Starting a business is an exciting endeavor. It starts with following a passion, then selling a product or service, and eventually managing your financial operations. Whether or not it’s the most exciting part of your business plan, choosing the right business account and a banking partner is a critical step to giving your business the boost it needs to grow and be profitable.
When starting a business, some entrepreneurs overlook the importance of opening a business account and choosing of an individualized banking plan, settling to run their business finances through their existing personal bank account. Kip Sobel, group product manager for PNC Small Business Banking, says running a business through a personal account can create tax confusion and potentially impact the credibility of your business.
“There’s magic in that debit card with your business’s name on it,” Sobel said. “To a supplier, it says ‘I’m real, I’m legit and I own a prospering business.’”
The Importance of a Banking Relationship
More practically, setting up a banking relationship with a business checking account allows entrepreneurs access to some of the basic functions critical to running their business. A business checking account:
- Allows access to cash and checks
- Provides a personalized debit card with a business name
- Separates business funds from personal funds
- Provides access to deposit services and remote deposit of business funds
To get started, Sobel, suggests that entrepreneurs include the creation of a banking relationship in their business plan. Next, he says to establish a network of trusted advisors who can provide counsel on key issues such as taxes, supply chain management, hiring and finances. Part of that network should be a professional financial institution to advise on banking products and services for effective money management.
“It’s important to talk to a professional, but many people don’t,” Sobel said. “It makes a world of difference to a business when you surround yourself with a network of people who want to see you win as much as you want to win.”
How to Open a Business Bank Account
Tactically, starting a business banking relationship and opening your first business banking account can be as easy as walking into a branch or going online. What you need to open a business banking account is also simple, but equally important to have at the ready. Besides your personal identification, such as a driver’s license, the typical documents you’ll need include the following, according to the Small Business Administration (SBA):
- Ownership agreements – This document, if applicable, is needed if you are going into business with multiple people. This contract states the rights of all owners in the endeavor.
- Employer Identification Number (EIN) - This is your business’s federal tax identification. You’ll need to apply for an EIN with the Internal Revenue Service.
- Business license – There are various licenses you might need to open a business, let alone a business bank account. This can depend on the type of industry your small business is in, and if the product or service you’re selling is regulated by your state or the federal government.
- Business formation documents – To create a business, entrepreneurs need to file company formation documents with the state, and these are also needed to open up a business banking account.
Depending on the bank you choose, and the type of account you open, a minimum opening deposit is also needed. For example, PNC’s Business Checking Account requires a minimum $100 deposit.
Choosing the Best Type of Account for Your Business
Whether you’re opening a business checking or savings account, a merchant account, certificate of deposit, or money market account, choosing the best one for your business doesn’t have to be a task you take on by yourself.
For example, a PNC small business banking team member will start the process with the PNC Cash Flow conversation, which helps entrepreneurs think about how they will handle tasks like deposits, payments, payroll and access to borrowed funds. That conversation establishes a baseline for what products or services may be of most use in the present and things that may help sustain growth moving forward.
For those who prefer to start the process online, PNC offers an account selection tool which helps prospective customers evaluate what business checking product may best suit their needs based on anticipated transactions, deposits and balance levels. From there, customers can interact with a PNC banker to get started.
“The good news for someone starting a business is that PNC is a full-service bank,” Sobel said. “We offer a full range of products, services and experienced advisors so we can be here for them as their business grows.”