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Regardless of the size of your business, you need a business bank account for your company’s finances. With it, you can separate your personal and business assets and protect your company and personal finances. Having a business bank account allows you to build a relationship with your business bank, which can help you if you need additional banking products such as retirement plans, business services and small business loans.
Do You Need A Business Checking Account
Almost every business owner can benefit from a small business bank account. If you operate as a separate legal entity, you must have a business account. Many are free to open, with no minimum balance or initial deposit requirements, and some even charge interest.
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Small business owners have several bank accounts to choose from. You need to find an account that fits your small business needs.
A business checking account is very similar to a personal checking account. Once you open an account, you can make deposits and withdrawals, write checks, send ACH and bank payments, and make purchases on your debit card. Both offer you excess plan protection and FDIC insurance coverage.
One or more people can access the account while checking the transaction. You can usually get a variety of debit cards to help you keep track of your spending. As with checking in person, you can download the app or visit the website to view your business account details.
By linking all your business transactions to a business account, you can use financial software like QuickBooks to manage your finances. To learn more about this accounting software, read our guide to what QuickBooks is.
Business Checking Account
Note that opening a business bank account often takes longer and requires more documentation than opening a personal bank account. However, most banks offer same-day account opening and funding. Business accounts typically have higher fees than personal accounts, and higher waivers for these fees.
The table below shows some of the differences between business and personal bank accounts, especially when it comes to payments.
Personal checking accounts are usually free or have very low fees and no minimum balance or opening requirements. For the most part, they have no trading limits, no cash deposit fees, and can be opened in minutes.
However, you won’t be able to access business services like a bank’s business services with just a personal account. If you operate your business as a separate legal entity, opening a separate account for your business is not an option.
Do Sole Traders Need A Business Bank Account?
While some banks offer free business checking, usually only for online accounts, most traditional banks charge waived fees. Fee waiver limits are generally higher than for personal accounts. Some banks have minimum balance and opening requirements and will charge you if you exceed your monthly business limit or cash deposit.
If you’re interested in opening a free account, check out our guide to the best free trading checking accounts.
Why do you need a business bank account? There’s almost no reason not to open a business bank account to support your small business:
There are very few downsides to opening a business bank account. The points listed here shouldn’t stop you from getting an account, as these are things you should know before opening a business bank account:
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After learning about the benefits of a business bank account and deciding to open one, here are a few factors to consider when choosing a bank for your small business:
Before you can open a new account, you’ll need to take some steps and provide documentation. Check out our guide on how to open a business bank account first.
Depending on how your business is structured, additional documents may be required. Whichever bank you choose will provide you with a list of what you’ll need, but here’s a list of the documents you’ll need to provide regardless of your industry:
For added convenience, you can choose online banking and open a business bank account. Check out our list of the best online banks in the business to find the provider that’s right for your company.
Does A Sole Trader Need A Business Bank Account?
Sole proprietors and single membership limited liability companies can legally use regular bank accounts for business purposes, but it is not recommended. If your business operates as a separate legal entity, you will need to open a business bank account.
No matter how small your business is, your business needs to have a bank account. Additionally, you should use a business bank account, not a personal bank account. If you earn enough money to cover your tax return, having a separate business bank account can make tax preparation easier. This will help you avoid any problems with the IRS in the future.
You should avoid making personal payments from a business account. This makes it difficult to determine the cash flow of the business, which can lead to tax problems. Additionally, if you are a corporation or limited liability company, you can opt out of personal asset protection by paying personal expenses from a business account. This can get you into trouble with the IRS and expose you and your colleagues to personal liability if the business is sued or goes bankrupt. Avoid it at all costs.
While it may be convenient to use a personal bank account, if you are running a very small, sole proprietorship business, we recommend opening a business account instead. Some of the benefits of a business bank account are that it increases your business’s credibility with customers, helps you build a business relationship with your bank, and makes tax preparation easier. At the same time, it limits your exposure to potential tax and liability risks.
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Robbie Manceto is a staff banker for a small business that fits the bill. He has 10 years of experience as a banker with the Bank of the Philippine Islands. He previously worked as a Customer Service Specialist at CIMB Securities in Singapore. Blog Back to Blog What can I do with a business bank account? – Stay on top of your finances
As a small business owner, you may be tempted to use your personal bank account for all transactions. At the end of the day, it’s your job and the money ends up in the same pocket, right? Well, maybe you should think twice about that.
Having a business bank account offers many benefits that traditional personal accounts don’t. From securing your finances to securing a business loan and protecting your identity, a business bank account is just what you need.
I’ll give you a few examples of what you can do with a business bank account and why it can benefit your small business or freelancer.
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If you’re looking for an easy-to-use checking account for businesses like home services, construction, hair salons, and more, check out BlueVine. Easily manage, save and spend your money to make your home service business shine. Open an account today.
Separating your personal and business operations is an important step in starting a small business. These special bank accounts are designed for businesses and cater to employers rather than individuals.
Clean, organized and easy-to-understand financial statements are just smart business. First, it greatly simplifies your account. With a separate business bank account, you can easily track all your expenses and pay taxes to your accountant.
You can also track your expenses and sort your receipts with accounting software that automatically imports and categorizes your transactions by linking them to your checking account.
Do You Need A Business Bank Account?
Organizing your business finances and records can help you avoid problems that arise from mixing personal and business finances. It can also make it easier for you to apply for a business loan, sell your business, or successfully pass an IRS (Internal Revenue Service) audit.
Credit cards are used all over the world today. Finally, if you want to expand your business, you need to accept credit cards. For this you need to open a merchant account, which is a type of bank account that allows you to process electronic payment card transactions.
After you open a business account, you link it to your company’s bank account, and the funds are transferred once the money is processed. So, you can accept not only online electronic transactions but also physical cards by purchasing the necessary equipment.
Alternatively, you can connect your merchant checking account to a payment processing service such as PayPal, Stripe or Bonsai. This makes the process much easier, especially if you run your business entirely online and you don’t need any special equipment to make payments.
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By separating business and personal expenses, you separate your financial responsibilities. Since your company’s debt will appear on your business credit report, your personal credit will not be affected.
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