If you’re like most entrepreneurs, when you get excited about your business idea, the first thing you want to do is attack it like the plague. You’re so certain you can achieve monumental goals, whether it be making huge bucks, impacting lots of lives, or simply improving your standard of living. Unfortunately, many people who jump on their excitement out of order end up with finance disasters, or even worse, legal issues or trouble with the IRS. In this article, we’ll talk about avoiding major finance and legal issues by learning how to open a business bank account online or in person.
- 1 My Story
- 2 The First Step: Make Sure You Have Your EIN Number, DBA or Articles of Incorporation Completed
- 3 Determine Your Account Needs
- 4 Check the Business Banking Costs and Fees
- 5 Choose Your Bank
- 6 Find out The Bank’s Requirements
- 7 Test Drive Their Customer Service
- 8 Choosing a Credit Union vs. A Bank
- 9 Check Their Account Opening Options
- 10 If You Fall Within These Industries, You May Be Required to Go To A Branch
- 11 Final Words on How To Open A Business Bank Account Online or In Person
- 12 Now, it’s Your Turn…
I can remember when my “magical” business idea struck. I was in the military. I had just determined that I didn’t want to be an employee forever.
I started paying attention to my talents, the things I enjoy doing, and ways I could help others, then my “magical” idea struck! I decided I wanted to start an online business! I was so excited, I wanted to rush right into it. I didn’t think about legal or finance things first. I wasn’t thinking about how to start a business bank account. My first thoughts were how I can impact others, and how my standard of living could change.
Eventually, I did like you’re doing, and started to do research. Unfortunately, the information was not as compiled as I plan to make it for you. I went to bank after bank with the wrong information, or finding out they charge ridiculous or erroneous fees. My research on how to start a business bank account was intercepted by tons of ads pitching for me to create a business account with this bank or that bank.
Unfortunately, opening a business bank account with any bank isn’t a good decision. It doesn’t have to take days, weeks, or months of bumping your head to figure out how to open a business account either, which is why I’m at my computer creating this post for you.
I want to help you make the best decision for the future of your business because that’s what How To Entrepreneur is all about…I’m here to tell you everything I know about business so you can achieve massive success. Making a good decision about what business bank account to choose is a small fragment of how I would like to help you, but let’s get started here…
The First Step: Make Sure You Have Your EIN Number, DBA or Articles of Incorporation Completed
Once you get to the bank, they will ask you for certain information. They may run a minor background check that shouldn’t take long and shouldn’t be invasive. Before they do anything (even sit you at a representative’s desk), they usually ask for your EIN number, DBA or Articles of Incorporation. You may be able to get around the DBA and Articles of Incorporation if you plan to operate as a Sole Proprietor under your own name, but if you want to operate under a fictitious name (or “Doing Business As” name), you have to get your DBA certificate. To get your DBA filed for you online, you can go HERE (or click the banner below), or it’s cheaper when you go directly to your local courthouse.
**Side Note: If you haven’t incorporated yet, and you need a hand, you can check out my article here to see your three options: DIY, hybrid, and Concierge. Check my article for complete DIY instructions, visit Rocket Lawyer if you want more of a hybrid DIY experience. Alternatively, if you want professionals to take care of the process completely (concierge service) for you, we recommend you check out the done-for-you service at incorporate.com here.**
Determine Your Account Needs
Once you have steady transactions coming thru, it can get confusing to keep track of everything in one account. I don’t want you to worry about opening multiple accounts too early if your transaction load is small, but you know better than I do how you will be spending money in your business, and whether the amount of transactions will get confusing for you.
Many businesses open multiple accounts to simplify their accounting processes. They may have an account for payroll, an account for materials and equipment, an account for taxes and so on. I’d say if you have less than 100 transactions per month, it may be easy for you to manage, but that’s subjective. You’ll have to decide.
You can start with one account, begin tracking your expenses with a software like Freshbooks or Quickbooks, and go from there. If you decide you are too confused with one account, consider opening others. You can also always consult an accountant for their advice on these things too.
Check the Business Banking Costs and Fees
Shop around to make sure you’re getting the best value for the service. I want you to stay in business until you want to quit; not to be wiped out by excessive expenses. It would be horrible if your business checking account is a contributing stressor as you run your business, and unfortunately, most startup businesses are trying to keep thier expenses as low as possible while maintaining quality. If you can avoid recurring business checking account expenses (especially in the beginning), I would recommend that.
Here’s a list of free business bank accounts by state, Hopefully this helps.
In addition to recurring account maintenance fees, check their overdraft fees and others they may have. See if they have overdraft protections options or ways you can prevent the accrual of unplanned expenses.
