How Do I Open a Deposit Account for My Business?
If you’re thinking about opening a business, one of the most crucial steps is finding and opening a business deposit account that’s right for you. Having a strong financial foundation can help you manage funds correctly and keep operations running smoothly.
What is a Business Deposit Account?
A business deposit account is a broad term that can refer to any bank account used for business purposes. Different types of accounts include:
- Checking is for daily transactions and easy access to funds.
- Savings are for accumulating surplus funds and can have higher interest rates.
- Money Markets have higher rates but allow for limited check-writing. Good for some liquidity while earning interest in idle funds.
- Certificates of Deposit (CDs) have high interest rates but cannot be accessed until the term is finished and penalizes early withdrawals.
Business owners use them to handle financial transactions like paying vendors, running payroll, and managing day-to-day finances.
What is the Purpose of a Deposit Account for a Business?
Business deposit accounts exist to help you run your business from the financial side. They’re dedicated to helping you manage your business finances like bookkeeping and tax reporting and keeping everything separate from your personal finances. Any maintenance fees or charges related to the account can be considered business expenses and claimed on your tax return.
It’s important to keep personal and business accounts separate because business accounts enjoy certain legal protections not granted to personal accounts. A business account will also offer financial protection from business debt liability.
Depending on the financial institution, business accounts come with a suite of tools and services to help you operationally. These can range from credit card processing to treasury management services.
There’s also a mark of professionalism when you work with other vendors and businesses, and they see you with a business account.
What Do I Need to Open a Business Deposit Account
Before you open a business account, have a few pieces of information ready:
- Identification: a valid, government-issued photo ID (driver’s license, passport). This is necessary to help prevent fraudulent activity.
- Social Security number (SSN): if you’re the sole proprietor, or you can use an employer identification number (EIN).
- Articles of incorporation of a business license: business documentation that identifies the business structure or name.
- Business information: the business address, phone number, and nature of the business.
- Account owner information: people who will be listed as account owners.
In addition to the above information, you’ll also want to plan to have a minimum deposit amount outlined by whatever financial institution you choose to go with to avoid getting penalized with a fee.
How to Choose the Best Business Deposit Account
Since the primary goal of the account will be handling business financial activity, get a good idea of the number of monthly transactions you expect to have, along with cash handling requirements.
When it comes to choosing a financial institution, review the services offered with the business account and see which ones you can take advantage of. These can include:
- Online and mobile banking features
- Integrations with account software
- Branch & ATM accessibility
It’s also worth seeing what level of customer support they offer and what their online reputation is according to other business owners.
Also, be aware of any fees or charges. A lot of institutions will have a minimum account balance requirement, and some business deposit accounts have monthly transaction limits.
As with any account, look at the interest rates available to help you earn more.
Additional Financial Services for Businesses
In addition to having an account, you’ll want the means to access those funds depending on what you need them for.
For short-term expenses, many institutions offer business credit cards that can include a rewards or cashback option to help offset costs.
For larger purchases, like equipment purchases or business expansion, look at lines of credit or business loans. Be sure to review the interest rates and repayment terms to make sure you can take on the debt.
Some financial institutions offer treasury management services, which can help with ACH payments & collections, wire transfers, remote deposit capture, online bill pay, and more. These can help manage liquidity, investment, and risk effectively.
Opening A Business Deposit Account
If opening a business deposit account feels overwhelming, or if you still have questions about what’s your best course of action, talk to us at Community First Credit Union. We have an entire team dedicated to helping business owners make financial decisions to keep their operations running smoothly. Contact our team or open an account today.
