Documents Required For Opening Business Bank Account – Small business owners should know what purpose each one serves, what their key features are, and how opening them will affect their business.
In short, if you want to receive credit, debit and other online payments from customers, you need to open two types of accounts.
Documents Required For Opening Business Bank Account
By reading this article, you will get a basic understanding of the basics of both accounts. You’ll also learn how they differ and what benefits they can bring to your small business.
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A merchant account is a type of business bank account that allows businesses to accept credit and debit card payments, as well as online payments.
Online companies collect information regarding these cashless payment methods through the following payment gateways:
When customers insert their card or enter their card information into a payment gateway on a company’s website or app, the information is sent to the merchant bank – the bank that hosts your merchant account.
This bank facilitates communication between various parties involved in cashless payment and ensures proper transfer of funds from the customer’s account to your account.
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First, the acquiring bank sends the transaction information to the customer’s card issuer, also known as the card provider, who checks whether there are sufficient funds to make the payment.
The card issuer approves or declines the transaction and then sends a response in data format to the electronic terminal paid for by the customer.
If the issuer approves the transaction, the payment is processed and transferred to your merchant account, where it is held and available for use for an average of 24-48 hours before being transferred to your corporate bank account.
This all happens in a matter of seconds and comes with a variety of fees for the merchant account, which vary from provider to provider.
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These fees typically range from 1.75% to 3% of the dollar amount of each transaction and 20 to 30 cents per transaction.
For example, Square, a leading merchant account provider, charges 2.6% + 10 cents for contactless payments, chip cards (swipe or insert), and magnetic stripe cards.
Another reason is that the bank also doesn’t make money from you by renting you a card terminal.
A business bank account enables business transactions and is a legal requirement for all businesses except sole proprietors.
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This is where merchant account funds go, as well as cash and checks from your customers.
Funds in a corporate bank account are typically used for normal business expenses, such as monthly electricity bills, software subscriptions, or payroll processing costs.
However, there are some special features that you should know before you open a business bank account.
First, most banks charge a monthly or annual account maintenance fee. The amount of this fee depends on the bank.
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Bank of America rewards its customers for keeping high balances, but many banks may take a different approach by charging you for lower than minimum balances.
Some banks put a limit on the number of free transactions you can process in a certain period – usually 200 per month.
Generally, the more funds you have in your account, the more transactions you can make. Banks reward customers for handing over large sums of money.
Finally, business bank accounts usually come with handy reporting tools to help you with your taxes, cash flow management and expense tracking.
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Businesses use a combination of a merchant account and a business account to process and accept credit cards, debit cards, and online payments from customers.
When it comes to accepting card payments, the main difference between a merchant account and a business account is that credit card payments made to a merchant account are processed much faster than those made to a business bank account.
When a merchant bank account accepts a card payment, the payment is delayed until both the acquiring bank and the issuing bank approve the transaction.
On the other hand, the merchant account bypasses this delay by transferring money to the seller, even if the online transactions are still pending.
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They verify the merchant in the application process, but for a corporate bank account they have to fill several forms.
Another important difference is that corporate bank accounts allow you to withdraw funds directly and deposit them into your account. This is not possible in a merchant account.
So, corporate bank accounts are primarily used to track day-to-day business expenses and pay for office rent, payroll or advertising:
Once the purchase is approved by the customer’s credit card, the money goes to your merchant account.
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From there, you can transfer the funds to the company’s bank account, where you can use them to make purchases, pay bills, and run your business.
Merchant accounts are needed by businesses that want to accept credit, debit and other online payments from their customers without having to wait days for each transaction to be authorized by the acquiring bank and issuer.
Enabling customers to pay cashless and online is important in this economy, which is why more and more companies are opening merchant accounts.
If you are running an online business, a merchant account is very important because collecting cash is not really a viable option.
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Instead, with a merchant account, companies can set up online payment gateways where customers can make cashless online purchases from their laptop or phone without even interacting with staff.
Trading accounts are also required for physical companies. It is rare for a business to accept only cash. Customers are often confused when faced with refusals to credit or charge.
Even mobile businesses like taco trucks now accept credit and debit cards. They simply use the portable card terminals provided by their trading account provider.
Before applying for a merchant account you should also know that you need to set up a merchant bank account.
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Acquiring Banks (Merchant Account Providers) Companies must deposit funds from the merchant account into a personal checking account or corporate bank account rather than another.
You can accept payments in different currencies, streamline cash flow and demonstrate the legitimacy of your business, thereby building authority in your niche.
As each generation moves towards cashless payments, it is important to set up your business with a merchant account to easily process credit cards, debit cards and other forms of online payments.
If you want to open a merchant account to receive cashless payments, you must have a merchant bank account.
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Even if you don’t want to offer cards as a payment option, unless you’re a sole proprietor, your business must legally have a business bank account.
If you run a corporation, limited liability company (LLP), or limited liability company (LLC), a business bank account is your best bet.
Sole proprietors should also consider opening business bank accounts, as they provide an additional level of legal protection from lawsuits.
Only the funds in the bank account are at risk of seizure. This is one of the many reasons you should separate your business finances:
The Documents You Need To Open A Business Bank Account
Another benefit of having a business bank account is that it makes your business appear more professional and trustworthy to customers.
When you can accept credit and debit cards, shoppers trust you to keep up with the latest trends.
Using a corporate bank account also makes managing your tax preparation easier. Most companies pay quarterly business taxes.
Collecting your expenses and income in one online place makes estimating these quarterly tax payments easier.
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On the other hand, if a sole proprietor uses a personal bank account as a repository for customer payments, it can be difficult to tell the proceeds from selling the business and the proceeds from Venmo from a friend or other source disconnected from the business.
Also note that if your business is selected for audit and you do not have a corporate bank account, the auditor may review your personal account.
How opening a business bank account lays the foundation for a good relationship with your bank can help you secure business loans and other forms of financing in the future.
It’s an even better experience working through these sometimes difficult financial situations and working with a bank you trust.
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Choosing the best bank for your specific business needs is the most important part to spend the most time on.
That’s why it’s important that you set up your business to accept these cashless payment methods from your customers. They will appreciate it.
Both are required to accept these payments, as well as other contactless online methods, without any delay. Submit the Canada Bank Account Opening form by email, link or fax. You can download, export or print it.
With, only a few simple clicks are required to make changes to the documentation. Follow these quick steps to convert your PDF Canada Bank Form online for free:
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