Module 2: Lesson 5 – Setting Up a Bank Account and Merchant Account

A pivotal step in the journey of establishing your business is to set up a bank account and a merchant account. These financial foundations are crucial for the smooth operation of your business, enabling you to manage transactions, receive payments, track your on-hand cash flow, and maintain a clear financial overview. In this lesson, we’ll explore the significance of having separate business accounts, guide you through the process of selecting an appropriate bank, and provide insights into obtaining a merchant account for online transactions.

Separation of Funds:

First, let’s start by emphasizing the importance of maintaining a clear separation between personal and business finances. Establishing a dedicated business bank account brings numerous advantages, including simplified accounting, streamlined tax reporting, and enhanced financial transparency. This separation is a fundamental practice that contributes to the long-term success and financial health of your business.

Establishing a dedicated business bank account is not just a best practice; it is an imperative safeguard for both your business and personal assets. From a legal and liability standpoint, mingling personal and business funds can jeopardize the limited liability protections provided by certain business structures, such as LLCs or corporations.

Maintaining a separate business account reinforces the legal identity of your business entity, preserving the limited liability protections it affords. In the event of legal issues, lawsuits, or debts incurred by the business, having a segregated business account helps shield your personal assets from being implicated. This distinction is crucial for protecting your personal finances and assets in the face of unforeseen challenges, ensuring that your business’s liabilities are contained within the realm of the business itself.

Selecting the Right Bank:

Next, we’ll delve into the criteria for selecting a bank that aligns with your business needs. Considerations such as fees, account features, online banking capabilities, and accessibility play a crucial role in making an informed decision. Choosing the right bank is a strategic step that sets the stage for efficient financial management.

By thoroughly comparing each of these factors, you can make an informed decision when selecting a bank that best suits your business requirements. Remember, the goal is to establish a partnership with a financial institution that not only meets your current needs but also one which will accommodate your business’s growth in the future. Here is a detailed list of what you should look for when comparing and choosing the right bank for your needs:

• Rates and Fees:

  1. Compare account fees such as monthly maintenance fees, transaction fees, and ATM fees. Some banks offer fee waivers based on a minimum balance or a certain number of transactions.
  2. Examine interest rates on business savings accounts to ensure your funds work for you. Some business accounts will offer a high-yield savings account option with a 4%+ APY interest rate. If you use it smartly, you could do pretty well with that by the end of a year.
  3. Consider any additional charges associated with overdrafts or other account activities.

• Account Features:

  1. Evaluate the features offered with business checking and savings accounts. Look for features like mobile check deposit, bill pay services, and overdraft protection.
  2. Consider whether the bank provides additional services that align with your business needs, such as business credit cards, business loans, lines of credit, or merchant services.

• Online Banking Capabilities:

  1. In today’s digital age, robust online banking capabilities are crucial. Assess the functionality of the bank’s online platform, including ease of use, account management features, and security measures.
  2. Ensure that the online platform allows you to efficiently monitor transactions, initiate transfers, and access account statements. A user-friendly online interface can significantly streamline your financial management.
  3. Some banks also offer a neatly detailed account spending report at the end of the fiscal quarter and year. This can come in handy to compare with your reporting to see areas you spent heavily in that might be improved to increase your ROI (Return On Investment).

• Accessibility:

  1. Consider the bank’s physical presence and accessibility. Assess the number and location of branches and ATMs, especially if your business involves frequent in-person transactions or cash handling.
  2. Explore the availability of customer support channels, including online chat, phone support, and in-person assistance. Responsive and accessible customer service can be invaluable during times of need.
  3. Ask if the Bank you are reviewing will be assigning your account a dedicated banker to bring your questions to. Some banks do this in order to guide you and your business as you grow. This is a terrific situation for someone new to business because it gives you access to a money-man that will get to know you and your business, making it simpler to get additional products, such as business loans and credit cards, established down the line.

Opening a Business Bank Account:

With a clear understanding of the selection criteria, we’ll walk you through the step-by-step process of opening a business bank account. This process ensures that your business has a dedicated financial space for transactions, payments, and financial management. Below is a step-by-step blueprint for what you need in order to do this right the first time. Following these steps ensures a seamless experience in establishing your business’s financial identity.

Collect Your Documents:

Before heading out to the Bank, take a moment to gather up a hard-copy of all of your required documents to bring with you. The Bank will want to keep copies of these documents for their files on your business. Here is a comprehensive list of the documents you will need:

• Personal Identification (Driver’s License, Passprot, Government Issues ID Card)
• Copy of your EIN Certificate Letter
• Copy of your Filed Business License from the State, to include:
  • Completed DBA Filing (If Applicable as a Sole Proprietor)
  • Articles of Organization and Operating Agreement (If Applicable as an LLC)
  • Articles of Incorporation and Corporate Bylaws (If Applicable as a Corporation)
  • Copy of the lease for your place of business (unless home-based business)
  • Home-Based Business Affidavit filed with the City your home is in (If Required)
  • Home-Based Business License for either the County, City, or Both (If Required)
  • Copy of any other relevant business registration or permits that your business requires (If Required)
  • Copy of your Filed State Sales Tax Certificate Registration (If Applicable)
  • Money to put on deposit in your new Business Accounts ($100 Recommended)

As the majority of you in this course, will more than likely be creating a digital, informational-based, product to sell, and will be doing so from your home-based office, you will more than likely not be required to bring a copy of your lease, or need to worry about sales tax certificates or other permitting. Still, it is a good idea to check with a licensed corporate attorney’s office or give your County Business Registration Office a call and double check to ensure that you are following the laws of your State and local governments.

