One of the first things to think about when starting a business is the finances. Not only how the company is going to make money, but also how it will manage and store its funds.
As a result, opening a business bank account becomes an essential part of starting a business. With important considerations of whether your business will need an account, what documentation you may need in order to open one and what type of account and bank is best suited for your business. Below we have outlined the major elements to think about when opening a business bank account, to help you decide what best suits your business.
Do I need a business bank account?
No matter what industry or type of business you are running, majority of businesses will require a business bank account. Even if your business is cash based you will most likely need a business account to deposit your takings into.
For sole traders and partnerships having a business bank account is optional, however the ATO does recommend having a separate account in order to separate personal and business income. Companies and trusts are required to have separate bank accounts for tax purposes.
Some benefits of having a business bank account are that it may help to centralise and simplify your fund management, as it allows you to track and control your expenses and income. It also makes it significantly easier when tax time comes around as you won’t need to separate your personal spending from the businesses. Additionally having a business bank account appears more professional, rather than having a personal account details on invoices, when it comes to billing suppliers and customers.
What will I need to open an account?
In order to open a business bank account you will need to have your ABN, and for companies you will also need your ACN.
The banks require you to show 100 points of identification upon setting up a business bank account. Which may include documents such as passports, drivers licence, birth certificates, Medicare cards and utility bills, to name a few.
For companies you will also need all the relevant signed company documentation, such as constitution, share certificates and appointment of directors. Additionally the bank requires all of the members and directors details, with directors and signatories needing to be present in a branch to sign the bank documents.
Majority of the application can be done online prior to visiting the bank, however directors and signatories must still visit the branch to finalise the setting up the account.
What are the diffent types of bank accounts?
Business transaction account
This is an everyday account, for incoming and outgoing funds for the business. This account is the one linked to credit cards, electronic banking, debit cards, cheques and ATMs for the businesses daily transactions.
Business savings account
This is an account where business can store cash, and earn interest on it. This account is often also used for GST or PAYG for the business.
Business term deposit account
These accounts are for businesses with a large amount of capital or cash they won’t be spending in the short term. The account has fixed periods where cash cannot be withdrawn, in return for a higher interest rate. There are some banks that offer deposit accounts that may act as tax-effective investments using pre-tax income, as well as those that allow the setting aside of income tax withheld for employees in pay-as-you-go (PAYG) arrangements.
What is the best bank for business?
Here is a comparison of the fees and services offered by the top 4 banks, for business transaction accounts.
Fees are $10 per month flat fee
Cth assisted transaction are $1.10 per transaction
Cheque deposits are $0.70
Electronic transfers and ATM transactions are free
Monthly allowable cheque and branch visits are 30 per month.
Offers either a low or high fee account, depending on the number of transactions the business makes.
Monthly fee $8.50 / $10
Cheque deposit or collected are $0.60/$0.50
Assisted transactions are $1 per transaction
Monthly allowable transactions are 28 cheques or 17 branch visits, and 100 cheques or 50 branch visits for the high fee plans.
Has a $10 per month account fee
Charges for cheque and deposit transactions will only apply once a threshold is reached.
Has a $10 per month account fee
And access to unlimited online banking, cheques, ATMs and EFTPOS
There is a tiered interest on your account balance.
No minimum balance required.
Opening a business bank account is essential for majority of businesses, in order to manage funds, ensure personal and business finances are not confused, simplify taxes and for the professionalism of the business. Hopefully the above points have helped you in deciding on the type of account you may need, what information required to open an account and which bank may suit your business.
This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.