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4 Mistakes to Avoid When Opening a Business Bank Account

4 Mistakes to Avoid When Opening a Business Bank Account

When you think of business success today, you probably think about improving your online presence, ensuring that your customers have an awesome experience, and establishing yourself as an authority in your industry. However, it’s difficult to do this if your company doesn’t have an account that your customers can pay into when they purchase goods or services from you. If you are ready to get serious about your small business, then it is important that you open a business checking account for receiving and making company payments.

However, choosing a business bank account is not always as straightforward as it may seem. With so many features, types of account, and even different types of bank to choose from, many new entrepreneurs find themselves at a loss as to how to determine that they’ve made the right choice. Setting up a new business bank account for the first time can be confusing, so we’ve listed some of the top mistakes to avoid, to help guide you through the process.

Mistake #1. Not Having a Dedicated Business Account

Although certain sole traders, such as casual freelancers, may be able to get away with using their personal account to receive payments, if you are running a larger business then it’s important to make sure that you have a dedicated account for company finances only. You may be tempted to simply use your personal bank account for the extra convenience and to avoid additional setup fees, however, it’s important to note that business revenue is usually much more difficult to track when it is combined with personal and household finances.

In fact, larger businesses may benefit from setting up separate accounts not just for business expenses, but for different aspects of the company’s finances, for example revenue, sales tax, and payroll expenses to help keep each separate and organized. Discover business checking accounts here.

Mistake #2. Choosing the Wrong Bank

You might think that there’s little to worry about when it comes to picking a bank for your business. However, choosing the wrong bank can have serious ramifications for your company further down the line. For example, if you choose a fairly new bank that is not yet as established as some of the bigger high street names, you may be putting your business finances at a higher risk.

On the other hand, going for a traditional, well-known high street bank could lead to future issues with lending money for your business. Today, it’s more difficult than ever before for entrepreneurs to get business credit; larger banks are being more stringent when it comes to the applications that they approve. Before deciding on a bank for your business, it’s a good idea to make a list of your current and expected future requirements. This will help you make a choice that best fits your needs.

Mistake #3. Missing or Incorrect Information at Setup

When it comes to setting up a business checking account, you will likely find that different banks require varying information about a business in order for the account to become active. However, new small business owners tend to frequently make the mistake of bringing the wrong or incomplete information with them when opening their account.

To avoid this situation, it’s important to enquire about which documents are required when you book the appointment to set up your account. If you have chosen to open an account with an online-only bank, be sure to read all the requirements carefully before you proceed. In most cases, you will need to have your social security number, tax ID and other financial information to hand when opening a business checking account. The tax ID that you use should be your Federal Employer Identification Number.

Mistake #4. Failing to Consider the Minimum Monthly Balance

Many business bank accounts will offer fee waivers for customers who are able to keep the account balance above a specified minimum amount each month. However, many new entrepreneurs fail to give this factor much consideration when they open a new business checking account. Although it’s usually entirely possible to allow your balance to fall below this level, it will result in additional costs incurred for your business.

Before you choose a bank account for your company, it’s important to bear in mind their minimum monthly balance and determine whether this is something that you can expect to meet on a monthly basis or even better, can keep your balance over the limit by a few hundred dollars.

Opening a business bank account isn’t as easy as many believe! Don’t make these costly mistakes.