At the startup of your business, it may seem simpler to run your business transactions through your personal account. Here’s when to consider a change.
Approximately 69% of business owners manage their business’s finances themselves. If you’re the one managing your business transactions, you know how important it is to do so efficiently and accurately. An easy way to do this is by using a separate business bank account.
Doing so will also offer you a few other important benefits. Let’s take a look at the benefits of a business bank account, how to choose the perfect account, and how to make the most of it.
Benefits of a Business Bank Account
Separating your business and personal finances is critical for your tax situation. Tax-deductible expenses must have clear documentation to support them. In addition, separating your expenses can help protect your personal assets against liabilities if your business is a corporation or limited liability company.
Having a separate business credit profile may be helpful in securing credit for your business. Many lenders need to see some business credit history before they will approve small business loans or other lines of credit.
Keeping your accounts separate also makes it easier to manage your business’s finances. You can see everything clearly in one place, have access to exclusive services, and maintain a professional image.
When to Switch to a Business Bank Account
If you have a sole proprietorship, you can technically get away with using a personal bank account for your business. However, it is recommended that you have a separate account. Some banks have even been known to close personal accounts if they are used for business purposes.
If you don’t have a business bank account, you should switch to one now. If you are in the process of starting a business, now is the perfect time to separate your business transactions through a business bank account.
You’ll be able to have your business transactions separate from the very beginning, creating a clear separation and giving you helpful information about your business’s finances.
Types of Accounts
When most people open their business bank accounts, they default to opening a single checking account. While this is the first account you’ll need and the one you’ll use most frequently, there may be benefits to also opening a savings account or even multiple accounts.
A business savings account can help you build up your savings, which can be crucial if you are building your cash reserves, saving for an emergency, or saving for a future purchase. Depending on your tax situation, having a separate savings or checking account can also make saving for quarterly estimated taxes easier.
Some businesses also find it easier to separate certain expenses via separate checking accounts. For example, having a separate payroll account is quite common depending on how many employees a business has.
Choose Your Bank
The first step to opening a business bank account is to choose which bank you will open your account with. A bank with branches near you is helpful, especially when it comes to owning a business. You’ll be able to develop a relationship with your bank and get access to help whenever you need it.
In addition, you should consider what services you need and if your chosen bank offers them. A common wish for many business owners is to have a bank that also offers business credit cards and small business loans. You’ll also want to look at the fee schedule and any balance minimums.
Business Services to Consider
There are a few other business services exclusively for business banking customers that can make managing your transactions easier. For example, adding Positive Pay can help prevent check fraud when using checks to pay vendors or employees.
While most personal checking accounts come with debit cards, not every business account does. Subject to credit approval, a business debit card can make it much easier to manage your cash flow. You can easily withdraw funds and purchase supplies and inventory without relying on checks.
Sometimes your bank’s schedule doesn’t line up with yours. Having access to a secure online banking portal is critical in today’s business world. Plus, ParkeBank accounts not only let you initiate ACH and wire transfers online but provide the capability of depositing checks into your account safely & securely using Remote Deposit Xpress without a trip to the bank.
In a similar vein, night drop deposit access can allow you to deposit cash or checks 24 hours a day, even if the bank is closed. With a secure deposit bag, you’ll know your deposit is safe and will be completed the next business day.
How to Open a Business Bank Account
Once you decide what bank accounts you want and which bank you will work with, all that’s left is to request information and go to the branch. But before you do this, you need to gather a few items.
You may want to apply for an Employer Identification Number (EIN) and bring it with you. This is a taxpayer identification number that makes it easier for the IRS to track your earnings and file your business taxes.
You’ll need to bring a copy of your partnership agreement is required if you have a partnership. Corporations require an EIN and a copy of your articles of incorporation.
If you are using a DBA name, you’ll need a copy of your DBA certificate. Some states also require a business license which you’ll need to bring to the bank.
No matter what business structure you have, you will also need a business address and your personal identification.
Make the Most of Your Business Bank Account
Setting up a dedicated business accounting system can help you make the most of your account. You will be able to better track and analyze your business income and expenses and make decisions based on them. This is especially true if you are juggling multiple bank accounts.
You can choose to either hire an accountant or use a do-it-yourself program such as QuickBooks. Both can be good options depending on your business, transactions, and budget.
Once you have your business bank account in place, it’s important that you run all of your business transactions through it.
Depending on the type of business you have, you may need to work with other merchant services. Your bank can help you set up access with these vendors, such as payroll or credit card processors, making the process much smoother.
Manage Your Business Transactions Effectively
Setting up a separate business bank account can make it much easier to manage your business transactions. You’ll reap the benefits of separate business and personal accounts and have access to exclusive business services that can make managing your business much easier.
Request more information about ParkeBank’s business accounts and services today.