Five things to know before opening a business checking account

You read the title of this article and you think to yourself: Do I really need to open a business checking account? The answer is you do. Here are just some of the reasons it’s so critical to open a business checking account:

  • Accurate and clean bookkeeping: Separating your business account from your personal account makes it much easier to write off business expenses and sort through your business transactions at tax time.
  • Business vs. hobby: Without a business checking account, the IRS might decide that your business is a hobby, rather than a real business. Having a separate banking account can make a big difference.
  • Looking like a business professional: Having a business checking account adds professionalism and credibility to your business.
  • Credit card payments: Having a business checking account enables you to accept credit card payments from clients and customers. 
  • Liability protection: If you are an LLC, having a business account is the only way to protect you from personal liability in case something goes wrong at your business.

 

Let’s look at the five things you need to know before opening a business checking account. 

Select the right bank for your small business needs

Choose a financial institution that will best meet your small business needs today and as you grow in the future. Look for these business banking features:

  • A free business checking account
  • No or low monthly fees, including monthly maintenance fees, transaction fees and ATM fees
  • No transaction limit
  • A high interest rate
  • No minimum deposit or minimum balance requirement
  • Quick access to cash 
  • Overdraft protection
  • Direct deposits
  • Online banking
  • Mobile banking

Choosing the wrong bank can have serious ramifications for your company down the road. For example, if you choose a well-established bank, you might have difficulties getting a business loan, because larger banks tend to be less flexible when it comes to the applications they approve. 

How much money do you need to open a business checking account? 

Most banks require you to deposit a small amount of money into your account when you open it. Some that don’t require an upfront deposit will make up for this by charging you random monthly fees or requiring a minimum daily balance of say $1,500. 

When you bank with Kabbage, you aren’t required to make an upfront deposit; you aren’t charged random monthly fees; and you aren’t required to maintain a minimum balance.

Information you need prior to opening a checking account 

To open a business account, you will need the following documents. Please note that the exact documents you need have to do with what type of business you have. Make sure you have everything you need readily available.

Sole Proprietor Partnership LLC
  • Social security number
  • Personal identification (driver’s license or passport)
  • Business license with the name of the business and the business owner’s name(s)
  • Certificate of assumed name/DBA
  • Monthly credit card revenue (for merchant accounts)
  • Employer identification number (EIN)
  • Personal identification
  • Business license
  • Certificate of assumed name/DBA
  • Partnership agreement with the name of the business and its partners
  • Organizing document filed with the state 
  • Monthly credit card revenue (for merchant services and accounts)
  EIN

  • Personal identification
  • Business license
  • Certificate of assumed name/DBA
  • LLC operating agreement with the name of the business and its partners
  • Articles of organization
  • Monthly credit card revenue (for merchant services and accounts)

Know the monthly fees associated with the business checking account 

Many financial institutions will offer fee waivers for customers who are able to keep a minimum daily balance. Unfortunately, many new business owners fail to give this factor much consideration when they open a new business bank account. They end up getting charged monthly expenses that they hadn’t budgeted for. 

Before you choose a bank account for your company, it’s important to look at the minimum balances (daily and monthly) and determine whether this is something you will be able to meet.

Once again, when you bank with Kabbage, you don’t need to worry about monthly fees.

Know what services you need to run your business efficiently 

Before making your final decision, take a moment to think about what services are critical for you to have to run your business efficiently. If your business doesn’t need to accept cash, online banking could be a nice convenience for you. If you prefer in-person service, a local credit union could be your best option. Easy access to money is always a convenience, as is an easy-access debit card and mobile banking.

Learn more about how Kabbage Checking can support your small business.

 

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