July 6, 2021 | Last Updated on: August 1, 2023
When you founded your business or startup, one of the first things you did was probably to set up a business bank account. It’s helpful and recommended to keep business transactions separate from personal ones and as a business grows. Transaction volume can become unwieldy if managed through personal bank accounts. Furthermore, commingling your personal expenses and personal transactions with those of your business instead of having a separate business bank account can expose you to extra personal liability risks. You may not be required to set up a business banking relationship for doing business (for example if your business is a sole proprietorship) but having a business bank account can confer significant advantages regardless of the size or type of your business.
One feature of a small business bank account may be the ability to accept payments or easily set up a merchant account to accept payments and ACH transfers for products and services with ease. Ian Sells – CEO & Founder at RebateKey explains, “Having a business account enables you to receive credit card payments for both physical and online transactions.” Without a business bank account, you may be unable or have trouble setting up accounts with credit card processors and other companies that facilitate accepting consumer payments.
Just like your personal checking account, your business bank account will have a helpful digital user interface (some are better than others) where you can review transactions, understand the account balance, view the average daily balance, see a clear record of cash deposits and outflows, understand cash flow, and gain insights into the finances of your business. You can usually run reports, download transactions, and may even be able to sync your account with major bookkeeping and tax softwares such as QuickBooks. Adam Garcia, CEO at TheStockDork, really likes the integration features of his small business bank account: “My bank allows me to integrate and connect the business account with the accounting software we are using at our company. This is the best feature and benefit that a business bank account can ever provide. It helps us to manage our bookkeeping and track our expenses on a daily basis.”
Tax season is a stressful time for all business owners and having all transactions in one place can alleviate some of that stress. A business bank account, if used to its fullest potential, will contain most or all of the business expenses that are necessary to calculate deductions for taxes. Eric Nisall, an accountant in Coral Springs, Florida, strongly recommends that his clients have separate accounts for business and personal. “All business activity is maintained in one account and all personal activity in another. There’s no need to waste time trying to figure out what transactions belong to which side, and it sure makes tax time much simpler as well.” And Sean Chapman, Founder and Author at small business Tools&Goods, prefers to keep a small business bank account in order to “Keep my records clear in case the IRS gets interested in my account activity.”
Nicholas Martin, Editor in Chief at small business Pest Control Hacks explained that one benefit of his small business bank account is the ability to present his business more professionally. “Sharing business bank account details with contractors makes me look more professional and authoritative.”
Keeping business and personal finances separate can help protect your own personal identity details, such as your social security number and personal assets, from any thieves looking to steal your information. You will be asked to put your business information on a lot of documents and forms and you can have peace of mind knowing that you haven’t put any of your personal accounts at risk.
While running your business, you may need more products than just a checking account. As your business grows, you may need much more than a business debit card and ATM access: you may need small business loans, lines of credit, a savings account, business credit cards, and additional banking features and products. Having a relationship with a bank may help you gain easier access to these products. Ryan Dalal, CEO & Founder of Word to PDF finds that having a business bank account is helpful when seeking out other financial services such as credit, “Having a business bank account is also required by some institutions. If you don’t have a separate account, many providers won’t give you a loan or credit.” If you are interested in taking out a loan, such as one from the Small Business Administration (SBA), it may be easier to secure such a loan if you can demonstrate the legitimacy of your business through clean and separate books and accounts.
Many banks have introductory offers in the form of lucrative bonuses that can be several hundred dollars just for opening the account and making a modest deposit of business funds! Fred Hoffman, Co-Founder of Senior Life Insurance Finder explained, “Banks often offer introductory bonuses as a way to attract business owners to open a business account. Some offers include bonus cash for making an initial deposit.” DoctorOfCredit is a helpful resource for the most up-to-date bank bonuses for business checking accounts. Be a little wary of companies advertising “free business checking accounts” and be sure to look behind the curtain to understand where there are fees.
Banks may also offer features and perks like free bill pay, free or discounted business checks, low or no minimum balance requirements, unlimited monthly transactions, low or no monthly maintenance fees, no foreign transaction fees, waived incoming wire fees, overdraft protection, and instant payments. Almost every bank nowadays offers online banking, so that is table stakes. Some business bank accounts even earn interest. Ouriel Lemmel, CEO and Founder of Win It, an app for managing and disputing parking tickets, explained that it’s important to shop around a bit for a business checking account with a good interest rate. “Before opening a business checking account make sure you are taking advantage of accounts that allow you to accrue interest. This is a great way to earn a little extra cash while storing your business’s money in a safe place.”
