After spending what feels like a decade of your life to start your own business, your dream has finally taken flight. Everything is set but choosing your business bank account. You’ve already assigned it into the pile of “I’ll get to it later”.
But why? Is it because you already share a financial relationship with a bank and it is easier to extend that relationship to your business as well?
That could be the the easiest to do, but just like you’d spend significant effort looking for a life partner, you should do the same for your business bank account. After all, it’s not like you would change your bank account every month. Most businesses stick to the same bank, ‘til death (of the business or bank) do them apart’.
Let’s first find out why a business bank account is necessary:
There are many reasons to have a business bank account – legal, professionalism and ultimately, it’s just good sense.
When you own a business, your business becomes legally responsible for any liabilities. So, firstly, if your personal and business finances are commingled, your business will not look real. This will make you personally liable in case of any disputes. Hence separating your finances can protect your personal assets against any liability.
Appearances were, are and will always remain important when running your own business. Be it a fancy office in the financial district or whether you work from home. – you need to keep up your business appearances. When you have a business account, it will better entice prospective clients by making your business look professional and help establish its legitimacy better.
Evaluating the growth of your business
Separating your business and personal finances helps you better evaluate the trajectory of your business performance. You can calculate your income to expense ratio, if your business is making money, evaluating your cash flow situation, etc.
Management and simplicity
You will be in a better position to manage your business if you have a separate bank account to manage your business finances. Firstly, it will help you evaluate how much money is going in and out of your business. Secondly, it will simplify your tax process because you can easily put together all your business information from your bank account instead of breaking your head segregating your business and personal finances at the last minute.
What do you need to open your account?
Now that we have established the importance of opening a business account, let’s delve into what you need to get the process started:
- Business/Corporate Account application form.
- A Resolution sanctioned by the Board of Directors to open the business account. (Applicable for Private Limited and Limited Liability Partnership companies).
- A Certified True Copy of the M&A or the Memorandum and Articles of Association. (Applicable to Private Limited companies)
- A Certified True Copy of the NRIC or Passport of ALL Partners, Authorised Signatories and Office Bearers.
- A Certified True Copy of the By-Laws. (Applicable to Associations, Societies and Clubs).
- A Certified True Copy of the MOM or Minutes of Meeting of the Management Committee.
- Additional documents may be requested on a case-to-case basis.
Some banks require that the majority of directors and the account signatories to be physically present when the paperwork is signed in Singapore when opening the business bank account. However, banks having overseas branches may also accept the documents being signed at their branches overseas or even before a Notary Public.
What to look out for when opening a business bank account
1. Avoid providing incorrect information
This is a common mistake to avoid, especially if you are just starting your business. The opening of your business bank account will be delayed if you bring incorrect paperwork during your appointment. Organize the documents before you enter the bank to sign the paperwork. When you make the appointment, if you are unsure regarding the provision of additional documents, contact your relationship manager or a banking officer regarding the documents you need to submit.
2. Managing your cheque signings
Even if you are just starting your business, it is always good to think and plan ahead. You need to setup and dedicate your cheque signing responsibilities. For instance, if you are starting a business with a partner, whose name will be on all the cheques? Will your business cheques have 1 or both your signatures? Are both your signatures required for all cheques or only cheques over a certain amount? However insignificant this sounds right now, it will help resolve conflict and issues later on when your business takes off.
3. Order the right cheque books
Is your business going to have a DBA (Doing Business As) name on its cheques or will it have your company’s legal name? Do not get the wrong company name printed on your cheque books. If you are an entrepreneur starting your own business, then check with your bank if they will provide you with an electronic cheque printing option that can be compatible your company’s accounting software.
4. Know the minimum account balance required
Know what the minimum balance to be maintained on your business account is. If you fail to maintain this minimum balance requirement, you will unnecessarily incur fees and charges. This can be a painful mistake when you are just starting your business and money is tight.
5. Choose a bank that is best for you
As mentioned previously, a business bank account is a long-lasting relationship that you will be maintaining with your bank. Therefore, you need to pick a bank that can give you what you want out of this business relationship.
Business bank accounts offered by top banks in Singapore
OCBC Business Entrepreneur Account
This account comes with several perks that are offered for free. These could include things like 200 GIRO transactions, FAST Payment Transfers, 2 TT (Telegraphic Transfers) and 30 cheques. You would also get access to internet and mobile banking with free debit cards.
Other perks could include discounts of 50% on Singtel Business Mobile Plans and no minimum balance requirements for the first 6 months. However, you will have to make an initial deposit of S$3,000 and maintain an average balance of S$5,000 (after the first 6 months).
DBS Entrepreneur’s Account
With this account you get a fee of the minimum balance for the first 3 months after which you will have to maintain S$10,000 in the account. If you fall below the minimum balance you will be charged a fee of S$35 per month. The initial deposit will be only S$3,000 and there will be no fee charged for services like cheque books, debit cards and internet and mobile banking.
Another offering from DBS is the Digital account which has no minimum balance requirements but it does charge S$18 per month. Since there are no minimum balance requirement, there is no penalty for not maintaining funds in the account. This is ideal for startups in their early stages that may also transact online more often. With this account you will have to pay for cheque books (S$25 per cheque book) should you need them.
UOB e-Business Account
The initial deposit required for this account is only S$1,000 and no services charges are imposed. you also get to enjoy a waiver of S$20 on your monthly subscription fees on the Business Internet Banking Premium package. It also offers a rebate of S$1 on each outward TT upon maintaining the minimum average daily balance of S$10,000 in your business account.
The great thing about this account is that you get a 100% rebate on your Bulk Payroll transaction fees processed through Business Internet Banking.
Cutting costs is one way of looking at choosing a business bank account, however, money comes and goes, but quality of service and perks will stay with you for a long time.
Additional Reading: 3 Key Traits You Need to Have to Thrive in a Startup
Keep reading the BankBazaar blog for more insights into career issues, together with tips to master your money and get better at life.