How to Open a Business Bank Account – Forbes Advisor INDIA

If you've recently started a business and are sending and receiving payments, it's time to open a business bank account. A business bank account can help you track expenses, manage invoices, and file taxes more efficiently.

More importantly, a business bank account can offer protections that a personal bank account cannot, such as limitations on personal financial liability and merchant protections for customers. It can also help establish business credit for future borrowing.

Here are the steps to opening a business bank account:

What do I need to open a business bank account?

The documents required to open a personal (business) current account will vary depending on the type of business you operate. All business owners will need to provide at least the following documents:

• Personal identification information through government-issued photo identity documents such as Aadhaar or PAN card.
• Business proof such as Goods and Services Tax (GST) and Income Tax Return (FIRM).
• Latest color photography.
• An account opening check from an existing personal checking or savings account.

Depending on the type of business, you should also prepare the following:

• partnership: Partnership agreement and state certificate of partnership
• Co., Ltd: Company Regulations
• LLC: LLC Operating Agreement

How to Open a Business Bank Account

The requirements for opening a business bank account are similar regardless of the type of financial institution. Here are the basic steps:

1. Get an EIN

If you don't already have one, you'll need to obtain an official IRS EIN (Employer Identification Number), also known as a Taxpayer Identification Number (TIN), which is a unique number assigned to your business for tax reporting purposes.

2. Prepare your documents

Before you go to a bank or apply online, make sure you have the necessary documents ready, such as a government-issued photo ID and business license. Commonly required documents are explained above.

3. Apply in person or online

Depending on the financial institution, you can bring your documents to a branch or open an account online by uploading your documents. Many accounts also require an opening deposit, which can be paid by check, credit/debit card, or electronic transfer from another bank account.

Types of Business Bank Accounts

There are four main types of business bank accounts: Here we'll take a closer look at each type and what they're best used for.

Corporate Current Account

• Best for: Everyday use, such as sending and receiving payments
• advantage: Instant access, online banking, mobile banking, overdraft facility and carrying out international transactions.
• be careful: Trading fees and limits

Business Savings Account

• Best for: Storing short-term and medium-term savings
• advantage: Earn interest and are FDIC insured up to $250,000
• be careful: Account fees and rate changes

Business Credit Card Account

• Best for: Spending flexibility
• advantage: Increase your working capital, build credit, and earn rewards
• be careful: Interest charges, impact on credit scores, and debt accumulation

Business Merchant Account

• Best for: Supports debit and credit card sales
• advantage: Serve more customers and combine with other services
• be careful: Transaction fees and other fees

How to Find the Best Business Bank Account

The best business bank accounts have low fees and a variety of features to help you manage your business. Here are some factors to consider as you narrow down your options.

• Monthly fee. Business bank account fees range from INR 150 to INR 3,000 per month. You can often avoid these fees by maintaining a minimum balance in your account, but some good online banks offer free business bank accounts.
• Competitive APY. A business savings account is a smart place to set aside cash for future expenses while earning competitive interest rates.
• Monthly transaction limit. A business bank account may allow up to 500 transactions per month without any fees being applied, so when choosing an account, consider how many transactions you are likely to make in any given month.
• Free wire transfers and stop payments. Wire transfers vary depending on the type and amount of money you are sending, and getting an account that offers free wire transfers can save you a lot, even after paying the monthly fee.
• Bundled accounts. Some banks offer bundled accounts, which can help you save money by bundling a business checking account with a business savings account, an IRA or a merchant services account.
• Account features. Most banks allow you to export your data into an accounting program like QuickBooks, but some go further and allow you to automate recurring payments and payroll, track tax-deductible expenses, and take advantage of advanced search features.
• Rewards and perks. Many banks offer competitive business credit cards with perks like cash back, rewards points and travel insurance, so you can get the most out of your business spending.
• customer service. It's important for businesses to have access to customer service when they need it, and some banks have dedicated personnel who focus solely on corporate banking needs.
• There is room for expansion. Consider all the bank's services that may be important to you in the future, such as commercial and treasury services, business loans, credit cards, and lines of credit.

Why Open a Business Bank Account?

Opening a business bank account allows you to keep all your business finances in one place and separate from your personal accounts. Mixing business and personal finances can make it hard to organize and track expenses, which can create headaches when it comes time to file taxes, especially if you get audited.

A business bank account also helps legitimize your business. If you need to borrow a business loan, lenders will require documents like an income statement and cash flow statement. Having an account dedicated to your business's incoming and outgoing payments can make preparing these documents easier and more accurate.

Questions to ask when opening a business bank account

If you're opening a business bank account for the first time, asking the right questions can help narrow down your options.

Here are some of the most important questions to ask yourself when choosing an account:

• What are the main features of the account and what needs of my business can it meet?
• What banking tools would be most useful for the type of business I run?
• Is branch banking access important? If so, what functions must the branch be able to perform and how much does it cost to do so?
• Would an online bank or banking app better suit my business needs than a traditional bank account?
• Are there any banking options that are specifically suited to the type of business I run?
• Why might a business bank account not suit my needs?

Ultimately, the business bank account you choose should offer the features and benefits you need most to maintain control over your finances.