Set up Your Business to Receive Payments, the Right Way!
Do you have a Checklist to Setup My Business to Receive Payments the Right Way?
Over the many years that I have been in the Payments Industry, many new business owners have asked me this question. Well, here is a little bit of background and some points to think about when Setting up your business.
You need to setup a separate bank account to receive checks, credit card payments, and also cash, depending on the type of business you incorporate. Some business types, like sole proprietorships, do not need a separate bank account and you could use your personal checking account to accept payments. Your bank account should be ready before you receive your first payment from your first customer.
Most businesses do not need a special license or permit to start accepting money from their customers. However, there are other basic business rules and regulations that you need to follow. Check with your local Business Registration and Licensing Office.
Here are the Most Basic Steps to Set Up your Business to Receive Payments, The Right Way!
1. Register Your Business and Obtain a Tax ID number.
To open a business bank account, you will first need to request a Tax ID number from the IRS. Once the IRS issues you a number, you will then need to obtain a tax ID number from the state in which you intend to do business. To get a Federal Tax ID(or EIN) number, you can do it online at the EIN Portal (also available from the IRS website). To obtain your State Tax ID form, go to the State Government Websites page on the IRS website to check how to get it done.
2. Apply for a DBA (Doing Business As) Name.
If you decide to be a sole proprietor and choose to do business under a different name (known as a DBA), you will need to register your DBA with your local Business Registration and Licensing Office before your bank will let you open a business account in your DBA name. In some states, this is as easy as paying a registration fee to the county clerk either in person or online. In other states, they may require an Ad in a local newspaper.
3. Set up a Business Bank Account.
If you’re running your business under your name, you can deposit customer payments into your personal checking or savings account. If you have incorporated your business, be it through httpss://www.incauthority.com/ or by other means, and selected a corporate name, then you need to set up a business checking account so that you can deposit checks made out to your incorporated company name.
Depending on the type of business organization you incorporate, your bank may need your company’s articles of incorporation and your corporate seal.
4. Set up a Merchant Account.
- a credit card merchant account
- a bank account
- a virtual terminal to process payments OR a card swiping machine
A merchant account will allow you to accept customers’ payments via MasterCard, Visa, American Express(Amex). When your payment is charged to your customers’ cards, it will automatically get transferred into your associated bank account within 2 to 3 days. At the end of the month, you will get charged whatever commission rates agreed upon in your contract and they will be automatically debited out of your associated bank account.
Merchant Account set-up fees range from $30 to $250. There will also be monthly and per-transaction fees. There may also be a monthly PCI Compliance Fee.
Monthly Statement fees typically range from $3 to $15 (or more), and transaction fees range from 5 to 50 cents per swipe.
The Discount Rate is a percentage of payments that you are charged per transaction. This can range from 1.5% to 4%, based on transaction amount, sales volume, and your risk factor. The discount rate will also depend on whether you swipe the customer’s card at your store or through an online payment system like an eCommerce Store.
5. BONUS TIP: Switch & Save
If you already have a Merchant Account with another provider where you are accepting Credit Cards, and/or ACH Processing, I may still be able to help you lower your costs. Read more about our Switch & Save Program. In addition to beating your Processing Rates and reducing your Transaction Costs, I will switch you over to our services Free of Charge! And make sure your customers are aware of all the different ways they can pay, with handy stickers, as this can be the difference between a sale and no sale.