At its core, a corporate bank account is not that different from a personal account. However, it is crucial that you have a separate one to properly separate your personal and business expenses
In any industry it is important to keep personal and business assets separate but the government takes this extra seriously and there are laws to enforce it
When should I open a corporate bank account? You should open your company’s account once the business is “incorporated.” If you need help with this step, see our earlier class on incorporation and registration HERE
Which bank should I use? Consider:
- Do you have an existing relationship with a bank?
- How far is the branch from your home and/or office?
- What types of services does the bank provide?
- What history do they have/what are their requirements for giving lines of credit to young government contractors?
- What kind of guarantees do they require?
Guarantees: When you are researching financial institutions, make sure that you understand the sorts of guarantees they require on different products
Personal Guarantee: YOU ARE ON THE HOOK FOR THE DEBTS THAT YOUR COMPANY CREATES TO THE BANK (E.G. A LOAN
Corporate Guarantee: The company is on the hook but you aren’t
If the bank demands a personal guarantee then ask for a partial guarantee to reduce your exposure and once you have proven that you are reliable and pay promptly negotiate to remove any personal guarantee.
What do I need in order to open an account? You will need to bring:
- Incorporation documents
- Proof from IRS for Federal ID number (EIN)
- Personal ID showing you are a “member of the business”
- Initial funds for minimum balance requirements
- Call the bank ahead of time as requirements vary from one institution to the next.
Does my spouse need to be involved in this process? It depends on your state but likely yes. If something happens to you, there needs to be someone that can access the account.
This seems like a lot, do you have a couple recommendations: You should go meet a couple bankers to see who you like but if you are in greater DC I recommend the following banks that really understand small government contracting:
- Main Street Bank
- Eastern Foundry has established a relationship with Main Street Bank and can aid in discussions and negotiations.
- United Bank
- Burke and Herbert
- Republic Bank
- Bank of Georgetown