General Business Files

Sometimes looking into opening an account or accounts in banks can be confusing. There are so many types of banks and bank accounts! Which banks are right for you to open an account in? Which types of accounts do you need to open? Below are some simple explanations of several types of banks and the accounts you can open. One will surely be right for you!

There are many kinds of banks:

1. Savings Banks

These banks can also be called “Thrifts”, and are businesses that are for-profit. Savings Banks take deposits of money, invest that money, and pay the depositor interest out of the money made from those investments. Some Savings Banks give credit to depositors.

2. Credit Unions

These banks are non-profit financial institutions. A Credit Union is owned and controlled by those doing business there. Membership is needed to get into a Credit Union, normally determined by where the person works, their location, or possibly where the go to church.

3. Commercial Banks

These banks used to only deal with businesses, but have extended their services to individuals. Commercial banks offer individuals most of the same services as other types of banks.

4. Savings & Loans

These banks usually provide savings accounts. Money deposited into these banks is then loaned out to local residents in the community, normally for home loans.

5. Investment Banks

These banks do just what the name says…they invest. Investment Banks buy and sell stocks and bonds and give investment advice to its clients. These banks do not accept deposits, make loans, and are not insured by the FDIC (Federal Deposit Insurance Company).

There are many kinds of accounts:

1. Savings account

This type of account is probably the most basic account offered by banks. You deposit money into a savings account and earn interest on that deposit based on the APR, or Annual Percentage Rate.

2. Checking account

This type of account allows for depositing, withdrawal, and the writing of ‘checks’ to pay bills and for purchases. Many banks now offer ATM or debit cards along with the standard checkbook when you open a checking account.

3. Certificate of Deposit

This type of account, also known as a CD, is for deposit only. You don’t touch the money deposited in a CD for an agreed upon amount of time, ranging from 6 months to several years, and you will earn a guaranteed amount of interest. If you do withdraw the money before the agreed upon date, many banks will charge you a fee.

4. Money Market account

This type of account is similar to a savings account. The interest rate of a money market account is higher than the traditional savings account, but the minimum balance is typically $10,000 or more!

These are the basic kinds of banks and accounts available. Look around, and shop around, for a bank that is right for you.

So you’ve written all your plans, you’ve got any financing you need, and you’re all ready to set up your company. Uh, wait a minute… how do you do that?

The Basics.

A company is an entity, separate from you, that you need to create before you can do business. You decide what type of company it will be, you give it a name, and then you send off all the relevant papers to your government and pay any fees that need to be paid. Even for a one-person home business, it’s good to form a company — it keeps the finances apart, and means that you can sell your company to someone else if you want to. Besides, it might be a legal requirement where you live anyway.

Before you do anything else, you should send off for the forms you need to start a company — in the US, for example, you would talk to the SBA (Small Business Administration), while in the UK you would need to get in touch with Companies House. If you’re not sure, your local Chamber of Commerce or your lawyer should be able to advise you.

Types of Company.

The chances are that you will want your company to be ‘limited’, which means that your own liability when it comes to debts and other legal issues is limited to a certain amount, usually the amount that you invested originally. While it is possible to start an ‘unlimited’ company, it offers no real benefit — it just means that you take far more legal risk.

The choice between ‘private’ and ‘public’ companies should be equally easy. A private company can be of any size, and is owned only by the people who started it. A public company, by contrast, is one that can be traded publicly, and may be listed on the stock market — there will be a high minimum share issue requirement for this type of company that will put it well out of your reach, and formal qualifications may also be required.

So the kind of company you need is very probably a limited liability company, usually abbreviated as ‘LLC’.

Legal Requirements.

Before you can start a company, there are a few legal requirements you need to fulfill. You generally need to be over 18 and otherwise permitted to enter into contracts. You must not have been disqualified from being the director of a company, and you also can’t be bankrupt.

So far so simple, right? One last sticking point is that you will usually require two people to act as the directors of your company, not just one — you might have to ask your partner or a lawyer to be another director, or to act as a ‘secretary’.

Fee Time.

You’re likely to be hit for lots of different fees as you go through the process of setting up your company, but none of them should be too large. There will be a company registration fee, as well as a witnessing fee and perhaps some charges for stationery. You may be able to pay extra to have your company registered more quickly.

An Alternative.

If setting up a company sounds like hard work, you’ll be relieved to learn that almost all sorts of people offer comprehensive company registration services that don’t even cost all that much. Expect to pay about twice as much as the standard do-it-yourself fees, but it’s hardly going to break the bank anyway, and it can save you a lot of trouble both now and later on to get things done properly. If this is what you want to do, speak to a lawyer, an accountant, or even a specialized ‘company formation agent’.

Your Obligations.

Finally, be aware that from the moment you set up a company, you may have some obligations placed on you. The largest of these is tax reporting, where you will be required to send in a tax report every tax year. Forgetting to deal with tax issues could land you with a fine, so make sure you understand exactly what you’ve signed up for. You might also be required to do things like putting a small sign with your business’ name on the front of your business premises (your house), or to start writing your company registration number on business-related letters you send.