ESYB2 080 - Why You Need A Commercial Bank Account
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[00:00:00] In this video, let's talk about when to open a business bank account and how to do it. And again, realize this process is different in every country, but it's very similar in most countries. So I'll talk to you about how it is in the U S and most likely it's very similar wherever you are. It's just, you have to figure out.

How it's different in whichever country you may be in. So, generally, it's free to open a business bank account at any U. S. major bank. Of course, they will try to upsell extra things. Don't do it. You don't need it when you're starting out. When you need it, you can get the additional things then, but generally it should be free.

You'll get your checks for free, you'll get your account for free, etc. What I've seen is that the minimal requirement they have is that you at least put some money in there, like 500 or something like that, just to populate that account. But that sort of thing may vary bank to bank. Now, why do you need a business bank account?

One of the major reasons is that you [00:01:00] separate your personal finances from your business finances. Of course, you can pay from your business account to your personal account, sure, as a salary. But, if anybody sues you, the opposing lawyer, what they're going to do, first and foremost, is they're going to request your bank information.

And if they see that, even though you might have an LLC registered, and you might have limited liability company, what they'll look at is your bank statements, and they'll see that, oh, well, you have an LLC, but this LLC has no bank, it's just a, you know, fictitious kind of like, just a Veil of a company.

There's not no real company because the finances are handled by your personal finances. Then, this is how they pierce that veil of incorporation if they see that your finances are personal. This is why you need a business bank account so that your business revenue goes into the business bank account.

So, you open your business bank account right after you register your business [00:02:00] entity. And the business entity is, you know, LLC, S corp, C corp, whatever you have. Once you register it, go and open your bank account. And then, whenever your business gets paid, make sure the payment goes to the business bank account.

And then, whenever you take a salary, basically the salary comes out of your business bank account and pays you to your personal account. And if you do that, this adds to that liability protection because now you're running a LLC, limited liability company, like a real company, so you have that liability protection.

Which was one of the major points of registering your business. Now, when you go to the bank and you try to create a business bank account, they'll ask you for a few pieces of information. Some of the common pieces of information are your EIN, that's your tax ID number, your corporate tax ID number, your ID, meaning your driver license or, you know, picture ID licensed by your country and state, and also your business information, [00:03:00] like business name, business address, etc.

And wherever you open your bank account, it's not the final place. You can always close accounts. You can also have multiple accounts at different banks. Because different banks, they really do offer different pros and cons. Like, for example, some things that I've seen personally is that small banks can be more flexible when giving out loans.

So that's a positive, but a negative that I've seen is that I have a partner and his business bank account is registered with a relatively small local bank. And that bank has had problems with longer times to do wire transfers and some wire transfers have failed for whatever technical reasons. It's never happened to me with a major bank because I bank at Chase Bank and it's like a major bank.

I've never had wire transfer problems. So there are pros and cons. Who knows why the smaller bank had the wire transfer problems? I don't know in the [00:04:00] end, but there are just these little issues. My feeling is that registering with a big bank is safest and easiest, while you should go to a local branch and ask what are the benefits of their business bank accounts versus bigger banks.

And they might actually tell you some interesting and compelling benefits. So this is just an overview, but you should still do a little bit of your own research, and then ultimately decide where you're going to create your business bank account. But the important thing is that after you register your business, you should create a business bank account, and you should run your business finances through it.

Without that You may not actually have the limited liability protection that you assume that you do in case that ever comes up.

