Did you know that if you do independent contractor work, you should have a business bank account? Are you familiar with business banking, but your frustrations with business checking options led you to keep using your personal account?
Whether you fall into one of those categories or are just starting your business, opening a business bank account is essential for getting and keeping your business on track. While it requires more paperwork to set up and may seem easier to only use your personal bank account, there are benefits to keeping your business transactions separate.
If you run a franchise business or are a small sole proprietor, you'll need to open a separate business bank account. Federal law gives different protections to personal checking and business bank accounts, so you need to open the right one to protect your rights in case you dispute something on your account.
Your bank account terms also probably state that you can’t use personal accounts for business reasons. Banks do this to ensure they follow federal law and give you the proper services and pricing. If you don’t follow your account terms, your bank may close your account, disrupting your business if you suddenly can’t receive payments or pay your vendors. You may also be at risk of a lawsuit if your personal assets are mixed in with your business assets.
You will need both a business checking and a business savings account. A business checking account allows you to process payroll, make purchases, and receive deposits. It will also allow you to provide you and your employees with a business debit card for expenses.
A business savings account will enable you to store your funds, often in an interest-bearing account. Look for a business savings account with low fees and member FDIC insurance.
A Money Market account is an additional option that earns more than a typical business savings account without as much risk as stocks or bonds and can be paired with a business checking account for overdraft protection.
A CD (Certificate of Deposit) has a guaranteed fixed interest rate for the term of the CD and multiple CD terms available. They are also FDIC-insured.
All options typically offer overdraft protection with an associated business checking account, online banking, and mobile banking.
If you have an LLC or corporation, it must have its own business bank account in its name. An LLC or corporation is a separate legal entity from you, so it isn’t typically accepted to put its money into your personal bank accounts, even if you’re the sole business owner.
Instead, you should accept all business payments into and pay all business expenses from your business bank account. When it’s time to pay yourself, write yourself a check or set up a direct deposit.
If you mix your business money with your personal money, a court could decide that you weren’t really operating as an LLC or corporation. If that happens, you could lose the legal protections you thought you received by incorporating.
A separate business bank account also makes your accounting and payment processing easier. Whether you automatically import to your bookkeeping software or send everything to your accountant, you won’t have to waste time separating your personal transactions.
You’ll also have a clean, easy-to-understand set of financial records to use if you apply for a business loan, decide to sell your business, or get audited by the IRS. In addition, you won’t have to worry about losing your privacy by having your personal transactions placed under the microscope when your business transactions are reviewed.
One of the most important features of business bank accounts is controlling the level of access your employees have to your accounts. You can decide who has check-signing authority, can only make deposits, and can use a debit card. You can also set limits on business debit card use.
Depending on your account tier, you may also receive benefits such as unlimited transactions, earning interest on your cash reserves, and lower-cost cash and change processing.
Many business checking accounts don’t charge monthly service fees if you stay within your cash and transaction limits. Additionally, some accounts pay interest if your account is in good standing and your fees are low. Learning about how a business bank account can work for you will help you make the best banking decision for your business.
Banks typically want to do business with their current customers. A business checking and savings account can make applying for a business loan or business line of credit more accessible.
A business credit card is another option all businesses should consider. A small business credit card can start building credit for your business and be helpful when your business is ready to grow. Look for credit cards that offer low rates, cash back, or flexible rewards depending on what works best for your business.
Ready to open a Business Checking Account? We understand how essential convenience is to you at Seacoast Bank, and our products and services are 100% committed to providing a hassle-free experience. Contact your local banker today using the form below.