Once you sign your lease and have your address then you can incorporate (see the steps on this link) which is why it’s such a big rate limiting step. I suppose you could use your home address to incorporate and open a bank account it it’s a pain to change everything.
Once you incorporate you should then obtain your TIN, or taxpayer identification number, for your business. There is no need to pay someone to do this, many accountants and lawyers will try to charge you $50. It takes maybe five minutes on this online form. It’s the equivalent of a social security number for an individual. You should also fill out a W9 form which is used to supply your TIN to insurance companies for credentialing. Store page 1 of the link as a PDF on your iPhone and computer so you can easily send it out with credentialing applications.
Here’s Ho Sun’s take on opening a business bank account (originally published December 4, 2010):
“You would think that a practice management consultant would know the bare bones basics of signing up for a business checking account. Apparently, that’s not true. While my articles of incorporation were pending approval, my consultant suggested that I sign up for one. What they didn’t tell me was that you actually need your articles of incorporation to do so, which I was easily able to find out by browsing through bank websites. Thank goodness I’ve been avoiding them and not listening to them. In fact, I just ended my relationship with my them 2 weeks ago.
Before you apply for Medicare, you’ll also need to have a business checking account. Medicare requires all claims to be paid through direct deposit, so you will need to send in an EFT authorization form with your application. (Howie’s addendum: for your own convenience and sanity, you will want to get as many insurance companies as possible to pay you with EFT, but sometimes this can’t be done until after you either sign up for electronic remittances or even submit a claim and get paid by check. So don’t sweat it out now, the first two months after you open you can take care of this.)
In order to get a business checking account, you’ll need a business address, an EIN (TIN as illustrated above), and your articles of incorporation. Technically, you could sign up as a sole proprietor, and then update your business entity afterwards, but there’s really no point when it takes less than a day to activate your checking account. Medicare requires you to submit a voided check along with your EFT authorization form, but since your checks won’t come in the mail for a week or two, you’ll need a letter from your bank certifying your account information, unless your bank gives you sample checks.
I signed up for the most basic business account at the same bank as my personal account. Since I already have a personal account with these guys, I won’t be charged any monthly fees. The first 200 transactions per month will be free, and each transaction afterwards will cost $0.40. I won’t earn any interest on this account.
I applied for a business credit card at the same time, but was rejected because I have no cashflow. I’ve really learned to dislike that word throughout this process by the way. So, I ended up getting a Staples credit card with a $1,500 limit and a 29% APR instead. I still wanted some kind of business credit card as soon as possible so that I could start building credit for my corporation.”
The things I have to add to Ho Sun’s wisdom are that you should pick an account that doesn’t have any fees. Anytime I have a bounced check fee or over allowed number of transactions fee, I secure message the bank to waive the fee. They almost always will do it. Once you begin making money, you will want to keep maybe three weeks worth of operating expenses and periodically sweep the rest into a personal account- because personal accounts have more consumer protections than than business accounts should something like fraud occur.
Speaking of which, it is highly recommended that you get your business bank statement sent to your personal address, not your business one, if your employees can access your mail. Better yet, check your own mail (my employee doesn’t have the keys to my mailbox) and pay your own bills. There are many scam companies that send “invoices” that some office manager that isn’t paying attention will write a check for $200 for. We could write a entire blog post about this.
In terms of picking a bank, it’s probably best to get one that’s either close to your practice or your house. I don’t receive that many checks and stop by the bank once or twice a week to deposit them into the ATM (I probably get less than ten checks a week), but many of my colleagues with higher volume have purchased a check reading machine to make their lives easier, although such a machine charges fees.
When I opened, and even (if not especially) to this day, I took each and every advantage of credit card rewards points. Having practiced for a few years before I opened, my credit score was solid. Some of the business credit cards I recommend for a solo practice doc are the Chase ink preferred (80,000 point bonus worth $1000) or ink unlimited, Chase ink cash (five points of 7.5% back for internet and phone and office supply stores), AMEX business platinum (100,000 point bonus worth $1500 plus $200 travel credit every year; the $450 annual fee is tax deductible making it $270 out of your pocket which is offset by the travel credit), and the AMEX Blue business plus (two points per dollar for first $50,000, equivalent of 3% back on airfare when combined with AMEX business platinum). Email me through the blog if you want more details or application links.
Of note, as of June 2018 the Chase ink unlimited and ink cash have zero APR for 12 months; the AMEX blue business plus has zero APR for 15 months. Although the rewards aren’t as big as the other cards mentioned, if you’re in a cash crunch you might want to get these cards first.
We have learned there isn’t any need to build up business credit. There’s a company called Dun and Bradstreet which tracks your business credit, but for practical purposes as a solo doc your personal credit score matters most, and is what is looked at when requesting credit lines. You will be expected to provided a personal guarantee for all business credit lines anyway. This sounds scary, but if you are reading this chances are your practice will succeed, and it won’t matter.
One huge advantage of using business cards is that even if your utilization is high, it won’t report to your personal credit report. The only exception is the Capital One Spark Pay, which gives you 2% back on everything. This sounds like a reasonably good deal, but unless you pay off your balances before the statement closes, the balance will ding your personal credit score. So avoid the Capital One Spark Pay, except for the card opening bonus.