You have heard it a million times; you need to have a separate bank account for your business. I said it to you in my last post, Indie Crafters: The Top 5 Reasons for Bookkeeping.
I recently had to set up my own business bank account and I thought the process would be useful information to share with you.
I use Bank of America (no affiliation), I have ever since moving to the US in 2002, and I love that I can deposit a check through an app on my iPhone, but I’m sure the process is similar no matter where you do your banking.
To open a business bank account, you will need to provide specific documentation.
- Social Security Number or Business ID Number.
- Business name filing document, such as Fictitious Name Certificate of Certificate of Trade Name showing both business and owner’s name.
- Business License showing both business and owner’s name.
We all have a Social Security Number. Do we need a Business ID Number, otherwise known as an EIN?
If you are purchase items to use in the production process, then having an EIN allows you to set up a wholesale account. In other words, if you buy fabric and make quilts, you can buy that fabric at wholesale prices.
Sounds Great! But think about for a minute. Wholesale distributors like Checkers and Moda United Notions have minimum order quantities to open and maintain an account. They also sell in bolts and/or minimum order quantities, such as 6 charm packs. So unless your need a whole bolt of that pretty yellow floral to make your product for resale, it may not be totally necessary.
If you are operating an online retail shop where you sell fabric, then yes, you definitely want to set up an EIN. It’s as easy as going to the IRS website, entering some information, and within minutes, you have an EIN number.
What did I do?
I set up an EIN because it is simple, fast, free, and in case I need it, it’s there. It will also help me when it comes time to file my taxes, just for simplicity sake in my own head, really.
#2 Business name filing document, such as Fictitious Name Certificate of Certificate of Trade Name showing both business and owner’s name.
What is a fictitious name? I’m fictitious? No, I’m Allison Rosen! (sorry, couldn’t resist that one)… but my business name, The Crafty Controller, that is just something I made up and is fictitious. The more commonly used term for this is a dba or Doing Business As.
My name is Allison Rosen and I’m doing business as The Controller Controller.
In North Carolina, I need to complete A Certificate of Assumed Name for a Sole Proprietorship.
This form needs to be notarized – so I made sure to do that before I brought it to the register of deeds office in my city. Then it takes just a short while to be processed.
I need this certificate before I can apply for a Business License.
#3 Business License showing both business and owner’s name
I live in Wilmington, North Carolina – and the State specific requirements discussed here are related to my own address. Each State has different requirements (of course) but there is a very handy centralized website to help you out.
Once you are at the State level – guess what? There are also County level requirements.
It can be a tangled web of documentation with lots of ‘if this, then that’ type of wording.
What did I do?
I called the toll-free number and spoke with a really helpful person who told me absolutely everything I had to file. The order in which to file it, and the telephone numbers of my local zoning and business license offices.
Turns out I need to file:
- A Certificate of Assumed Name for a Sole Proprietorship. (see #2 above)
- A home occupancy permit request
- A Application for Wilmington Privilege License
- An Application for State Privilege License
Luckily, the Wilmington Zoning and Privilege License offices are in the same building.
And finally, I can use all of the information gathered so far to apply for the State Privilege License.
Are you still with me?
All of this for a bank account, seriously?
To be frank, I was kind of surprised by the bureaucracy of the whole thing; then I wasn’t. It’s the government after all…
Business Bank Account
My bank, and I’m sure yours as well, offers a variety of choices when it comes to checking accounts. Different fee structures, account minimum balances, reward programs, etc.
After about 2 minutes of reading the various options on the website, I clicked the ‘chat here’ button and another super friendly person helped me through it step by step. Do you see a trend here? Customer Service!
I chose a Business Fundamentals Checking Account because to waive the $15.00 monthly fee, I need to charge $250.00 a month to the debit card.
I don’t think I will need to charge that much, but that is much more likely than having a minimum balance of $10,000 or direct deposit set up which is required for some of their other account options.
I also opened a Business Investment Savings Account because it was free, and without it, I wouldn’t have overdraft protection. Not that I plan to need it, but let’s be safe.
A Business Credit Card with no annual fee and a decent rewards program rounded out my application.
I have all of my business filings done and a bank account to keep everything separate.
What about you? Do you have a bank account that is specifically for your business expenses? Have you gotten trapped in the ‘if this then that’ cycle of State requirements?
I am more than happy to take this off yours hands, if you would like to work with me, let me know! mail at allisonrosen dot com
I would love to hear from you, and I bet your fellow Indie Crafters would like to hear about your experience. Share it with us in the comment section below.