Landlords will benefit from using a business checking account to deposit rental income and pay property expenses. While some landlords choose to use their personal checking accounts for rent collection, you can easily open a business checking account to keep your professional and personal finances separate.
You have renters, doors, and property management down to a science. Then, after all of this setup, one thing remains: money. Where do you put it? A business checking account, of course. But, where do you start setting one up?
As a landlord, collecting rent and managing money is one of the most important aspects of your job. Your lease will detail how rent will be collected each month, like a handwritten check or an electronic payment, for example, and you will need to decide how and where you will deposit and manage that rental income. Using a business checking account, even if you self-manage one property, is one of the best practices for your rental property income. This article will teach you how to easily open a business checking account as a landlord.
Why You Need a Business Checking Account for Landlords:
A business checking account is beneficial for landlords because it enables the separation of your personal and business finances. Keeping these separate can help with tax season, paying vendors and property expenses, and allow you to streamline your services as a landlord. This practice enables you to prepare for your portfolio’s growth if that is something you want to pursue.
In addition, if you choose to collect rent online and use a property management software platform, you will be required to have a business checking account. Thankfully, opening a business checking account is a simple process and is often as easy as opening a personal checking account.
As an additional note, these steps can be used for a property manager or management company. Like all business owners, property managers should consider opening a separate business account to manage their daily expenses, such as office space, utilities, rent, software subscriptions, and paper products. This will keep their personal office expenses separate from the property portfolios they manage on behalf of owners to avoid the commingling of funds.
Learn more: A Real Estate Investor’s Guide to Tax-Smart Property Management
What Is Needed to Open a Business Checking Account:
The process of opening a business checking account is much easier than you might think, and can even be done online. You might be required to go through a standard identity verification process, similar to when you opened a personal savings or checking account. Specific requirements depend on your location and the bank you choose.
In order to open the account, you may need any applicable documents from the following:
- An address
- A phone number
- The name or names of the account owners
- Two or more forms of identification
- Your SSN or EIN
Depending on your state laws, your bank might request a business license if you are operating as an LLC or using a DBA as a sole proprietor.
In most cases, however, if you are a self-managing landlord or investor, you will not need to register a business in order to open a business checking account.
To put it simply, to open a business checking account, you will need your business’s documentation, your identification information, and an initial deposit amount. The minimum deposit required for this account will vary depending on the bank you have chosen.
Understanding an EIN for Landlords:
An EIN is an employer identification number. Most banks prefer you set up a business account with an EIN rather than a SSN. An EIN indicates to the bank that you are keeping your “business” finances (EIN) separate from your personal finances (SSN).
You can obtain an EIN instantly and for free from the IRS’s government website via a quick form.
How to Pick a Bank for a Business Checking Account as a Landlord:
The next step in the process is to choose a bank with which to open your account. There is no shortage of options for your banking needs, meaning you can be quite selective in this process.
You might be able to open a business checking account at the same institution as your personal checking and savings accounts. You should choose your bank based on the services it offers and how well they suit your needs. For example, some banks are entirely or mostly online, while others are primarily in-person. If being able to walk into a physical bank for help is important to you, select a bank with locations near you.
Other factors that may impact your decision include fees, spending limits, and how well they have optimized their processes. Customer service is important here, as needing help with banking is an inevitable part of the process. If you prefer to speak with customer service representatives, choose a bank that does not regularly use AI or other artificial answering systems to automate customer service.
Take your time in this part of the process, as it is very important. Once you have made your decision, you can move on to creating this account.
How to Open a Business Checking Account:
Finally, after all of that preparation, it is time to set up your business checking account. This is a fairly fast and easy process, often taking a couple of minutes, and many banks allow you to apply for these accounts online. However, if you chose a less automated banking platform in the previous step, you may need to do it in person.
Be sure to read any terms and conditions carefully and make certain that you fully understand them before submitting your application. Some banks have sign-up bonuses that require you to take additional steps or meet specific criteria before you can benefit from them. Others have limits to how much money you can deposit or use at one time, and going against these policies may cause you trouble.
This application will generally be reviewed and approved or denied within a few minutes. It is more likely than not that your application will be approved, so don’t worry too much about the waiting period.
Congratulations, you have a business checking account!
Once your application is approved, you will be able to access your account immediately. You should start with an initial deposit, even if it isn’t required. Now, you can easily track your income and expenses as a landlord, streamline your accounting, and set up online rent payments through your property management software.
Learn more: 5 Tips for Choosing Between Residential and Commercial Real Estate Investing
Final Thoughts:
Setting up a business checking account is a simple process, and one that might be required if you want to access convenient services, like online rent payments. Most banks and related institutions have guides and representatives who are happy to help you with the process, and having your finances kept separate makes the effort worth it.
