An important component of small business ownership is having a business bank account. Before rushing off to your local branch, though, you'll want to make sure you have the required documentation. Business News Daily asked financial experts what small business owners should bring to their business account opening appointments.
Personal identification and professional licenses
As with a consumer account, the first thing you need to open your business account is a form of personal identification. As dictated by the Patriot Act, Dodd Frank Act and Consumer Financial Protection Bureau, consumer and business owner/operators must provide certain details and data to corroborate their identities and their business models, said Jim Angleton, president of financial services firm AEGIS Finserv Corp. He said to provide photocopies of driver's licenses for the account holder and signers of the accounts, as well as any professional licenses you might need for your business.
Employment Identification Number (EIN) and name registration
The next item you'll need is a tax identification number, and, depending on how your business is set up, possibly a name registration.
"If you're a sole proprietor, all you need is an Employment Identification Number (EIN), your Social Security number, as well as a driver's license or passport," said Levi King, CEO of Creditera, a personal and business credit solutions and monitoring firm.
King said that while some banks allow sole proprietors to open accounts without an EIN, it's a good idea to create one because it reduces the chance of identity theft.
Elaine Banks, assistant vice president at Lee's Summit, Missouri-based Lead Bank said that if you conduct business under a name other than your legal name, you may also need your Doing Business As (DBA) name registration, which is granted through the Secretary of State, and failure to register may be a misdemeanor under your home state's law.
"All businesses must register through the state in which they are located," Banks said. "[DBA registration] is required for anyone doing business under a name other than their true name."
Articles of incorporation and banking resolutions
Are you operating your business as anything other than a sole proprietorship? If so, you'll need to bring additional documentation to your account opening appointment.
"If you form a business as an LLC, limited partnership, corporation or other separate legal entity, to open a bank account you will need the articles of organization or incorporation that you filed with the state, if you are the sole owner," saidTiffany Wright, president ofThe Resourceful CEO, a financing advisory firm for small to medium-sized businesses. "If you are one of multiple owners, you will also need to bring a resolution from the other owners or board granting you the right to transact financial business for the company in general, or open and control the bank account specifically."
If you don't have these documents yet, Wright said many banks keep sample resolutions on hand for small businesses to use. [MORE: What Are Articles of Incorporation?]
Before setting up the accounts and banking resolutions, you should also decide who will have authority over your business banking. This is called assigning authority.
"Who will be allowed to sign checks, access account information, make changes and make withdrawals?" King said. "This should all be documented [and brought to the bank]."
Expected cash-flow figures
To get your business banking relationship off to a good start, experts suggest providing as much information as possible about expected financial transactions. Think about your anticipated cash flow and possible credit needs before your initial meeting. Will the business collect payments immediately, or will it invoice them? Does your cash flow change with the season?
Banks said to also consider how the business will pay for materials, suppliers, employees and other expenses.
"As you determine the structure of the business and think about the processing of transactions, you will have the ability to provide an estimate of transaction volume for your new business account," Banks said. This helps your banker suggest other suitable services for your business.
Angleton suggested including this information in an executive memo outlining your expectations for monthly bank balances including a low, moderate and high dollar amount.
"The more data you supply up front the better," Angleton said, adding that small business owners should understand that the bank will use the requested information to conduct required due diligence in verifying the applicant's identity and activity, in accordance with to the Bank Secrecy Actlaws.
While you may prefer to open your business bank account online instead of in person, doing so may limit your banking activities. In addition, members of certain industries must open business bank accounts in person. For more information on opening business bank accounts online, visit the U.S. Small Business Administration website.
Originally published on Business News Daily.