When setting up a business bank account, there are several things to consider to maximize your benefits while minimizing costs. First, you must understand your needs and business financial goals when shopping for an account. The various business bank account options can appear redundant as many account features look similar. We’ll help you identify key differences between business account options and what you should consider when selecting the best account for your company. So before you select which bank to go with for your Illinois business, continue reading for some tips.
Why do I need a business bank account?
If you have a small business, you will more than likely have expenses that can be tax-deductible. If you have any tax-deductible expenses, you should set up a separate business bank account as it can streamline your tax filing process. This is because if you mix your business with your personal accounts it can be rather difficult when it comes time to file your taxes. You will spend extra time having to separate which transactions are your personal ones and which are the business’s.
Not only does having a business account separate from your personal make your accounting more manageable, but it also improves your professionalism and provides additional security if you undergo a tax audit or lawsuit. When you set up a business bank account and write checks for various vendors, it will have your business name instead of your personal name. This signals that you have a dedicated business banking account that says you are here to stay. This can help improve customer and client confidence in your business.
A separate account can also protect your identity. Because you will be using the business account for a possibly high number of transactions, fraudulent activity risk can increase. By setting up a business account, you can avoid your personal information, including your social security number, from being at risk.
It may also come in handy later on for your business when you want to request a loan. By building up a business banking relationship, when you later need to request a loan from the bank, you may be able to obtain some special privileges or improve your chances of being approved.
Which is the best bank for my business?
There are two critical points to consider when looking for the best account to suit your needs. First are bank features, and second are the financial characteristics specific to your business.
The best bank for your business depends on which features you value the most. For instance, a business owner who travels a lot for their company may want national bank branches so they can perform banking activities when traveling. Another example is if a business owner wants to make many deposits throughout the month, they may benefit from a bank account with fewer restrictions on the total monthly allowed deposits.
So the first step when selecting the best business bank account for your Illinois business is to understand the general account features and determine which is most important to you. These features can include, for instance:
- Deposits allowed monthly
- Wire transfers
- Amount of monthly general transactions
- Remote banking (online or through an app)
- Financial tools
If the list of your priorities is long, that’s okay. You will prefer to find one that can tick most of the banking features you want.
Another vital point to note when shopping for the best account is understanding your company’s financial status. This can include how you get cash, perform deposits or transactions, and what kind of liquidity your company has. Other essential business characteristics you should consider include:
- How much cash do you work with monthly
- Whether, and if so, how often do you need access to ATMs
- If you require national, regional, or only local access
- If you are just starting your own business or growing
- Whether you transfer large amounts of money nationally or internationally through wiring
- How often you need to pay employees, clients, and bills
What do I need to open a business bank account in Illinois?
To be eligible to open a business account in Illinois, you must form your business with the secretary of state. You will also need to obtain an employer identification number from the IRS. The instructions to form different Illinois business structures, including limited liability companies, limited partnerships, corporations, and general partnerships, and where to send the forms can be found here. The free application to apply for an EIN with the IRS can be found here.
When we talk about a business account, we will refer to business checking accounts because, for most businesses, this account performs multiple transactions the best rather than needing to save money for emergencies. Each bank has their own requirements. After selecting your bank, contact them to determine what documentation you need. By preparing this beforehand, you can more efficiently and quickly open your account. Some general items you may need:
- Articles of organization/incorporation depending on your business structure
- The business bylaws
- The operating or partnership agreement
- Your EIN
- Two photo IDs
How do I start using the account?
After setting up your business bank account, you will need to fund it. The initial money used to start your business is a capital contribution.
Depending on your bank, you may want to meet a minimum account balance to avoid fees. Otherwise, there are often few requirements for how much money needs to be put into your account initially. However, it should be at least enough to cover your expenses and avoid overdraft fees.
What are some banks specific to Illinois that I can consider?
Some banking options available in Illinois major cities, including Chicago, include BMO Harris Bank, Chase Business, and Wintrust bank. These are only a few options available to Illinois residents but are some of the more popular ones. Make sure to shop around more so you don’t miss out on other banking opportunities that may be a better fit for your business.
The BMO Harris Bank is a large bank with several ATM and branch locations throughout Illinois. Their tiered accounts have several different options compared to other major and competitive banks in Illinois. Their basic business checking account allows you to have 200 free transactions and waiver of your $15 monthly fee for the first three months. You can also avoid fees by having a minimum balance of $1,500. Other business accounts are offered here, including the Business Advantage Checking account that allows you to accumulate interest, free 500 transactions, and waive your monthly fees for a $5,000 minimum balance.
The Chase bank account also has several branches and ATMs available even nationally. You can take advantage of Chase’s network if you travel a lot. A few Chase business accounts are available, including Chase Business complete banking. There are low monthly fees that you can waive in multiple ways, including maintaining a minimum balance. There are unlimited electronic deposits allowed with the complete banking account.
Wintrust bank is a more community-minded bank that offers tiered checking accounts. They offer several different account options, including Entrepreneur Checking, which is set up for newly formed businesses. Several locations are located throughout the major cities of Illinois, including Chicago. Wintrust also does not require a minimum balance, but you can avoid monthly fees if you meet $1,500.
Opening a business bank account is a significant step when starting your business. It is important to consider what your goals are to make the most of your business banking account.