As I continue to work through setting up my company and LLC, I am learning a ton of new things. I have decided to document my notes along the way and share my experience. The last time I talked about my company, I detailed the process of setting up an LLC and a few of the things I learned. Today I want to cover another step in this process – setting up a small business checking account.
While it may not seem like a big deal, setting up a checking account for your business that is separate from your personal account is critical to your success. Here are a few details that I have come across from my experience.
$500 Initial Deposit
One of the required steps of setting up an LLC is defining your initial deposit to begin financing the operations of your business. I made the decision to start with a $500 initial deposit. In order to make this deposit, I needed to setup a business checking account that was separate from my family’s personal finances.
It is critical that you keep your personal and business finances separate for several reasons. If you avoid separating your personal and business financial accounts you actually can run into several risks, including getting on the wrong side of the IRS. For tax reasons and proper organization, you need to separate these finances if you want to take your operation seriously.
Small Business Checking Account Requirements and Features
While it may seem like a simple step to open up a business checking account, there are actually several things you need to consider when choosing a bank. Here are a few of the features that I wanted in a checking account that were important to me. Many of these features probably don’t seem very glamorous, but they will ensure that my LLC can run properly while keeping my overall costs low.
- FDIC Insured – The single most important factor when opening up any kind of monetary account, whether it be personal or business. Always make sure any account you are considering opening is FDIC Insured.
- No Minimum Balance Requirements – As a small start up, I don’t want to be paying an extra fee if I don’t hold a minimum monthly balance. Cash will be a bit tight for a while and I need to make sure I keep what I already have!
- No Monthly Maintenance Fees – No matter what type of account, I never open any accounts that charge a monthly maintenance fee (for whatever reason).
- Free Checking Transactions – During the first several months, I don’t anticipate a lot of checking transactions (less than 20). Even though I don’t expect a lot of activity, I want to make sure my transactions are free.
- Free Online Bill Pay – Most business and personal checking accounts offer free online bill pay as it is cheaper for the bank. It is also cheaper and more convenient for me to conduct most of my transactions online, so this feature is a must.
There are also plenty of requirements that you may not be aware of when opening up a small business checking account. Here are a few tips that I recently found when I opened up my account.
- Federal Tax ID Number – While opening my account, I was required to provide my Federal Tax ID information.
- Proper Business Documentation – In my case, I formed a LLC which gave me an official Articles of Organization number in the state I am conducting business. This information was required by the bank in which I opened up my account with.
- Initial Deposit – Small business checking accounts may require a minimum initial deposit or balance. I setup my LLC to be funded with a $500 initial deposit which met the requirements of opening up my small business checking account.
Final Thoughts
There are many things a new business owner needs to concern themselves with. Setting up a checking or savings account should not have to be one of them. This does not mean to say that you should take this step lightly. As long as you plan properly and take your time researching the right checking account for your business, you will be in good shape.
Always remember that it is critical to separate out your personal finances from your business!
What tips can you provide others looking to setup banking accounts for their small business?
This post was originally published back in April, 2010 but still contains many tips on setting up a business checking account that still hold true today.
Related posts:
- 5 Reasons to Open a High Yield Savings Account
- 10 Reasons to Open a HubPages Account
- Starting a Home Business – Setting Up the LLC
- 5 Tips for Investing in a High Yield CD
- 4 Things to Consider When Setting Up Your Business
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{ 4 comments… read them below or add one }
All of this sounds like a lot of work, but really exciting as well. I can’t wait until the day I do the same…
P.S. Thanks for the guest post.
@Moon – Setting up a small business checking account involves a lot more steps than I would have ever thought. Not that it was too difficult, just not as easy as a personal account.
Your welcome on the guest post – it was my pleasure!
Sometimes this can be overlooked by the bank to..open a new account if they want your business….. Finally if you are looking for a business checking account and have..a EIN number you may want to try Bank Of America Please note that a few people have recently reported getting denied by Bank Of America .If you get denied by any of these banks or know of any non chexsystems banks please..email us at help consumerbadcreditguide.com so we can adjust our list accordingly.
Small business is really benefiting more than the big firms these days just the need is for the little awareness.