If you’ve recently launched a small or home-based business, you might be asking yourself whether it’s really worth the effort and expense to open a business bank account. Wouldn’t it just be simpler and less costly to use the same account that you already have for your personal finances?
While combining your business finances into your personal account certainly seems like the easiest option, the fact is that it’s a smart business move to maintain at least one separate bank account for your company. No matter what size of business you operate, having a separate business account offers a number of benefits that are very useful for budding business owners.
Furthermore, with so many different options available, it’s easier than ever to find a business bank account that meets your particular needs. Read on to learn more about why it’s worth having a business account, and how to choose one that’s right for you.
Why you need a business bank account.
If you’re wondering whether or not you should get a business account, the first thing to consider is that you might be legally required to do so. Under IRS rules, any incorporated business, regardless of how the business is structured, must have a business bank account.
And if you think you’re off the hook because you operate an unincorporated sole proprietorship, you should be aware that you typically can’t get a business loan, nor accept credit card payments for goods or services, unless you have a business bank account.
Beyond simply complying with the rules, there are other reasons why having a business bank account is a good idea for any company. Because they are specifically designed for business owners, business bank accounts offer many perks and protections that personal accounts don’t. These include:
Financial protection
Maintaining a separate bank account for your company is an important way to safeguard your personal and business finances alike. If all your finances are together in a single account, your personal assets may be at risk if your company can’t pay its debts, and your business’ credit score may likewise be damaged if you’re affected by a personal financial crisis or setback.
More organized expense tracking
Keeping careful tabs on your company’s finances is an essential part of setting your business up for success. This is much simpler to do when you’re not having to sort through a single account to figure out which financial transactions are for your business and which ones are personal. With a separate business account, you can also generate relevant reports and statements more easily.
Fewer hassles at tax time
As a small business owner, you naturally want to take advantage of as many business tax deductions as possible. However, unless your business and personal finances are clearly separated, claiming certain business tax deductions could trigger an audit.
A more professional image
Being able to accept credit and debit card payments is one of the things that gives your clients and customers confidence in your professionalism. As mentioned earlier, however, this can’t happen without a business bank account. A business account also means that checks can be made out to your business rather than to you personally, further enhancing your professional image.
How to choose a business bank account.
There are many different places to obtain a business bank account, including banks, credit unions, and other financial service providers. To help make sure you choose the provider and the account type that are the right fit for your business, here are some of the most important questions to ask about any accounts you’re considering.
What are the fees and requirements?
Most business checking accounts will have monthly maintenance fees, which may be waived as long as you maintain a minimum balance. Other potential fees to be aware of include fees for exceeding a certain quota of monthly transactions, including deposits; fees for withdrawing money from other institutions’ ATMs; and termination fees if you close your account early.
Note that it’s worth asking whether any of these fees or requirements might be reduced or waived if you also have a personal account at the financial institution in question.
Is there an introductory offer?
Banks are always keen to get new business customers, and may offer special introductory offers if you’re signing up for a business account for the first time. Ask the provider(s) that you’re taking into consideration whether they have any special promotions or offers for new account holders, such as lower fees for a certain period of time, or bonus cash for making an initial minimum deposit.
What mobile banking services are available?
More and more small business owners rely on mobile banking to be able to access and track business finances anytime, from anywhere. If you’re planning to do most of your business banking online or using an app, it’s worth investigating what kind of mobile banking services your prospective provider offers.
Different banks and institutions will have different mobile banking capabilities. It’s important not to assume you’ll be able to get the same level of mobile service whomever you choose.
