Do I Need a Business Bank Account for my Business?

The business bank account is an essential part of any new business. You can run business transactions with your personal account, but when your business grows, you will need to keep track of all the business transactions. For that, you will know the right time to open a bank account for business. It will solely record your business transactions. It will happen when your business transactions exceed the number of personal transactions.

A separate business bank account will help you manage your business transactions. You can write checks for expenses and can collect receipts. All this information will be recorded in the summary statement of your business bank account. Setting up a business bank account can help you track your business activities on a daily basis.

How to open a bank account for business?

A business account works just like a current account but with additional features. These features are different for different banks. The features help you provide easy services to make your business transactions run smoothly. The steps to open a business bank account are as follows:

1. Choose a Bank

The first step for setting up a business bank account is selecting the bank. You need a bank that will meet your business requirements or provide you with everything your business might require. You need to identify the best bank for your needs. Are you looking for some specific features like deposit reconciliation or cash management, or are you looking for a bank that provides you with a line of credit? You need to weigh all your options and select a bank that will give you some additional deals if you have a business bank account with them.

If you open a business bank account with the same bank as your personal account, then you might have special offers and deals that can help you in your business. If both of your business and personal accounts are in the same bank account, it will help you manage both accounts smoothly. You don't have to go to another bank for one bank account and a different bank for your personal account. It will simplify your responsibilities towards your bank accounts. Make sure that you analyse all your options, weigh the pros and cons, and then make your final decision. Selecting the right bank account is essential.

2. Prepare Documents

The next step is documentation. Every bank requires a set of standard documents that you need to submit for your business bank account. Every business owner must have an Identification number, like an Employer Identification Number or Social Security number. If you are an owner of a partnership firm, you must have an Employer Identification Number (EIN). Additional cash flow statements are also required to open a business bank account.

The documents are different for different business structures. Some of the documents required are as follows:

• Documentations for Sole Proprietorship
• Social Security Number or EIN
• Business license
• Documentations for Partnership firm
• Employer Identification Number (EIN)
• Business name filing document
• Partnership agreement
• Documentations for LLCs
• Articles of Organisation
• Social Security Number or EIN
• Documentations for Corporations
• Employer Identification Number (EIN)
• Articles of Incorporation

3. Open an account

You will have two options to open a business bank account. Either you can open a business bank account online or in-person from the branch of the bank. Some industries are required to open a business account in-person, such as telemarketing companies, gambling businesses, precious metals, or government businesses. The business owners of these industries cannot open a business bank account online.

For all the remaining businesses, opening a business account depends on the owner’s preference and needs. If you wish to open an account online, you can do so. If you prefer to go to the bank and open a business bank account, you can do that as well. If you want specific information for some specific points for your business or have any questions related to specifications, then it would be better to open a business bank account in person.

4. Verify

The last step is to verify. After you set up your business bank account, you need to check that everything is right and successful. Check all the additional specifications that you wanted in your business account. You can also make deposits and check if funds are coming in and out and everything is running smoothly. Verification is essential for a business owner to do. If you face any problem, you can cross-check with your bank, and they will make the necessary changes as per your requests.

Thus, to conclude, we can say that having a business bank account is essential. Every business owner should have a different business bank account for their day-to-day transactions. It might be hard to do all your business transactions through your personal account, and keeping track of data might get messy and bulky. The steps for setting up a business bank account are mentioned above in detail. Make sure you check the details and then open a business bank account as per your preferences.

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FAQs

Q. How much money is needed to open a business bank account?

Ans. The minimum amount in a business bank account is different for different banks and depends on the size of your business. For a small business, you can open a business bank account for INR 5,000. However, a quarterly account bank balance should be INR 1,00,000. It is the minimum average amount set by most banks. So, make sure to have the minimum balance in the bank account.

Q. Do I need to have an EIN (Employer Identification Number)?

Ans. Employer Identification Number is not required if you have an LLC or sole proprietorship business because you will be classified under the individual business owner category in the eyes of the IRS. You only need to have an SSN (Social Security Number) for your business. However, if you have a partnership firm, HUF (Hindu Undivided Family), a Corporation, etc. then, you must have an Employer Identification Number (EIN).

Q. How long does it take to open a business bank account?

Ans. Opening a business bank account might take up to two months as it is challenging to open up an account and require several verifications. To obtain a bank account approval, account number and verification might take on an average of two months. In some cases, it may take longer if you need to revisit the bank for more documentation proofs or if your documentation is not proper, etc. If all your documents are up to date, then you might get access to your business bank account sooner.