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What to look for in a business bank account
It’s fairly simple. You want a bank that is easy to do business with and has the features that your business needs. Depending on what you do, you will want different features. If you are a massage therapist accepting tips, you may want to be able to deposit cash into your account. If you are a graphic designer and never deal with cash, you might want to find a bank that integrates well with your electronic payments app. Below are some points to consider before you open your new account.
Low or no monthly fees
Banks can charge maintenance fees, fees for keeping the account open (minimum balance fees), and fees for certain types of transactions, such as external or wire transfers, among others. When you are starting out, you want your money to work for you.
Easy access to your money
This normally isn’t a huge problem, but if you want the ability to take out cash and you have a bank that operates solely on the internet, there may be restrictions as to where you can withdraw cash (or deposit it for that matter). Or, banks may place holds on your deposits for a certain amount of time. If any of these issues will be important to you in your business, you will need to look into it before you open your account.
Business-friendly features
Can you send and receive payments from your account? Does your account integrate with your accounting software? What options are there for savings accounts? For me personally, these are the most important features I look for. I want ease of use for my business, so I don’t have to spend extra time handling work-arounds.
Which type of bank is right for you?
Both traditional and online-only banks can be great options for your business banking, depending on what your needs are. Both have pros and cons. Here are some thoughts to consider so that you can make a more informed choice:
Traditional banks
Pros
Cash deposits. This is a big one, and if you are operating a business that accepts cash (think massage therapy tips), this will be a necessary feature for you.
In-person support. If you need help, you can go to a branch and speak to a person. If you have an existing relationship with a local bank, this can be invaluable.
Cons
Higher fees. Sometimes in-person banks can have higher fees. There are definitely exceptions to this, including some credit unions.
Online banks
Pros
Lower fees. These banks don’t have many (if any) physical branches to maintain, so they can afford to offer accounts with low or no fees.
Easier setup. For the most part, you can have a bank account the same day, and even within an hour in most cases. Traditional banks may have a lengthier process (though this is changing as well).
Cons
Limited or no cash handling. Many online banks offer cash withdrawals through an ATM network, but many do not offer cash deposits. I will highlight the ones that do in the review, below.
No local branches. There are some exceptions to this, but for the most part, you can’t walk in and talk to someone about your account.
Documents you may need to open an account
You will most likely need several types of documents to open your business bank account. Banks want to know who you are and what your business is. Here is a short, non-exhaustive list of documents you may need:
Personal identification (such as driver’s license or passport; varies among banks)
Business license documents
Business formation documents (such as articles of organization for LLC, etc.)
Employer Identification Number (or other tax identification number)
Questions to ask before opening an account
There are many questions to ask before opening your account. Here are some of them, below. Please note, these items are non-exhaustive, and you may need to add your own questions for your own particular situation:
Is there a minimum balance requirement? If so, how much do I need to keep in the account to avoid being charged?
Can I easily make cash deposits to this account if I need to?
Can I withdraw cash if I need to?
Will I be charged ATM fees if I need to withdraw cash from an ATM?
Will I be able to talk with a person if I have a question?
Can I deposit checks through an app?
Can I easily connect my bank account to my accounting software?
Are there holds on deposited funds?
Can I make electronic payments from this account?
Will I be issued a debit card?
More thoughts
You can also choose your bank based on your existing relationship with a bank. For example, I chose my business account based on the fact that I already have a relationship established with them for my personal banking. I am comfortable there. And that bank happens to have no fees for checking, I can make cash deposits, and I can go in and talk to someone when I need to.
The most important thing is to choose a bank account that works for your business. And remember, if your business needs change, it is absolutely okay to switch to a different account at a bank of your choice.
*The information provided on this website is for educational and informational purposes only and should not be considered financial, legal, tax, or investment advice. I am not a licensed financial professional, CPA, attorney, or investment advisor. Financial situations vary, and you should consult qualified professionals regarding your specific circumstances before making financial decisions.
