
Make sure your deposits go through. Track the funds coming in and out of your account to make sure everything runs smoothly.
Use your business bank account in conjunction with accounting software to keep your finances in order. Patriots online accounting software gives you an easy way to track business transactions. And, we offer free, U.S.-based support. Get your free trial today!
This is not intended as legal advice for more information, please
Decide Which Accounts You Need
There are several types of business bank accounts and your company may need more than one. The most common are:
- Business checking account: Similar to a personal checking account, business checking accounts are designed for receiving payments and spending. This is where you keep your working capital. It’s possible to earn interest on these funds, but interest-bearing business checking accounts are rare.
- Business savings account: This is where you put money your company doesn’t intend to spend in the near future. Savings account funds earn interest over time, but they have more limitations on how you can access your funds.
- Merchant services account: A merchant services account is necessary if you plan to accept credit and debit card transactions.
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Giving Your Social Insurance Number When You Open A Bank Account
Financial institutions must ask for your Social Insurance Number if youre opening an account that will earn interest for tax purposes, such as an interest-bearing account or a Registered Retirement Savings Plan .
The financial institution must give your information to the Canada Revenue Agency. It must state the interest earned on the account each year for income tax purposes.
However, if the financial institution wants to use your SIN for anything else, it needs your written consent.
Make Sure Your Business Bank Account Leaves You Room To Grow
Some business bank accounts impose transaction limits and charge you extra fees for exceeding them. This can prove costly if you’re constantly bumping up against this limit. Review your business budget and anticipate how your company’s future growth could affect how much you pay in fees every month.
If you think your current business bank account could become restrictive, check to see if the bank has another account that would provide you with the additional free transactions or other services you need.
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Can I Open A Canada Business Account From Abroad
Some banks will require you to be present to open a business bank account in Canada. However, other banks will allow you to go through the whole process without visiting the country. Its important to note that in many cases there may be more account restrictions and up-front requirements if you dont visit Canada when opening the account.
It is always worth checking the citizenship, residency, and other requirements given by each bank and state before applying. Your application will also depend on the type of business you run.
Because many international banks operate in Canada, you may be able to simply open an account with one of these banks within your own country, and then transfer the account to Canada. Unfortunately, you may be charged greater fees for holding an international account, while you may also need a high minimum balance.
Do I Need To Open A Business Bank Account
If youâre wondering if you need a business bank account, youâre asking the right question.
Does your business make money, take in payments or have expenses? A business bank account allows you to keep these funds and transactions separated from your personal transactions, reducing the headaches when looking at your statements. Plus, there are some perks to opening a new bank account just for business transactions that go beyond simplifying your credit card and bank statements.
Purchase protectionYour customersâ information is secured through the bankâs purchase protection.
Line of creditYou may be offered a line of credit through your business bank account that will make it possible to let your personal credit card take a much-needed breather.
Business credit cardsYour business bank account may lead to a business credit card complete with points, rewards, and routine credit increases.
Clean banking recordsCome tax time, youâll quickly know exactly how much you spent and earned over the year. This information is also helpful when preparing your monthly financial statements as well, or any time, really.
Protection from liabilityIf you have an LLC or youâre figuring out how to incorporate your business, youâre legally required to have a business bank account to separate personal and business spending. But itâs also just good business practice. Keeping finances separated offers all business owners more protection, including sole proprietors.
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Do I Need An Ein To Open A Business Bank Account
It depends. There are two times when you may not need an EIN to open a business bank account:
If you are a sole proprietor
If you are an individual LLC
In both of those cases you are taxed as an individual, so you donât need a separate business identity as far as the governmentâor some banksâare concerned. Sole proprietors and individual LLCs are able to open a business bank account using only your social security number, but you may not want to.
Applying for an EIN is quick and easy. Itâs a free process. With an EIN from the federal government, you have a bit more protection if your one-person business works as a contractor or needs to fill out any tax forms. Using your EIN rather than your social security number avoids giving personal information in more online financial databases than may be necessary.
If you are not a sole proprietor or an individual LLC, you definitely need an EIN to open a business bank account. According to the U.S. Small Business Association, you also need an EIN to:
Our advice? Go ahead and get an EIN.
Doing Business Overseas And Need To Make International Business Payments Wise Could Save You Money Versus Your Bank
When you have to pay employees or suppliers overseas it might seem logical to do this with your bank. You already have an account there, they have all your information, so it just seems easier. Although these are valid reasons, easier certainly doesnt mean cheaper.
Most banks wont convert your money at the mid-market exchange rate when you make an international payment. Instead they add a mark-up and charge you a hidden fee that way. Wise is different. Its smart technology skips hefty international transfer fees by connecting local bank accounts all around the world. Which means you can save up to 8x by using Wise rather than your bank when you send your money abroad.
Wise also has a lot of additional features for business users. You can connect with Xero to make your life easier, upload a batch of payments in one go or even automate your payments by integrating with our API. And theres more to come in the future.
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