It happens that two people I care about are both starting their own professional service businesses. Both of them are really good at what they do as the main core of their business, and neither has any experience with the basic admin. I wanted to help, and as I got going, I realized that this might help other people too.
Assume you’ve established the legal entity. Whether it’s a corporation, LLC, partnership, or fictitious business name (DBA), you have the papers you need to go to a bank and set up your accounts.
This isn’t rocket science, so let’s not make it too hard. You probably have a checking account at some bank already. Most of the banks do pretty much the same thing, so if the one you already have an account at works, great.
Here are some factors to consider:
- Most banks work reasonably well with online software you’ll need, like Mint, Freshbooks, and QuickBooks, kashoo, WaveAccounting, or some other. You’ll want a bank that lets you read records online, and lets you make payments online and schedule payments. If your current bank doesn’t do that well (most banks do; this is very common these days) then you’re looking for another bank. Make sure you know what formats they export transactions in.
- Bonus point: the banks I deal with don’t do well at exporting the payee information as well as check or transaction number and amount. Ask a bank about this … maybe they can do better. Don’t expect much on this one. The good news is that you’re not likely to have a lot of transactions every month, so identifying the payees and categories should only take a few minutes.
- You want a bank that cares about small business. Most banks do. If you’re in doubt about your current bank, ask them. See if they make you feel good about opening a business account there.
- If you don’t really like your current bank, then ask around. Ask the people you know in the same area who are running businesses. What bank do they use?
What accounts you want:
The goal is to separate business transactions from personal transactions. It’s a really good idea to have separate checking, savings, and credit card. Use the business credit card for all business-related transactions, and only for business related transactions.
- You want a separate checking account in the name of the business, with you as the owner and authorized signer. The bank will need to see your paperwork. Try to get this account free, which might require keeping a minimum balance or something.
- Set up a savings account too. You’ll use the savings account to put aside money that you’ll need later to pay taxes. This should be free.
- Get a visa or master card. It doesn’t have to be with your business checking bank. I use a Visa that gives me United Airlines miles. Credit cards have perks, and they also have fees, so I suggest you shop around.
I should add that these three accounts — checking, savings, and credit card — aren’t necessarily transacted with the bank as business accounts. What you really need is separate accounts. It is good though to have the checking in the name of the business, so you can deposit checks when they come. That’s cleaner, and clients like to see you as a business.