By Fernando Berrocal

How do you set up a bank account for your startup? You'll need a business bank account if you start doing things such as paying employees, signing vendor contracts, accepting investments, etc. It's tempting to run things through your accounts at first because you want to get your business up and running as quickly as possible to be more productive, and that is the fastest way to do it. However, this can eventually become an expensive mistake that might put you and your business at risk rather than an efficient decision. We'll explain why you need a business bank account, how to get one, and how to choose the right banking partner.

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What Are the Benefits of Having a Business Bank Account? To begin, it's just a good idea to establish a separate bank account from your one for a multitude of reasons. The main and most obvious one is that, if you're like most people, you have a lot going on with your finances. That’s why it’s advisable to not mix your business spending with them: it'll only result in an eventual chaotic mess that'll be difficult to discern afterwards and it’ll affect both your personal and professional life in the long run.

The good news is that, in this digital era, opening a bank account for your startup is now easier than ever. In the past, every business founder had to rely on the outdated practice of opening a bank account by visiting a real bank office near your residence (if there was one nearby). Previously, it might have taken days or weeks to complete this task. Nowadays, in a matter of minutes, you may create a bank account for a business that is digitally connected with your other financial operations.

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What You Need to Get Started: Setting up a bank account is a simple process, but there are a few items you'll need to gather to complete the Know Your Customer (KYC) process. Bank-defined KYC procedures include all steps necessary to verify that their clients are real, as well as analyze and manage risks. These client onboarding procedures aid in the detection and prevention of money laundering, terrorism funding, and other forms of illicit corruption. The following are the essential papers you'll need to complete this task:

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• Articles of Incorporation. 
• Employer Identification Number (EIN).
• Names, Identification Numbers, Social Security Numbers (SSN), and the Addresses of all the founders and owners who possess more than 20% of the business.

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Here's what you'll need to do when you're ready to create a business bank account:

1. Determine which accounts you'll require: There are a variety of business bank accounts available, and it may require more than one:

• Business Checking Account: This is where you maintain your operating capital and receive payments. These funds can earn interest, but interest-bearing business checking accounts are uncommon.
• Business Savings Account: This is where you keep money that your business won't be spending any time soon. Savings account balances accumulate interest over time, but they are subject to restrictions.
• Merchant Services Account: This is necessary if you plan to accept credit and debit card transactions.

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2. Choose a bank:  After you've determined the types of accounts, you'll need to choose a suitable bank.

• Account variety: You'll need a bank that can give you the essential business bank accounts and also aim to anticipate demands. Make sure your bank provides a business credit card or a business loan if you think you'll need one.
• Fees: Monthly fees may apply to business bank accounts. ATM fees and wire transfer fees are two other things to be aware of. Consider how these fees could affect your profitability.
• Rates of Interest: This is particularly important for business savings accounts, but certain business checking accounts also give interest.
• Branch and ATM Network: If you think you'll need cash, be sure the bank you select has a wide ATM network with fee-free ATMs in your region, whether you choose an online or brick-and-mortar bank.
• Account Management Tools: Through an online account or a user-friendly mobile app, a smart business bank account should allow you to check your balance, pay invoices, and shift cash around.

3. Gather the Required Documents: Now that you know which business bank accounts you'll need and which bank you'd want to work with, you'll need to acquire all of the necessary documentation to apply. Contact the bank if you have any queries regarding anything else you would need to apply.

4. Apply For the Account: Although many banks allow you to apply for a business bank account online, some may need you to visit a location in person. As long as you have all of your papers in order, applying shouldn't take long.

5. Deposit Funds and Start using your Account: You may deposit dollars and use your account just like any other bank account after it's been set up. When you open an account with your bank, you may be required to make a minimum deposit. This can be cash or funds transferred electronically or by wire transfer from another bank account. You might also make a payment via cheque.

Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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