Practical tips on how to open a business account
If you run a business, and decide that having a business bank account is vital for you, then you need to know that opening this type of bank account is not that hard. However, you should pay attention to details, such as the right type of bank account, required documentation, terms and conditions, and of course, the right bank. If you open a business bank account, it gives you an opportunity to keep personal and business cash flow separately from each other.
Mostly, everything depends on the bank you use and the country you live in. Nevertheless, there are some general tips, which apply to almost every type of bank and business account. Today PaySpace Magazine is happy to share these very handy tips with you.
For convenience, let’s split up the process into five points:
1. Choosing the type of business bank account
Here, within this step, we can distinguish three major types of business bank accounts:
- fee-free business bank account;
- traditional business bank account;
- business savings account.
Free Business Bank Account
This type of account is the most typical one. It is optimal for most businesses. A bank will not charge monthly fees on the basis of a minimum criteria (for example, having minimum required balance). At this point, you will be able to receive a conventional banking service, such as deposits, withdrawals, transfers, etc.
Business Checking Account
If you pay monthly/quarterly/annual maintenance fees, a bank usually offers you a wider variety of services.
At this point, it is better to check the so-called quality/price ratio. This means you should check what products and services you will receive for the offered prices, and whether it will be of interest to you (in simple terms, is the service they offer worth its price).
Business Savings Accounts
A business savings account allows you to keep your funds with an option to earn interest.
There are different types of business savings accounts:
2. Choose the right bank
This point is quite straightforward. Here, your aim is to find the bank that meets your requirements and demands. There are some major factors to pay attention to:
Mostly, the factors depend on the bank and the country it operates in. We recommend starting the search for a bank in your country, or the country you are going to start your business in.
3. Comparing costs
So, you have made up your mind, and now you know exactly which type of business account you need and which bank meets your demands. This is where you don’t need to rush. Now it is time to consider all possible pitfalls (maintenance costs, fees, hidden payments, etc).
Let’s consider the most popular fees you might face (and subsequently compare):
- Monthly service fee: Usually it is a flat fee
- Minimum balance fee: You pay this type of fee if the minimum balance requirements are not met
- Transaction fee: Most often, for exceeding the maximum number of transactions allowed per month
- Cash deposit fee: Related to the maximum allowed monthly cash deposit
- ATM fee: Related to different ATM transactions
You also should keep in mind that a free business account does not mean you will not be charged any fees, such as transaction/overdraft fees, etc.
4. The required documentation
This point is rather a specific one. Therefore, in most cases, it will depend on the country you live/start a business in. There are no general rules here, since different countries’ systems have their own set of documents, such as passport, any kind of ID, birth certificate, business license, etc. Anyway, you’ll have to check out for yourself exactly which documents are required at the bank you’ve chosen by yourself. The most common documents are those which prove your identity/nationality, and the nature of your business (or business permission).
5. Deposit funds
Now you have finally considered all the pros and cons, compared all fees and costs, and have completely and totally decided which bank and account type you will use.
The last step is to “top-up” your business account. Generally, there are three ways to implement this. The first way is to write a cheque to your business from another account like a personal account. The second one is to make an electronic transfer from another account. The third, and final way is to deposit old-school cash straight to your brand new business account.
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