A business bank account is necessary for any person running any business. Whether you are a freelancer, an independent contractor, or an upcoming business person, you need a business account. This is because business accounts offer features that are key to financial management.
The US Small Business Administration encourages opening a business account as soon as you start undertaking business expenses. You want to separate your expenses and incomes from business ones completely. Separating your personal finance from your business finance can help prove that your business is a separate entity in the case of a limited liability company (LLC) or a corporation.
In addition, it is also essential when it comes to the calculation of your taxes. When filing taxes for the business, you must have clear documentation of your income and expenses. Otherwise, you may find yourself having problems with the IRS and even paying higher taxes.
Before we look at the requirements for opening a business account, let’s look at the types of business accounts you may open. Generally, there are five types of business accounts. These accounts offer diverse features; business owners should only open an account that matches their needs. The main business accounts include
You have to decide which of these accounts you want to open depending on your current business needs and their future potential.
You will need similar documents to open all the above account types. Like the case with a personal account, you will be required to provide proof of identity documents for yourself and tax compliance documents for the business. The requirements are as follows:
All business owners must be involved in the opening of the account. Although sometimes it may not be necessary for all owners to be present when opening the account, their personal details will be required. These include the legal names, government-issued ID, or a driver’s license. A valid passport, working permit, and/or visa might be required for foreigners.
The other documentation necessary for opening an account includes the various types of licenses. You will be required to show all the necessary licenses and permits or the type of business you are running in your state.
The Employer Identification Number (EIN) is one of the key and most vital details needed when opening a business account. The EIN is used when more than one person owns the business in question. In the case of a sole proprietorship, you may use the SSN in place of the EIN.
Depending on the model and type of business you are running, you may be required to provide more information. Different banks may also have other requirements above the general requirements highlighted here. Apart from personal information, licenses, and the SSN or EIN, you may also want to prepare the following documents:
Though opening a business bank account is not expensive, you can further save by opening an account through some business formation services. Some banks such as Bank of America often partner with company formation services such as LegalZoom and competitors to offer you bonuses that can save you a lot of money.
The bottom line is that a business account is good for everyone running a business. It does not matter the size of the business or its mode. A bank account is an important tool that helps ensure prudent financial management. Business accounts also help business owners avoid heavy taxes that may come as a result of mixing personal finances with a business one.
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.
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