Choose Your Bank
Choosing the closest bank to you may not always be the best decision. Some banks offer more benefits than others. For example, at the credit union I bank with, they charge once your transaction volume reaches a certain point, but they don’t count certain transactions like payroll processing as a part of your transaction volume IF you use certain payroll processors. There are little “fine print” rules at each bank, but if you pay attention to them, you could be at an advantage in the long run.
These steps of building your business right the first time can save you lots of heartache in the future. As your business grows, you’ll find that you won’t want to come back to the drawing board to redo arrangements like this.
Choose a bank based off of the benefits they offer you. Here are some examples of benefits you may be able to find:
- Small business seminars
- Discounts on Small Business Services (payroll processing, taxes, consultations, etc.)
- Waived transaction fees
- Rewards programs
- Good customer service
- Low wait times
- Good driving distance
- Global use
- E-Payment integration Support
- Various payment options for your customers
- Visa, Mastercard, or American Express (be careful to check they have your preferred processor)
- And, the list can go on…
Find the bank that serves you best!
Find out The Bank’s Requirements
Some banks will require different paperwork, forms of ID, bylaws, or various things. If you think you have selected a bank, give them a call or try another way to contact them, so you don’t waste your time traveling or playing around with their online registration to find out that you don’t have sufficient information. Sometimes, you can’t avoid these time-waster hiccups, but do your best.
Test Drive Their Customer Service
I’ve opened bank accounts with various types of banks and later decided the customer service was unbearable. Some banks have you waiting 1 hour or more to open an account! See if they have appointment options or some way that can make you have a customized experience.
Don’t fall for the lie that “this is how it is”. You can find places that will treat you well if you look for them. I can’t tell you how frustrating or annoying it can be to wait one hour or more everytime you need to make a deposit or withdrawal.
You need to grow your business! You don’t have time for that!
Choosing a Credit Union vs. A Bank
The last thing you want is to grow a big business and have a difficult time getting things done related to your finances. The bank you choose really can make handling your business finances easy or difficult. You may find that opening an account at a credit union and a commercial bank might suit you well, but let’s examine the differences.
Credit unions tend to be smaller with a more relational feel. At some credit unions, you can expect to be greeted by name or treated very friendly. The small, cozy feel of a credit union usually won’t be duplicated by a big commercial bank.
Credit unions are “owned” by the members, therefore treating the customers right and increasing the benefits (including interest rates) for the members is usually their utmost priority. They may have very nice features for small businesses because they tend to be small businesses themselves. They benefit from offering seminars, consultation, and other benefits to help their members because the more money you make, the more they manage. Think of a credit union like a professional association that’s there to help you coodinate your money affairs.
Alternatively, commercial banks are usually owned by shareholders. They are designed to give the highest return and best treatment to their owners (the shareholders). They make decisions like interest rates, # of employees, rules, and regulations in favor of gaining profit for their shareholders. At commercial banks, you can feel much like a number, but they also have their advantages.
The advantages of opening an account at a commercial bank instead of a credit union are:
- You usually won’t have trouble finding or using an ATM to access funds
- You can find branches in multiple locations (many are nationwide or even international)
- You may have extra perks like ATM deposit features, 24/7 phone support, and other things small credit unions typically can’t maintain
Check Their Account Opening Options
Some banks will have options to open an account online, by phone, or otherwise. If you prefer to open an account online, you may sacrifice some benefits by choosing a bank that offers that option (or you may not). Make sure you don’t jump into the most convenient option for opening the account without weighing it against whether the bank is the best overall option for handling your business finances. Letting someone manage your business finances is a big deal! Choose carefully.
If You Fall Within These Industries, You May Be Required to Go To A Branch
According to the Small Business Administration, Companies who provide money services (including check cashing, issuing money orders, issuing store value cards, exchanging currency, or wiring funds in exchange for a fee) cannot open an account online. In these cases, you’ll need to go to the branch personally to open an account.
There’s also industries that are limited to opening an account in person. Those industries include:
- Precious metal dealers
- Government entities
Be mindful if you’re in any of these industries that opening an account online may not be an option.
Final Words on How To Open A Business Bank Account Online or In Person
Hopefully, the information presented here helps you make a good choice about which business bank account to open, and let’s you start “getting the money rolling in!”. I hope to save you loads of time, so you will be able to “hit the ground running” and start bringing to the world that give only you have.
If you have questions or concerns, leave your comments below, I’d be glad to help. If you’d like to consult with someone about starting your business, creating a business strategy, or creating a business plan, we’d love to help. Visit the How To Entrepreneur Consulting page HERE. If you’d like to meet and join a community of entrepreneurs who are making things happen online, create a FREE account with Wealthy Affiliate HERE. I’m there all the time and I’d love to help you scale your business online.
Now, it’s Your Turn…
Have you opened a business checking account? Was it a good experience or bad? Was it easy or hard? Were there any details I may have left out? Leave your comments below. I’d love to hear your thoughts.