New business owners often wonder which action items to prioritize when launching a new venture. If you recently started, or are about to start a business, one of the most important steps you should take is to open a business bank account that is separate from your personal account. Opening a separate account will provide some key proof that you are operating your business separately from your personal matters, thereby laying the foundation for more effective liability management. A separate account will also assist you with financial tracking and tax preparation.
The following steps should be taken as you prepare to open a business account:
1. Research different types of business accounts. Banks provide a variety of options for the accounts they offer. The key features to keep in mind are monthly fees, interest earned, and minimum balance requirements. You should also examine the bank’s accessibility, convenience, and overall reputation. For example, if you are operating an e-commerce business and have little need for making deposits at a brick and mortar location, an online business account may suffice and afford you the opportunity to enjoy higher annual percentage yields than more traditional banking institutions. Thinking about your unique business objectives will enable you to identify the bank account features that best suit your needs.
2. Gather your formation documents. When opening a separate business account, banks will require you to provide your business’s formation documents to confirm the legal structure and name of the business. One of these documents may be an Assumed Name Certificate if you have not yet legally created a separate entity, or if you are operating the business under a trade name. If you have formed a limited liability company or a corporation, your formation documents may be your Certificate of Formation or Articles of Incorporation.
3. Provide proof of licenses. Depending on the nature of your business, a bank may also require you to provide evidence that you have obtained and maintained the specific licenses required to operate your business.
4. Obtain ownership agreements. Account ownership agreements, like corporate bylaws and company operating agreements, shed light on the roles each owner plays in the business. As it pertains to banking, these documents identify which individuals are authorized to sign checks, and take other actions with regard to the bank account. Review your ownership agreements to ensure that the company has clearly identified and empowered the right individuals. Further, make sure that the account ownership agreements are not in conflict with the provisions of the formation documents. Finally, have a process established for removing an individual’s authority.
5. Obtain an Employer Identification Number. An Employer Identification Number (EIN) is a federal Taxpayer Identification Number provided by the Internal Revenue Service for a business. An EIN identifies the business for banking and tax purposes and is required by a bank when opening a business bank account. Most banks will not allow you to open a business account without an EIN, unless the account is for a sole proprietorship.
We Are Here for You
If you are finding the steps associated with opening a new business overwhelming, we can help. At Sjoberg & Tebelius, P.A., we work with business owners to help them navigate the various complexities involved with starting and operating a business. Schedule a virtual meeting with attorney Mark Tebelius today – 651-738-3433; [email protected].