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Establishing the Financial Foundation

Establishing the Financial Foundation

 
Man holding cash with a calculator and accounting notebook on table
 
 

Three Steps to Establishing the Financial Foundation

(1) Obtain an Employer Identification Number (EIN)

An EIN is the business equivalent of a social security number. Obtaining an EIN for your business will allow you to conduct business on behalf of your company, such as opening bank accounts or filing taxes. Obtaining an EIN is a requirement for most business structures, except if you are a sole proprietorship. As a sole proprietorship, you and your business are considered to be the same person, so you can use your own social security number to conduct business for your company.

To have an EIN issued for your business, you must file an application with the IRS (IRS Form SS-4). The easiest and quickest way to file for an EIN is online. You can apply for an EIN online here.

(2) Open a Business Checking Account

Although not strictly a legal requirement, it is best to open a business bank account. However, if your business is a limited liability company or a corporation, it is important to open a separate business bank account to show that you and your business are separate. If you do not, then you are in serious risk of losing your business’ limited liability protection where then you will be personally liable for the debts of your business.

Before heading to your local bank to inquire about opening a business checking account, consider the following questions in order to choose the best checking account for your particular business:

  • What services does my business need?

    • merchant card processing?

    • business savings?

    • need to make lots of transactions a month?

    • need to withdraw/deposit large sums of money a month?

    • online banking?

  • What are the expenses of opening the account? (Monthly fees, transaction fees, etc.)

  • Does the account earn any interest?

  • Do I need to maintain a certain balance each month to avoid a fee?

The following websites have compiled a list of “best business checking accounts” that are worth a read to begin your research into opening your business checking account.

https://www.nerdwallet.com/best/small-business/business-checking-accounts

https://www.moneyunder30.com/best-business-checking-accounts

https://www.forbes.com/advisor/banking/checking/best-business-checking-accounts/

When you decide on the type of checking account you need and the bank that you want to open the account with, make an appointment with that bank to set up the business account. While making the appointment, ask what business documents are needed for you to bring to open the account. The type of business documents needed vary on the type of business structure your business is. In general, you may need to bring the following (*check with your specific bank for the required documents):

Sole Proprietorship

  1. Picture Identification (e.g. Driver’s License)

  2. Business License

  3. If applicable, fictitious business name

Partnership

  1. Picture Identification (e.g. Driver’s License)

  2. Business License

  3. Partnership Agreement

  4. If applicable, fictitious business name

  5. Certificate of Limited Partnership (applicable to limited partnerships only)

  6. Statement of Qualification & Limited Liability Partnership Election (applicable to limited liability partnerships only)

LLC

  1. Picture Identification (e.g. Driver’s License)

  2. Employer Identification Number (EIN)

  3. Articles of Organization

  4. Operating Agreement

Corporation

  1. Picture Identification (e.g. Driver’s License)

  2. Employer Identification Number (EIN)

  3. Articles of Incorporation


(3) Open a Business Credit Card

For the same reasons that you should open up a business checking account, you should obtain a business credit card, so you can easily separate your personal expenses from your business expenses. Having a business credit card will also allow you to pay expenses without constantly having to write a check. As an added bonus, you can earn rewards while using the business credit card, such as cash back, travel points, or airline miles.

The following are links to websites that review and compare the best business credit cards:

https://www.valuepenguin.com/best-small-business-credit-cards

https://thepointsguy.com/guide/top-5-business-credit-cards/

https://creditcards.usnews.com/business#how-compare-business-credit-cards

 

DISCLAIMER: The contents of this article represent the opinions of the author and do not constitute as legal advice. Due to the generality of this article, the information provided herein may not be applicable in all situations and should not be acted upon without consulting with an attorney. Neither this article nor any legal analysis, legislative updates, or other content derived from it should be construed as legal or professional advice or as a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of this article. The choice of a lawyer or other professional is an important decision and should not be based solely upon this article. No representations are made as to the accuracy, completeness, or validity of any information contained herein.

Contact the Law Office of George R. Bravo to find out how any information here applies to your particular circumstances.