An Ultimate Guide on Setting Up Small Business Bank Account

Setting up a business account for your small business is crucial if you’re looking to do anything related to banking. You may also need to apply for an EIN, which will make managing your taxes easier in later years. There are tons of perks when it comes to having this type of bank account.

But the perks are only attached to the right decision taken while going through the selection of the bank account. Let’s have a detailed understanding of the whole procedure starting with the perks attached to the small business account.

Perks of Having a Small Business Bank Account
8 Basic Things to Remember While Setting up the Small Business Bank Account
Process of Setting up Small Business Bank Account

Perks of Having a Small Business Bank Account

Each type of bank account has its own personal merits and demerits. Even small business bank accounts have their own perks over any other type of bank account. Let’s take a look at the advantages of having a small business bank account.

Bank Account is the Base of Business

The bank account will be where you deposit money from clients and make deposits from sales. The bank account is also where you receive payments for services or products sold through your business.

You can use this money to pay employees, rent office space, buy equipment and supplies, advertise your business, and more. All these dependencies on the bank account make it the foundation of the business. Hence, it is not wrong to assume that a bank account plays an essential role in forming the foundation of the business.

Maximizes Tax-Deductible Business Expenses

The bank will allow you to set up an account specifically for business expenses, which can be used to deduct any business-related expenses from your annual taxes. This means you won’t be taxed on any business income earned by using this account as a personal source of funds.

It Will Be Easier to Track Your Business Expenses

It will be easier to track your business expenses. You’ll be able to see which bills are paid by the business and which ones are paid by yourself. It will also make it easier to know how much money is available in the bank account at any given time, which can help determine whether you need money from home or if there is extra money sitting around waiting to be spent on something else.

Access to Capital and Credit

A capital and credit line is imperative for a small business. A good way to access capital is through a business loan, which can be obtained from a local bank or credit union.

Alternatively, one can also apply for a small business loan from a commercial lender. Commercial loans are usually more expensive than personal loans, but they come with more flexibility in repayment and interest rates.

8 Basic Things to Remember While Setting up the Small Business Bank Account

Though it may look exciting, setting up a small business bank account can be tricky. It’s more than just choosing a good financial institution and choosing the right type of account for your needs – there are pitfalls to be aware of. To avoid mistakes, we’ve compiled a list of things you should know when setting up your first small business bank account.

1. Consider the Type of Business You Operate

Knowing what type of business you will be running is important before setting up your business bank account. If you plan on running a very small business with just one employee or a small business with a few employees, it may not make sense to open an account with a big bank with multiple branches throughout your city.

Instead, consider opening an account with a local bank that caters to small businesses. This will ensure you get the best service and rates for your needs.

If you operate multiple locations or have employees working remotely, it makes sense to open an account at a large bank that provides services nationwide. You can still use these larger banks for managing your finances, but it’s also good practice to set up accounts at smaller local banks as well (especially if you do business online).

2. Check for the Bank Locations and Branches

Ensure your bank has multiple locations, including at least one branch near your business. If you’re doing a lot of business with other banks, it’s a good idea to make sure that you’ve got their contact information on file at your new bank as well. You never know when something might come up, and it would be nice to have a backup plan in place just in case.

3. Estimate the Frequency of the Bank Use

If you are only making monthly deposits, then opening an account with a local institution may be sufficient. However, if your business has more frequent transactions (i.e., weekly or daily), then you should consider a high-yield checking account instead of the previous one.

4. Outline The Payroll System

When managing a small business, you need to be aware of payroll and other financial matters. Payroll is one of the most costly elements of running a business. It can include taxes and benefits such as health insurance, 401(k) plans, vacation time, etc. You’ll want to ensure your business can pay its employees in full every month.

5. Get a List of Loan/ Credit Offered by the Bank as a Service

While banks tend to offer small business loans in one form or another, a handful of options are tailored specifically for small businesses. These include merchant cash advances (which allow you to take money from your account when needed), overdraft protection, and payroll advances.

6. Select a Bank With a Good Reputation

Researching banks can help you find out if they have been operating successfully in their chosen field for many years or not and if they have had any complaints filed against them by customers or clients over late payments or other issues such as fraudulence or corruption.

7. Enable Digital Banking

If you want to access your bank account via mobile phone or tablet, some banks offer apps that allow you to do so with a few clicks.

Digital banking has become standard for most financial institutions these days. This means that if there’s an issue with one account or another (which can happen), you’ll be able to access all of your accounts from any device — computer, tablet, or phone — without having to physically go into a branch or call customer service staff on the phone.

8. Look for Any Associated Fees

The following are some of the most common fees.

Deposit Fee: A fee a financial institution charges to make a deposit. A small business bank account may charge a low flat rate or tiered fee structure based on the size of the deposit you make.

Service Fee: The amount you pay to use an account, such as ATM withdrawals or checks to cash. It’s often included in your monthly statement and not explicitly listed. Ensure you understand how much you’ll be paying for each service before signing up for an account.

Terms and Conditions: Any additional information about your account that isn’t included in the monthly statement, such as additional fees or restrictions. Make sure to review these carefully before signing up for an account.

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Process of Setting up Small Business Bank Account

The complete process for setting up a small bank business account is a simple process given if all the steps are completed successfully and without any mistake.

Choosing a Bank

There are many banks to choose from, but you need to ensure that the one you choose is right for your small business. It’s important to look at their services and fees before choosing.

You can find this information on their website or contact them directly. You’ll need to look out for the interest rates and fees they charge, as well as whether they offer any special programs for small businesses.

If you’re starting a new business and aren’t sure where to start looking, it may be helpful to call around and see what other businesses are using as their banking service provider. This will give you a better idea of which banks offer the most competitive rates and services for small businesses.

Choosing an Account

You’ll need to choose a bank that offers the lowest interest rates to get the best rate. The most common way to do this is by using a credit card with a rewards program. To get the best rate, however, you will also need to use a bank offering low fees and minimum balances.

You can check banks’ websites or call their customer service lines to find out if they have any programs like these. You may need to make an appointment with someone in the customer service department to do this.

Setting up Your Account

Once you’ve selected a bank and have chosen an account, there are still a few steps to complete. To open an account, you’ll need to provide:

Proof of Identity: You’ll need two forms of proof of identity — one that shows your name and address, such as a passport or driver’s license. The other form must show your signature and photo, such as a birth certificate or passport.

Complete Formalities: The business will be required to furnish the mandatory details that might be related to the business to complete the account-setting process.

Get Your Welcome Kit: Once the formalities are done, you will receive a welcome kit that will include everything you need to start with banking transactions.

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The primary benefit of having a small business bank account is preventing your finances from getting mixed up with business finances. This will help you keep track of everything that’s going on with your business, but more importantly, it will help you avoid paying income taxes on money that doesn’t need to be taxed.

Avoiding extra income taxes not only helps you save money but also helps the government collect less money. The more organized your records are, the easier it will be to manage your business and personal finances later.


What 4 documents do you need to open a business bank account?

4 documents required to open a business bank account are an employer identification number, business formation document, business license, and government-issued identification.

Do I need a separate bank account to start a business?

Yes, having a separate bank account for a business is considered a good practice to follow for organized business management.

Can I use my saving account as a business account?

Yes, saving accounts can be used as business accounts.

What are the disadvantages of a business bank account?

Business bank accounts are linked to multiple fees as compared to personal accounts. They are also provided with the minimum personal gains such as fewer insurance schemes and policies when compared with the ones available with the personal or saving account.

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