Did you know opening bank account isn’t just meant to assist in legitimizing your new operation? The process is also crucial as you will need the account when filing your business tax returns. Click here if interested in learning more about why you need to open one.
Having a separate bank account for freelancer is crucial to enable you to separate your finances from your business ones. Operating different accounts also makes it easier for you to keep track of what you will need to record as expenses and income.
By opening a business account, you also get to convey your financial position to potential investors, manage employee pay, deposit and receive payments, and budget more accurately. So, how do you go about completing the process of opening one?
Steps to Follow When Opening a Business Account
1. Select the Preferred kind of Small Business Account
Many entrepreneurs begin by opening a checking account for their businesses. Here, an entrepreneur must decide between two types of accounts:
• Online Checking Account: Works well for many investments that don’t need to make cash deposits
• Accounts with Traditional Banks: This kind of account attracts numerous fees but favored for its ability to offer a broad range of services and products.
A business owner may also deem it necessary to open and operate a business savings account. Such an account will allow the investor to start earning interest on money sitting in the account awaiting deployment.
Where possible, it’s considered best to have both a checking and a business savings account. This way, you get to separate the savings fund from the working capital.
2. Locate the Ideal Banking Institution
The second step when opening business bank accounts is to decide on the bank that will best suit your business’ banking needs. Any institution selected will greatly influence factors such as:
• Overall fees and costs
• Customer service
• Number of available banking locations
• Online banking experience
• Total number of available financial products
An excellent starting place is a bank you have already banked with in the past or one you have an ongoing banking relationship with.
3. Consider the Costs of the Business Bank Account
Even though you will come across various free banking account options, you have to understand each bank will normally charge transaction fees. In some cases, the bank may waive the transaction fees if the transaction meets certain criteria, e.g., keeping in line with the transaction limits, using bill pay, or maintaining the set minimum balance.
The banking facility will normally assess the bank account fees on CDs, business savings accounts, and business checking accounts.
Note that having a free business checking account isn’t to imply the institution will not assess any fees. For instance, your banking institution may still charge the business overdraft fees, wire transfer fees, and transaction fees. Meeting the monthly minimum deposit requirements may qualify you to receive a waiver on the monthly account fees.
4. Collect All the Documents Required to Open Bank Account for Freelancer
Whenever you need to open a banking institution for your business, the bank will ask you for various documents. The purpose of these documents is to assist in verifying the nature and name of your venture. This includes providing documentation to prove the company is registered with the tax authorities.
Documentation is also needed to show that the individual opening the account is legally authorized to do so. The type of documents required by the banks will vary depending on your existing corporate structure.
5. Open an Account in Person or Online
The entrepreneur has an option to either open the account online or to visit a branch location and apply in person. Some banks may provide both options. In the case of online accounts, this option is only made available as the institution doesn’t have an extensive network of physical locations.
Whether applying in person or online, you still need to have with you all the required documents. You can either show them to branch officials or submit them via the website.
Online account opening may translate to better approval times, as you don’t have to physically queue at the branch location. On the other hand, some entrepreneurs may choose to do it in person to enable them to receive one-on-one customer service. For online accounts, the person opening the account is typically provided with a live chat feature or a customer service number.
6. Deposit Funds into the Business Account
The last step in opening a business account is to deposit funds into the new account. You can deposit by:
• Completing an electronic funds transfer from one bank to another
• Writing a check to the newly established business account from your account
The account automatically becomes ready for use when the deposit is made.
If you run a business that receives and accepts many checks, the bank may offer you a service where you can deposit all of them without ever having to leave your office. The service is formally known as remote deposit capture or remote deposit. It’s, therefore, recommended you make inquiries from the customer service personnel on its availability.
Doing so will make it easier for you to deposit many checks at once with ease.
Tips for Opening Small Business Bank Account
Even though it’s necessary to have an active business account, you will need to keep a few things in mind before deciding on how many to open and the type to open. Essential tips to consider include checking into fee-free accounts, starting with the checking account, and opening an account because it offers better functionality compared to the personal one.
When opening the account, you may also find it necessary to open a credit card for it. The bank account is beneficial to the entrepreneur and will assist him/her to better control of the company finances. Using the in-built functions, e.g., remote deposit capture will also greatly simplify the banking process for your business venture. It also provides you with added flexibility.