Four Points to Keep in Mind When Opening Your First Business Bank Account

Opening your first business bank account can quickly become an overcomplicated and daunting task, especially if you have no idea what you are doing. Many people decide to simply use their personal accounts for business purposes, because it seems like the easiest approach to take. However, all businesses should have their own bank accounts.

In addition to the legal reasons why it is imperative to keep your personal and business funds completely separate, according to the Houston Chronicle, there are also tax ramifications that need to be considered. In order to make the process much easier for you to handle, here are six points to keep in mind.

Do Not Automatically Choose Your Personal Bank

When searching for the most convenient approach to take to open a business account, the first idea that might pop in your head is to use the same bank that you already use for your personal finances. That is a seemingly natural response that the average consumer might have when it comes to anything dealing with finances – such as automobile loans, mortgage loans, retirement funds, etc.

However, when it comes to your business account, you need to fight against that natural inclination. Take the time to shop around first and explore other business banking options before settling with your current bank. A different bank could very well be willing to offer you reduced fees, personalized customer service and a better quality experience overall. Take a look at these legal case studies before you decide!

Work on Building a Relationship with the Bank

One of the biggest benefits of having an official bank account for your business is the fact that you can build a successful working relationship over time with that financial institution. The advantages of this relationship go far beyond the ability to communicate with all of the employees on a first-name basis.

According to Nerd Wallet, your banker should be a part of your advisement team right along with your accountant and attorney. Leaning on your banking institution for their expertise, especially when it comes to your small business bookkeeping needs, can save you a lot of time and unnecessary stress. This is especially the case when it comes to learning how to further understand the financial side of your business and how it works successfully.

Sticking with your personal account or even using a different type of financial management might seem efficient, but you will not be able to build the same type of relationship.

Read the Fine Print Carefully

When establishing any type of financial account, whether it’s personal or professional, you should never hesitate to read the fine print. Making sure that you read the fine print of any document that you are asked to sign or even an offer that you are advised to consider, you can protect your own interests as well as the best interests of your company.

Just because a promotion might seem to be a great deal does not mean that it is – especially when the long-term management and stability of your company’s finances are at risk. One of the biggest traps that many people seem to fall into very easily is that of “free” checking. When opening a bank account for your business, that concept might seem to be one of the most attractive deals to you.

However, you need to look closely at the fine print in order to see if there are any strings attached. In most cases, according to Nerd Wallet, you will have to pay some sort of recurring fees for your business banking services. In order to keep the account “free,” most banks require a minimum balance to remain inside of the account or even a certain amount of money saved in the account via direct deposit.

By studying the fine print carefully before committing to anything, you will be able to quickly see where all of the “strings” attached to those so-called promotions are located. There are many online resources from different sites, including Shopify that can help you to educate yourself on these types of things in order to stay two steps ahead of the game.

Do Not Rush to Open a Line of Credit for the Business

Another point to remember is that you should never rush to open a new line of credit for your business, according to the Federal Deposit Insurance Corporation (FDIC). This is an important point to keep in mind because chances are that the personal banker that establishes your business account will try to promote their credit services to you at the same time.

One of the primary reasons why small businesses fail within the first few years is due to the lack of financing. However, there are other ways to build financing than opening new credit lines right away. You should focus on building a “cash cushion” which will help to alleviate the financial stress of running a company over time, according to the New York Times. Keep in mind that a credit line has to be paid whether your business succeeds or fails.