Open a bank account

Open a bank account

After youve legally registered your business, youll need somewhere to stash your business income. Having a separate bank account keeps records distinct and will make life easier come tax time. It also protects your personal assets in the unfortunate case of bankruptcy, lawsuits, or audits. And if you want funding down the line, from creditors and investors alike, strong business financial records can increase the likelihood of approvals.

Note that LLCs, partnerships, and corporations are legally required to have a separate bank account for business. Sole proprietors dont legally need a separate account, but its definitely recommended.

Start by opening up a business checking account, followed by any savings accounts that will help you organize funds and plan for taxes. For instance, set up a savings account and squirrel away a percentage of each payment as your self-employed tax withholding. A good rule of thumb is to put 25% of your income aside, though more conservative estimates for high earners might be closer to one third.

Next youll want to consider a business credit card to start building credit. Credit is important for securing funding in the future. Corporations and LLCs are required to use a separate credit card to avoid commingling personal and business assets.

Before you talk to a bank about opening an account, do your homework. Shop around for business accounts and compare fee structures. Most business checking accounts have higher fees than personal banking, so pay close attention to what youll owe.

To open a business bank account, youll need a business name, and you might have to be registered with your state or province. Check with the individual bank for which documents to bring to the appointment.

Learn more: What Does It Really Cost to Start a Business?

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