Whether you’re a new entrepreneur or seasoned business owner, opening a business bank account is an important step in your business’s money management strategy.
What are the benefits to opening a business bank account?
- Better financial record keeping
- Easier to calculate and pay taxes
- Improved business expense tracking
If you own a limited liability company, or LLC, there are some added benefits and important considerations to opening a business bank account.
Do sole proprietors, LLCs, and s-corps need a business bank account?
The short answer— yes, sole proprietors, LLCs and s-corps should open a business bank account. Laws, regulations and financial reporting requirements for each of these types of business entities vary, but here’s some general information as to why each type needs (or at least should) open a business bank account.
- Sole proprietor: Opening a business bank account can help you easily track your business expenses versus your personal spending, making tax time much easier.
- LLC: One of the most important reasons a LLC should open a business bank account is because it ensures you maintain personal liability protection. Personal liability protection means your personal money would be protected if something in your business’s finances went array, like if your business declared bankruptcy or you were sued. If you comingle your business and personal funds in one account, you could be jeopardizing this protection and your personal money may be seizable.
- S-corps: If your business is a legal separate entity, then it needs it’s own business bank account.
4 steps to open a business bank account
- Decide what type of business bank account you want: business checking, savings or both
Just like credit cards or other money management products, business bank accounts come in a variety of shapes and sizes.
If you’re going to be using the account to deposit and spend money, then a business checking account — like WaFd Bank’s simple business checking — is probably right for you. Business checking accounts allow you to deposit and write checks, process payroll and more.
Alternatively, if the account will primarily be used to save money for a rainy day, then a business savings account may be a better fit. With WaFd Bank’s business money market account or business savings — you’d be earning interest on the funds within your account.
- Pick your bank
Depending on which type of business bank account you decide to open, you’ll want to shop around at different banks to determine which one has the features and rates that are right for you.
Here are some things you may want to consider when choosing the bank for your business bank account.
Location: While more banking tasks — depositing checks, processing payroll, etc. — is done remotely now, some businesses may need their bank to have a local, nearby branch. At WaFd Bank, we’ve got over 230 convenient locations in eight states.
Money/treasury management tools: Check to make sure the bank you’re considering opening a business bank account with has the tools you need to manage your money. These might include:
- Merchant services (accepting credit card payments from your customers)
- scanDeposit (scanning checks remotely to deposit into your account)
- ACH processing
- eWire (sending wire payments from your online banking)
To learn how these tools could make balancing your business’s books easier, contact your local WaFd Bank business banker.
- Gather required documents to open a business bank account
What do you need to open a business bank account? The requirements to open a business bank account will vary depending on which bank or credit union you choose, but in general you’ll probably need the following documents to open a business account (as applicable):
- Social Security number
- Employer identification number
- Business license
- Business name
- Organization documents (e.g. articles of incorporation)
If you’re applying for credit or the treasury management tools listed in step 2, then you may need to provide additional documentation.
- Stop by your local branch for in-person expertise and support
After you open your business bank account, connect with your bank’s local team to ensure your account(s) are set up in a way that makes managing your money easier and helps keep your funds and information safe.
You’ll want to think about who should have access or insight into the accounts’ funds. For example, does your accountant or bookkeeper need to be able to deposit to or write checks from the account? Who should have access to your business online banking profile; should some people have read-only privileges? Can your accounting staff send wires; if so, should there be a dollar limit?
Have questions? We’re here to help! Simply ask Walt or call our Customer Care team at 1-800-324-9375.
Opening a business bank account doesn’t need to be time consuming or confusing, here are some basic steps to get it done.