Go to the Bank:

Now that you have your documents together, and properly organized, it’s time to make an appointment and got to the Bank. This is perhaps one of the most exciting times as a new venture begins. This is the moment when everything goes from theory to a new state of reality. Until now, all you have done is fill out forms and file paperwork, most likely online.

Today, however, you are getting real with your business venture. This is your moment to shine, and more than likely you are grinning from ear to ear about the opportunity to sit down with your new banker and tell them all about what your business will be able to do. Take time to enjoy this moment. You’ve earned it.

While you are there, you will be asked to fill out an application. Most Banks will fill this out with you as they talk with you. Present the documents you are asked for (only). It is wise to have all the required documentation readily available in your folder, but don’t volunteer more information than is necessary. The Business Banker will tell you exactly what they will need from you based on their particular needs.

Ask them if they have an business programs to help you get established, or any community contacts that you might reach out to. You would be surprised how helpful a good Business Banker can be to getting you a leg up when you are just starting out. Make Banks have great ties within the local community, and if they mention you it can open up a couple of extra doors to get you rolling.

At the end of your appointment, you should be walking out with a business checking account, complete with temporary checks. You will either be given an ATM or Check Card while you are there, or you will have one mailed to you. This varies based on the Bank you choose to work with. Be sure that you get your Banker’s direct line and email address. Ask them if they can set you up with a business credit card as well while you are there.

• Important note about the business credit account. Many times, people think they are signing up for a business credit line when they are in fact signing up under their personal credit. A good question to ask is whether they are going to look at your business credit or personal credit in order to approve or deny your application. Ask this question before completing a credit application with the Bank. A business line will use your EIN number instead of your SSN in order to establish your account.
• Some Banks will set you up with a Business Credit Card but also require a personal guarantee based on your personal credit as a backup. As long as the business line is being reported to the Business Credit Bureaus, this is fine to do. The important thing is that they will not only grant you the credit, but that they also report regularly to the Business Credit Bureaus so that your Business can establish a good credit history. We have seen many business owners make the mistake of using their personal credit for their business needs, and it can lead to disastrous results. Just as you do with separating the funds, you should also do with separating the credit for your personal protection.

Opening a Merchant Account:

Now that you have established your business, legally, and you have established your business bank account, it’s time to start selling online. Before you can do this however, you’ll need a way to take payments from your customers and get those payments into your new bank account. This is done through something called a Merchant Account.

Merchant accounts offer a transaction based account service to accept payments by credit card, credit, or check directly from your customers and verify that those payments are valid and safe for you to exchange your goods and services for. These transactions are checked against the fraud databases, to ensure cards are not stolen, and a myriad of other things to protect both you as the merchant, and the customer.

There are many Merchant Service Accounts to choose from. Your Bank may even offer you one while you are setting up your Business Accounts with them. Since we are creating an online business, however, and we are going to sell our services online with the help of the Business Tools you have access to through your membership here at United Business Networks, you will get the best benefit from opening up a Stripe Merchant Account.

Stripe’s Merchant Service Account has been fully integrated into every aspect of our Business Tool Systems, from sales to delivery, and even reporting. Merchant products can even be created directly with Stripe through our platform, offering you the most robust and comprehensive product and sales controls you will every need.

In order to setup your Stripe Account, you will need digital copies of many of the same documents that you needed for the Bank Account from earlier. It is important to have these available. Also, take some time, before you begin applying, to figure out your product line and business descriptions. Stripe will ask you what your business is about, and how you will describe your service or product. You will want these answers to be descriptive, but fairly short. A good guide would be about 2 to 3 lines.

IMPORTANT NOTE:

• One thing we will tell you is that you should be sure to get your business domain and email address setup prior to creating an account with Stripe. Your Business Email will not be able to be changed later, and all Stripe receipts to your customers will have that email on it. If you don’t want your customers knowing your personal email address, use a professional business email for your company.
• If you have not done so already, we recommend getting setup with Webhost Rocket in order to establish your online presence. Webhost Rocket accounts will give you access to setup a business email and website for as little as just $10/month which is one of the best rates we have seen. You can get setup with them at https://webhostrocket.com

When you are prepared, visit: https://stripe.com to begin your application for your Merchant Account. The system is pretty self-explanatory and will walk you through what you need. It will take a couple of days before your account will be ready to use because Stripe will send 2 deposits to your new Business Bank Account. You will need for these deposits to clear and then log back into your Stripe account to provide them with the 2 deposit amounts in order to verify your bank account and start accepting payments.   

Once you have been setup and are verified to take and receive payments through Stripe, you will need to setup your Stripe Merchant Services Account within the system platform so that you can use it to start selling. We will go over how to do this, in detail, in Module 3.

Activity and Discussion within the Online Community Group Page:

To reinforce your learning, engage your peers in the online discussion group, and share your experiences and insights from your experiences as you got setup with your bank and merchant accounts.

• Was it easier or more difficult than you thought it would be?
• Were you excited or nervous?
• Did you feel this lesson adequately prepared you for what you faced?