When starting your own business, apart from choosing your business structure and tackling any licensing or registration issues, one of the first things business owner should do is to open a separate bank account for their business.

Even if you plan to do business under your own name, keeping all your business transactions in one place, separate from your personal accounts, offers many benefits. We offer these business banking tips for entrepreneurs to explain why you need a business bank account, what to look for in an account, the benefits of merchant services, and how to open an account.

Why You (A New Entrepreneur) Need A Business Bank Account

While it might seem easier to run a new business from your personal checking and savings accounts, most financial advisors would recommend that you separate your business and personal finances with different bank accounts. Even if you’re starting your business under your own name as a sole proprietor, co-mingling your funds can lead to complications and legal troubles.

If you’ve formed a limited liability corporation (LLC) to insulate your personal assets from your business liabilities, running your business through your personal banking and checking accounts can put that legal protection at risk. If you faced an expensive lawsuit, a judge could rule that because you keep your business and personal funds in the same accounts, the financial liabilities of your business also apply to your personal assets.

Co-mingling your funds can also make it difficult at tax time, when you need to differentiate which of your expenses were personal and the ones that belong to your business. That could create all sorts of trouble for you if the IRS has a question about your returns or wants to conduct an audit.

Having separate business bank accounts can also help you establish credibility by opening separate business checking and savings accounts in the name of your business, as well as a business credit card. If you don’t have any employees now, you probably will in the future. If any of them might have the ability to accept and make payments on behalf of your business, it would make sense for them to do so using your business accounts, plus a business credit card in their name.

While we’re on the subject of documentation and finances, remember to keep track of your business expenses and hold onto receipts. It can be easy to forget to do this as you’re launching and growing a business, but it will save you plenty of headaches later on—especially at tax time.

Choosing the Right Business Checking and Savings Accounts

For most of our new business customers, their first business account with us is a business checking account. They might opt for a savings account later on, as their business and banking needs grow. When considering your banking needs, think about the types of services you’ll need and how active you’ll be in issuing and receiving payments.

Here are a few things to consider:

• The minimum monthly balance requirement, which is how much you’ll have to keep in your business checking account to avoid paying fees. Many small business checking accounts have no minimum balance requirement.
• Monthly maintenance fees or service charges. In many cases, these fees are waived as long as you maintain your minimum balance requirement.
• Transaction and deposit limits. There could be limits on how many transactions you can conduct in a day, or on the total dollar amount for certain transactions.
• A debit card with no additional fees.
• Online banking and bill paying, to make it easy to manage your funds.
• Mobile check deposits, so you can deposit checks to your business accounts through a mobile app without having to visit a bank branch or an ATM.

What Are Treasury Management Services?

Another thing to consider with business bank accounts is the type of merchant services and payment tools the bank offers. These Treasury Management Services can turn a business checking account into a platform for managing and investing your business funds, keeping track of your transactions, and making payments. These treasury services may include:

• Automated Clearing House (ACH) payments, also known as wire transfers, offer a secure, low-cost, and convenient way of transferring funds and automating payments between bank accounts. These are typically used for paying vendors, issuing payroll, and making regular payments for your business costs, such as
• Remote deposit capture lets you scan a check for deposit from your workplace computer or a mobile device, without having to visit an ATM or a bank branch. This allows for faster deposits and more efficiency in handling payments.
• Merchant services, so your business can accept payment from all major credit cards through a secure point-of-sale system.
• Autobooks is an online accounting tool that some banks offer to their business customers. Your business can use it to send invoices, accept payments, pay bills, and automate your accounting processes.
• Lockbox services streamline the collection and processing of customer payments by having them sent to a PO Box that’s managed by your bank. This speeds up the collection and crediting of payments to your account, which saves you time and money.
• Sweep & zero balance accounts optimize your cash flow and utilization by automatically transferring any excess funds into an interest-bearing account overnight. This way, you can earn interest on your idle funds to increase your profitability while maintaining liquidity.
• Fraud protection services are a vital part of business banking today. With automated fraud detection, you can create a database of authorized check recipients, ACH blocks and filters. This protects your accounts but making sure only the checks and payments you authorize will clear your account.

What Documents Do You Need to Open an Account?

If you’re starting a business in Texas, you won’t need a general business license from the state, although if you have a name for your business, you’ll have to file your Doing Business As name with your local county clerk’s office. If you incorporate your business, such as a limited liability corporation (LLC), you’ll have to do so through the Texas Secretary of State. Depending on your occupation, you might need a professional license from the Texas Department of Licensing & Regulation or a license from the federal government.

If you’re a sole proprietor running your business and filing taxes under your own name, you can use your Social Security number for your business. If you hire employees, run your business as a partnership or corporation, or have to pay sales taxes or excise taxes, you’ll need an employer identification number (EIN) from the IRS. If you are required to register your business with the state, you’ll need to do so before applying for your EIN.

Once you have your licensing and registration taken care of, you’ll need the following information for yourself and your partners to open a business bank account:

• A government-issued photo ID, such as a driver’s license or passport.
• Your permanent home address, email, and phone numbers.
• Date of birth (such as a birth certificate) and Social Security number.
• Your business EIN and supporting documents.
• Your business name, business address, phone number, and the type of business you operate.
• If your business is incorporated, you’ll need your documents establishing this.
• Your business incorporation or registration date, or the date your company was founded.

The Value of Building a Relationship with a Local Bank

As a local bank, we offer these small business banking tips for the Houston area because we want all entrepreneurs and small businessowners to succeed. It’s how we support the local economy with personal guidance, business loans, and tailored support for businesses in the Houston, Galveston, and Austin areas. All our decisions are made locally, by people who have an interest in seeing you grow and support the local economy.

Contact Us for a Free Consultation

At Moody Bank, we offer local help for new entrepreneurs with banking services throughout the Houston area. Whether you need help figuring out the type of bank accounts you need for your business, accessing merchant services, or may need a business loan someday, our team of local bankers is here to help.

Contact Moody Bank today to schedule a consultation and let us support your business now and for years to come!