A real estate business can be profitable, providing an excellent opportunity to earn a living, especially if you have developed expertise in the niche. But whether you’re a landlord that manages properties, or an investor that flips houses, one of the crucial aspects of growing your real estate company is managing your finances efficiently. With sound financial management, you can enhance your cash flow strategy and avoid problems as you run your business.
When it comes to effective business finance management, it’s best practice to separate personal and business money. That way, you can monitor your expenses and income better. You can achieve this by opening a business bank account. But even if you’re not a local, you can still open a US business bank account for non-residents to separate your accounts and help your company to take off quickly.
Benefits Of Opening A Bank Account For Your Real Estate Business
Before we explore steps to open a bank account for your real estate business, here’s a brief look at how your business can benefit from it:
- Protects Yourself From Company Liabilities
Running a real estate business as a limited liability company or corporation effectively protects personal assets from business liabilities. However, this might not be true if you keep personal and business finances in the same bank account. Aside from being unable to prove that you and your business are different entities, it’s completely impossible to know which money is personal and which belongs to the business. Therefore, in case of a problem with creditors and lenders, you can lose all your money.
By creating a business account, however, you can separate your business from personal funds. As such, your money won’t be used to cover business debt obligations.
- Helps Build A Business Credit
Another benefit of opening a bank account for your real estate firm is that it can help establish business credit. Most financial institutions use a company credit history when evaluating and approving loan applications. Whether you want a loan to purchase materials, supplies, and equipment to support house flipping needs, acquire new rental properties, or grow your internal team, a good business credit history can help you qualify for a loan.
- Lets You Look Professional
Professionalism goes a long way in building a good image and reputation in the real estate industry. This enables you to expand your reach and tap into potential clients, especially since real estate investors or property owners are likely to trust and work with a company with a professional bank account instead of using personal accounts.
How To Open A Bank Account for Your Real Estate Business
Opening a business bank account is often easier than you think. It can even take minutes, especially if you’re applying online. To help you get started, here are steps to keep in mind when opening a bank account for your real estate business:
Select A Bank
Vouching for the bank is essential to ensure it can meet the needs of your real estate business. Below are factors to consider when choosing a bank:
- Range of services: Consider the service the bank offers. For instance, will they issue a business credit card? Do they offer a business line of credit? A bank that offers these services can come in handy since you may not have to reapply since they already have your details to get approved.
- Fees and requirements: Depending on the bank, some facilities may have maintenance fees, transaction fees, deposit fees, and minimum balance requirements.
- Accessibility: An accessible bank can boost the convenience of managing your real estate business. That said, it can help to check if there’s a nearby branch you can go to, a working website or mobile app, and the accessibility of their automated teller machines (ATMs).
- Initial Deposit: Some banks may require you to deposit a certain amount of money to activate your account, especially for large sums/checks. This is usually done using a bank deposit slip, but it isn’t necessarily an account opening requirement.
Instead, a deposit slip’s purpose is to prove that the transaction was made. It also helps ensure the accuracy and ease of transactions while facilitating reconciliation if discrepancies arise from the initial or future deposits.
Not all banks offer the same level of service and dependability, so ensure you compare different banks to choose the best one for your real estate business.
Prepare Documents Necessary
The documents required to open a business bank account vary from one bank to another. But, generally, there are some documents any bank will require from you. They include the following:
- Personal Identification
Banks will typically ask for documents that identify you. This can be your national identity card, driving license, or passport. You may also be required to provide other personal details such as a physical address, email address, and telephone number.
- Employer Identification Number
You’ll also need to prepare an employer identification number (EIN) to open a bank account if you registered your real estate business as a corporation, partnership, or limited liability company. However, you may need an EIN, even if you run your business as a sole proprietorship, if you plan to hire employees.
- Other Documents
Depending on your business structure, you may also need to produce agreement documents when opening a business bank account, as summarised below:
- Sole trader: Business registration certificate and licenses.
- Partnership: Business registration certificate and licenses, and partnership agreements.
- Limited liability company: business license, articles or organisation, and operating agreement
- Corporation: business license, articles of incorporation, corporate bylaws.
While this list is not exhaustive, it can give you a good start when preparing the necessary documents when opening a bank account. For better guidance, check with your bank for other requirements to prepare.
Takeaway
One of the ways to safeguard the finances of your real estate business is by opening a separate bank account. Apart from ensuring your money doesn’t cover business debts, it’s also an effective way to improve your cash flow management strategy. Consider the insights above when opening a business bank account.
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