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Why You Should Open Up a Separate Bank Account for Your Business?

by Shonda Valenzuela (2020-04-13)

Personal Loans in Tennessee | LendEDUWhen starting up a business, one of the first things to do would be to set up a business bank account. Using a separate banking account for your organization is advisable for several reasons, and setting up an account is generally fast and simple if you take some time to gather all of the required documents prior to going into the bank to set up the account.

Opening Up a Bank Account: One part of having a business brand would be to keep your company finances independent from your personal funds. The Internal Revenue Service, better known as the IRS, actually requires this.

The best way to separate finances would be to open a business bank account. Although free business checking is not as common for business like it is with personal accounts, many banks now provide this service.

Bank Accounts vs. Credit Union Accounts: Most credit unions also offer business accounts to owners, usually at reduced rates compared to commercial banks. In certain states, it's not necessary to be a member of any particular organization in order to sign up. You simply just have to be a citizen of the state the credit union is located in.

Business Banking Charges: While you are researching the different banking institutions in your area, make sure you include the price of checks and stamps as well. A few banks offer reduced or even no fees in the beginning, just to charge you with an absurd fee for your starting set of checks.

Documents Needed to Open a Business Bank Account Based on Business Structure: The documents required to create the account is determined by how your company is structured.

Sole Proprietorship: For a sole proprietorship, you may not need any more than a social security card or taxpayer identification number, generally referred to as a TIN. On the other hand, if your business calls for a government-granted permit, or you have filed a business name document since your business runs under a name distinctive from your own name, you will need the permit showing your name and the business name.

General Partnership: For a partnership, you are going to need a permit displaying the owners' names, partnership's TIN, and a copy of your partnership contract with you and your partners' names signed.

LLC: If you operate under a limited liability company, or LLC, you will need your company's Articles of Organization and TIN. In the event that the Articles of Organization do not offer enough information concerning who is certified to sign on the account of the LLC, you may even need an extra LLC document that will provide this.

Corporation: For any corporation, you are going to have to have the Articles of Incorporation and your company's TIN. Like with the LLC, if the Articles of Incorporation don't provide enough information about who is certified to sign up the corporation for a bank account, you might also need extra corporate records authorizing your status.

Essentially, you will want to bring the basic paperwork that verify the name and aspects of your company, confirmed that it is authorized by the IRS, and that you have the power to set up a bank account for the business.

In the years ahead, it is vital that you deal with your business bank account sensibly.

One particular benefit of regularly maintaining a sufficient balance in your bank account, always writing proper checks, and staying with the exact same bank as time passes is that you will raise your chances of getting a business loan from your bank if necessary in the future.

Be sure to check with the bank you are planning to open an account with regarding what you need before going there; this can save some time.