This week in the Freedom Friday blog and email newsletter, we're continuing the series 10 Steps to Take Your Small Business to the Next Level. Today we're going to cover the fifth step in taking your small business to the next level, and that is to open or change business bank accounts. If you're a small business owner, it is important to keep your business assets separate from your personal assets. If you mix your business assets with your personal assets, you will open yourself up to liability if your business gets sued. This is another reason why it is important to maintain formalities with your small business. If your business gets sued, you do not want your home, your car, or other assets in your own name are at risk through “piercing the corporate veil.” An important step to protect your personal assets is to keep separate bank account(s) for your small business.
As a small business owner, you will want to open at least one (or more) business bank accounts. In order to open a business bank account you will need your EIN number, a copy of your articles of organization or certificate of incorporation, and possibly additional paperwork required by your bank. Some banks will require you to produce your operating agreement or bylaws in order to open a business bank account. However, many banks require a “resolution” for you to open your business bank account. A good bank will draft the “resolution” for you, but some banks require you to draft the “resolution” yourself. I would shop around different banks to find out what their requirements are, as different banks will have different fees and other requirements. A bank that drafts the “resolution” for you is usually “friendlier” to work with than a bank that requires you or your attorney to draft the “resolution” to meet their requirements.
If you previously operated as a DBA, and you have transitioned your business to an LLC or other business entity, you need to update and change those bank accounts, as well. Bank accounts for a DBA are usually under the business owner's name. Remember “Joe's Window Cleaning”? His bank account is probably under his personal name, Joe Smith or whatever. If Joe changed from operating as a DBA to an LLC, he needs to make those changes at the bank as well, to avoid mixing his personal assets with his business assets.
Lastly, you'll notice I mentioned you should open at least one (or more) business bank accounts. There are some good reasons why you might wish to open more than one bank account for your small business. At the very least, you need to open a checking account. However, you might also want to open a savings account. Also, if you're interested in implementing “Profit First” ™ or any kind of bank account budgeting cash management system, you will need to open several bank accounts. As always, you should consult with a CPA or accounting professional before making these decisions.
If you are interested in starting a small business anywhere in Oklahoma, or you are interested in taking your small business to the next level, please contact me at [email protected] to schedule a FREE strategy session.
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