Many sole proprietors who are starting a new business ask if they need to register a business bank account. Good news: We have the answers, so you don't have to wonder any longer. This blog discusses whether you need a bank account for sole proprietorship, what kind of company bank account could be a good fit, and how to qualify if you do.

Can I open a bank account for sole proprietorship?
 

Yes. A single-person firm can create a personal or corporate checking account and use it for operations. There are no small business bank accounts designed exclusively for sole proprietors, but you are welcome to consider any small business checking account. Therefore, as a sole proprietor, you are eligible to open any type of company bank account.

Benefits of a bank account for sole proprietorship
 

To operate as a sole proprietor, you don't need to open a sole proprietor bank account. It is technically lawful for business owners to accept payments and make purchases using an existing personal bank account.

However, there are a number of benefits to keeping your personal and professional expenses in different bank accounts.

• Your bookkeeping will be easier
   

Utilising a different debit card for your business allows you to efficiently monitor cash flow. Tracking the financial objectives of your small business and adhering to your business plan both depend on having a clear understanding of what is coming in and what is going out. If your accounts are already divided, you won't have to put in much effort to separate your personal costs before doing your accounting.

• Tax season will be smoother
   

Maintaining a separate single proprietorship bank account might ease the burden of taxes, which are already a hassle. Since you won't have to sort through months or a year's worth of costs to determine which were for small businesses and which were personal, filing your taxes will be considerably simpler. Many companies checking accounts can be connected to accounting programmes, which will combine your transactions for you automatically. This only works if your personal and company spending are distinct.

• You’re more protected
   

Separating your professional spending from your personal ones can also help you protect yourself. You must be able to offer a paper trail for all of your company's financial transactions in the event that the Internal Revenue Service (IRS) audits your company at any point. This procedure will go much more quickly if you are able to see exactly how much money you have spent on your business without having to split out your personal expenses.

• You’ll have access to business financing
   

You will probably need a business checking account if you intend to apply for a business loan or other form of funding in the future. Most lenders require you to open a business checking account to check your company's cash flow before considering you for funding. Frequently, lenders must confirm that your company has the necessary resources to repay the loan.

• Your business will appear more legitimate
   

Customers who pay you will view your company as more legitimate if you have a business bank account. When sending money to a personal account, many people are wary. Consider making a purchase and writing a check to Jane Johnson; contrast that with making a payment to Johnson Enterprises. The latter gives the buyer a sense of security and greater legitimacy.

What type of bank account for sole proprietorship is needed?
 

For sole proprietors, a business checking account of any type is acceptable. A fantastic deposit account for lone owners has the following characteristics:

• Low monthly fees: Your bank account fees shouldn't be eating into your earnings. Before selecting a bank account for sole proprietorship, take maintenance fees, ATM fees, transaction fees and foreign transaction fees into mind.
   
• Low minimum balance requirement: Ensure that the balance in your account is not more than you are able to maintain. Many bank accounts for small businesses don't have a minimum balance requirement.
   
• Online banking: Entrepreneurs that operate as sole proprietors require rapid and simple access to their bank accounts. Check the ratings of the mobile app and the online banking system.
   
• Ability to link to other accounts: If you think you might wish to diversify your banking portfolio in the future, look into the various accounts the bank offers, such as savings accounts or lines of credit. These should be able to be connected to your checking account.
   
• Can take card payments: You can accept debit or credit card payments into your company bank account that also provides merchant services. This solution can make your bookkeeping easier while providing clients with simple payment options.
   
• Its website says “Member FDIC”: Your deposits are guaranteed by the Federal Deposit Insurance Corporation (FDIC), an agency of the federal government. Your money is protected in the event that the bank fails. Before submitting an application to open an account, confirm that the bank explicitly specifies that it is an FDIC member.
   
• Annual percentage yield (APY): Although the interest rates are often lower than those of savings accounts, certain checking accounts allow customers to earn interest on their balances. Comparing interest rates between various accounts.

How to open a bank account for sole proprietorship
 

If you wish to open a company bank account for sole proprietorship, there are a few steps you require to follow.

• Register your business
   

Registration of your firm with the appropriate federal, state, and municipal authorities is the first step in opening a business bank account (as needed). Depending on your state, you might not need to register a single proprietor.

• Find the right business checking account
   

You'll need to shop around to select the best type of business checking account for your operation because there are numerous varieties available.

• Gather your documents
   

Before you can open a business checking account, you must be capable of proving your identity and the legitimacy of your company. All the paperwork you'll require before submitting an application to open a business bank account is outlined below.

• Apply for the account
   

You may apply for a lot of business bank accounts entirely online. Locate a bank that has local branch offices if you'd prefer to submit your application in person.

Required details to apply for a bank account online for a sole proprietorship business
 

Your chances of having your application approved for the account may be improved by getting organised before you begin. You will require the following to apply for a business bank account for sole proprietors:

• Your business name
• Your business address, including the country and the state the business was formed in and operates in
• Your driver’s license or other personal identification
• Your business’s tax ID number, like an Employer Identification Number (EIN) or your Social Security Number (SSN)
• The type of business you own
• The month and year the business was established (often the date you applied for an EIN)

When necessary, you may also be asked to supply additional business documents, such as:

• A business license (also called an Occasional Tax License)
• A Fictitious Name Certificate
• A Certificate of Trade Name
• A Certificate of Assumed Business Name
• Doing Business As (DBA) documents

Conclusion
 

Your small business may benefit greatly from the assistance of Online Legal India. You'll be more likely to be approved for business financing, and you can build ties with banks to be able to obtain a business credit card. We're here to assist you in obtaining the funding required to expand your business.