Best Business Bank Accounts for eCommerce Businesses
A business checking account is one of the biggest requirements of any business. You can't use your personal checking account because it doesn't have the flexibility that businesses need for many different types of transactions coming through all the time. A business checking account gives you more flexibility, options, and leverage. It can also help build your business credit as well.
I will discuss the different requirements you'll need to set up a business checking account. I'll give a guide about the best banks. I'll also give options for people living abroad or expatriates who want to set up business accounts in the USA. And this is specifically for doing business in the USA. Some of these things may apply to your own country, but this is certainly what USA banks require. If you want to do business in the USA market, you'll need to comply with them.
These are the steps you need to take first before setting up a business account. Then, I'll show you the different types of banks and other services available for you.
Steps To Get A Business Checking Account
First, just to be clear, a business checking account is required for an eCommerce store. You're going to have a lot of different transactions going in and out of your business. It would be best if you separate your business and personal finances so that you can easily file your taxes, even if you're just a sole provider with the DBA. And if you don't know what DBA means, it is "doing business as." Some states require DBA or a name different from their legal name.
Look up the state you live in if it requires it or not.
1. Employer Identification Number (EIN)
Number two, to get a business checking account, you're going to need an EIN for employer identification number. The (IRS) Internal Revenue Service issues this. You're going to need that, whether you are a US resident or an international entrepreneur who wants to do business in the US market.
The process for getting EIN for residents and for international people. If you're international, you either call them on the phone or write them a letter. If you're a resident, you can apply online.
2. Limited Liability Company (LLC)
Number three, an (LLC) limited liability company, which people create to protect their personal assets like a house with a lot of equity in it or have a lot of cash or a brokerage account somewhere where there's a lot of cash or equity, is the least expensive, easiest to form business entity that is legally separate from your personal assets. If you're that type of person, who has assets to protect, I definitely recommend getting an LLC.
It's different for every single state. LLC is not a federal thing, and LLC is a state-based thing. Look up your particular state and see what's required. Some states like California have high franchise tax fees for LLCs. So, if you live in California, it might be a smart idea to start with a sole proprietorship. When your business starts growing, then consider you can actually move your fiscal residents to another state that doesn't have a state income tax and doesn't have franchise tax.
I recommend setting up a business in either Florida or Wyoming because those two states have a really easy formation. Very low taxes, things like that. But you will need your formation documents and your operating agreement if you have an LLC to set up a business checking account at a bank.
I recommend INCFile for getting an LLC. It's easy, affordable, and they provide all the paperwork you need available in an online portal and they offer great support.
3. Doing Business As (DBA)
If your state requires DBA, you'll need to get one. And so you'll need to provide your EIN, your LLC formation documents, your LLC operating agreements, and your DBA (if required) to the business banker. And you'll usually need to apply in person in order to get the account. There are some services now that actually do this for you.
Now that you have an idea of what it takes to get a business checking account, and why you need to get one, let's talk about the best banks to go for.
Best Banks for Business Checking
Number one is Wells Fargo. I recommend Wells Fargo. One, because I use them personally, and I like them. They're really easy to work with. Number two is because I operate in Wyoming, and Wyoming is where I have a business located because of the great privacy, low taxes, its retail. I don't have to charge sales tax anywhere outside Wyoming, which is a very low volume state as far as orders for me. So that's great.
If you live in another state that has income tax or franchise tax like California, it doesn't really make sense to set up an LLC in Wyoming because you're still gonna have to file it as an out-of-state LLC in California. But it might make sense if you do see in the future that you're going to move away from California to an income tax-free state like Washington or Florida or something like that. And you can maintain that Wyoming also. You can then shut down the California side of that, and then you can, kind of avoid paying the tax income taxes, so keep that in mind.
Wells Fargo operates in Wyoming. I used to use Chase for my business checking. When I first got started, Chase, I was in California. Chase is really great because they have branches all over the place, and they're just one of the best, but they don't offer Wyoming. My account is in Wyoming, and Wells Fargo is available in Wyoming.
Bank of America is also good. I haven't used them myself, and I've heard some people had issues with them. But you're going to have issues in any bank, at some point.
They all have similar checking account options. When you look at the checking accounts, they'll all have different levels - simple and advanced ones. Usually, you start with a simple one, and you move up as your business grows and have more transactions. They usually have some sort of minimum to waive the fee.
Just keep that in mind that those are the top three banks (Wells Fargo, Chase, and Bank of America) I recommend for USA businesses.
Best Business Checking Accounts for Overseas Business Owners
Now, let's say you're not in your international base, who does not have a Social Security number, where you only do business in the US. One of the options is to go to the bank in person to set up a business checking account instead of setting up an EIN all the way to the United States. I recommend that you use services like Transferwise and set up with the business account. You'll then be able to receive funds, deposit them, and move the funds to your personal checking account in your home country.
Transferwise has very low transfer rates, so I highly recommend that you use it. I've also heard some great feedback about that as well. I've actually used them internationally to pay things like rent and other expenses abroad since they were great and have very low transfer rates.
Now, if you're international or you're just an expatriate that lives overseas, that doesn't want to spend the money to go back to the states, you can use a thing called Stripe Atlas to start your entire business. They provide a startup business formation, legal entity, you can even issue stock. The main thing is you'll have a Stripe account, which is what is used to process funds, and they'll file your LLC, your EIN, and your tax ID. They'll even set you up with a business checking account, a bank account. I'm not exactly sure how it works because I haven't used the service myself, and I know it costs around $700. It's a fairly steep fee, but it does work, which is great. It might save you a lot of time and money.
The last thing is, PayPal for business. PayPal offers a business account. It does not come with a checking or routing number. It's not like a regular checking account at the bank, but it is a payment processor. You can accept payments and make payments through PayPal. They can even give you a debit card. You can use the debit card anywhere; they'll even give you cashback for using it. I recommend that you set up a business PayPal account. You'll be able to use that with your eCommerce store for accepting payments.
Those are the top banks I would recommend going with. There are a lot more banks out there. But these are the ones that I've actually had experience with. Make sure you get this going for your business, and you'll be good to go.
I hope that was helpful. Keep in mind to always separate your business and personal finances.
Learn about the best credit cards for dropshipping that you can use to pay your suppliers, vendors, software, and services you'll use for an eCommerce business so you can get cash back and points rewards you can use to invest in stocks and crypto and get almost free luxury travel. I recommend that you use business credit cards for business transactions and personal credit cards for personal transactions to keep your finances separate and easier and cleaner for bookkeeping and tax purposes as well.
A business checking account for business, incoming, outgoing, a personal checking account for personal income, outgoing guys. I can't stress that enough after ten plus years of doing eCommerce businesses myself. I've learned that it is very difficult to go through and file your taxes, so make sure you do that and set it up.
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