A bank account is essential for everyone, be it an individual or a business. Individuals can open a savings account or a checking account in a bank. If you are running a business, then you need to have an account in the name of the business. Even if yours is a one-man show, it is always good to separate the business from its owner. Every business needs to open a bank account in its name to receive payments, make payments, avail of overdraft facilities, and other banking services.
In some countries, the business bank account is referred to as a current account. When you are starting a business, one of the first things you need to do before commencing operations is to open a bank account for your business. The following is information that helps you to understand how to open a business bank account.
Decide the bank
You need to decide where you will open the account, i.e. from which bank. If you have a savings account in a bank and are happy with its services, you can open a business bank account in the same bank and branch. There are banks that are popular when it comes to business bank accounts and have a reputation of being business friendly.
Do some research to find out such banks. Find out about the services offered by the banks and charges levied. One of the key things to consider is the overdraft facility. Most businesses don’t keep too much cash on hand. A business may face a situation where they issue a check to someone but don’t have the funds to cover the amount at present. This is where a bank can be of help.
The bank provides an overdraft facility, whereby they honor your check and allow you to transact on your account even if you do not have sufficient cash. Since a business keeps making frequent transactions, the bank is assured that the money will come into the account sooner or later. For providing the overdraft, the bank charges interest. You need to find out how much they charge and how much of an overdraft is provided.
Apart from the regular banks, there are online banks, credit unions, co-operative banks, and other type of banks where you can open a bank account for your business. Explore the various options. Compare the pros and cons before deciding.
Get the documentation ready
To open a business bank account, you need certain documents to be submitted to the bank. They are:
- Your personal identification document (photo ID like passport, driving license, or any ID issued by the government).
- Registration certificate of your business (issued by the authority concerned). A license issued by a local authority is also acceptable.
- Tax registration document may also be required to open a bank account in the name of your business.
- Partnership agreement or the articles of incorporation need to be submitted to the bank so that they know who the people are starting the business.
- Proof of address may be required in some places.
Go ahead and open the account
Once you have all the documentation in place, submit it and open the account. Decide who will operate the account and who will sign checks and inform the bank formally. Receive your checkbook and account details and you are ready to operate your account.