Is a Business Bank Account Required?

Every firm need a commercial bank account to keep personal and business activities separate. That is self-evident.

We’ll offer you additional reasons to create a business bank account in our Do I Need a Business Bank Account article below, and we’ll help you pick the best firm banking service for your specific business.

15 Reasons for Having a Business Bank Account

It is critical to have a separate corporate checking AND savings account because:

It demonstrates professionalism and aids in the development of corporate reputation.

You want your consumers to write cheques to your company, not to you personally. A business checking account communicates, “This company is here to stay, it’s not going away, and I can rely on it to look after me.”
A business account is a company-owned asset. A business bank account is transferrable if you decide to sell your company.
It keeps your personal bank account costs separate from your company bank account expenses. Never mix personal and corporate spending. If you do so, you will almost certainly be audited by the Internal Revenue Service (IRS). An IRS audit may be expensive and time-consuming; for this reason alone, you should maintain a separate company checking account.
It helps to keep the corporate veil from being pierced. Piercing the corporate veil is a legal circumstance in which courts disregard limited liability protections and find owners and directors liable for both company debts and irresponsible behavior. You must establish a separate business checking account to avoid this if your company is sued for carelessness or unpaid bills.
It reduces the cost and complexity of tax preparation for you and your certified public accountant (CPA). Loss of tax-deductible business costs may be costly to your firm. However, you don’t want to receive a call from your tax expert asking you 101 questions to which you don’t know the answers.
It safeguards your personal information and prevents accounting mistakes. While it is not unlawful for a sole proprietorship to operate from a personal bank account, it is not a sound business practice. To avoid identity theft, create a business account using your company’s Employer Identification Number (EIN) rather than your personal Social Security number.
It enables you to accept credit card payments, electronic funds transfers (EFTs), and ACH credit and debit transactions (e.g., direct deposit, payroll, and vendor credits). Credit cards are used regularly by consumers, and companies cannot accept credit cards via a personal bank account.
It is compatible with business accounting software. Most mainstream accounting software integrates with company checking accounts, making corporate accounting considerably easier to monitor and process in real time.
If you run a business as a sole proprietor, you must declare expenditure deductions on a Schedule C (business tax report). It is preferable to simply establish a limited liability corporation (LLC) and create a business checking account.
It will assist you in establishing company credit. Most firms eventually realize the value of taking out a business loan to leverage other people’s money in order to create money. As a company owner, you should educate yourself on how to create business credit.
It will turn saving money into a habit. Incorporate the concept of saving money into your company’s culture. Every successful business does.
It will enable capital availability in times of need or catastrophe. Savings accounts for businesses are liquid assets that may be accessed at any moment.
Your LLC will be ready for tax season. Every firm pays taxes; ensure that the money is properly accounted for and stored in your business savings account. You should be familiar with LLC taxes.
A business bank account might earn you interest. A business savings account offers higher interest rates than a company checking account. If you have a substantial quantity of money in your company bank accounts, you should put it in a business savings account.
It will not harm your company. Saving money in a business savings account never hurts. It can only benefit your company, not harm it.

Opening a Business Checking Account

It is as easy as collecting basic information and completing an application to open a business account. The important thing to remember is that there are two methods to create a business bank account: online or in person.

The following are the steps to opening a business checking account:

Perform your due diligence. Learn about the pricing structure and which bank is best for you. This entails studying several banks and credit unions, learning about their offerings, and selecting the one that will work best for your company type. Check out some of our business bank reviews for a simple way to start your study.
Obtain a tax identification number. The IRS will provide you with one free EIN. You may check up an EIN if you believe you already have one.
Gather your company establishment documentation (for LLCs and corporations).
Gather your company license or name registration documentation.
Call the bank to see what else you’ll need to create a business bank account. Every bank has different criteria, so check with them first before opening a business bank account. This information is sometimes available on the bank’s website.
Complete the essential forms and submit your company documentation in person or online.

Important: We propose that all firms create a business savings account to assist in the development of company credit and the formation of a money-saving habit. A company loan may be the last thing on your mind, but it is critical to prepare ahead of time for one.

By leveraging other people’s money, a business loan may help you develop your firm quicker. Business credit is another asset that adds to the worth of your company.

What Is a Commercial Bank Account?

A business bank account is one of the first assets you obtain when beginning a company, after naming it. You cannot manage your business revenue or spending, accept credit cards, write business checks, create business credit, or conduct business transactions without a business checking account.

However, what exactly is a corporate bank account?

A commercial bank is a valuable asset. A liability is anything that costs your company money, while an asset is anything that makes your firm money.

A corporate bank account is valuable since it allows you to:

Aids you in making sound business judgments. Making wise business choices increases your company’s income, allowing you to earn more money.
Interest builds up. Some business bank accounts pay interest, which may be utilized to help your company develop and make more money.
You avoid paying more in interest and fees. As you conserve money in your company bank account, you will be less reliant on costly business loans, which might cost you even more money. This savings allows you to invest more in your company.
As an incorporated entity, this helps you avoid breaching your corporate veil. This is due to the fact that having a separate bank account for your company demonstrates that you perceive it as a distinct financial entity.

Business Bank Accounts and Their Applications

The advantages of having a business bank account greatly outweigh the disadvantages. However, not all commercial bank accounts are made equal. That is why it is critical to differentiate between excellent, terrible, and best business bank accounts.

Checking Accounts for Businesses

The first business bank account you should create for your company is a business checking account.

It enables you to:

Take deposits (over-the-counter cash, checks, credit card, and electronic deposits).
Pay for company-related expenses (payroll, taxes, business insurance, suppliers, lenders, and everything else you can think of that you’ll need to run your firm).
Maintain meticulous records of all spending and revenue.
Keep your money safe. This account is FDIC-insured, which means that the federal government will cover you up to $250,000 if anything happens to the bank or your money.
Allow for dual signatures. If you have a partnership or staff, you may want to need two signatures everytime you make a withdrawal or deposit.
Using a separate company account, you may protect your incorporated advantages (such as restricted personal liability, etc.).

Accounts for Business Savings

A business savings account is a kind of company bank account that allows you to store money in a bank securely. The FDIC insures this account. When you have a lot of money in your company checking account, you should create a business savings account.

It enables you to:

Make it a habit to save money. The most successful businesses (think blue chips like Walmart, Amazon, General Mills, Hershey’s, and General Electric) all have substantial capital reserves.
During a liquidity constraint, protect your company. In fact, 80% of firms fail due to cash flow and company revenue issues.
Save money to avoid having to take out costly company loans.
Maintain your liquidity. With a corporate savings account, you may liquidate assets to acquire equipment, real estate, and other large acquisitions for your company.
Develop your business credit. Yes, having a company savings account may assist you in establishing and building business credit.

Certificates of Deposit for Businesses

A term account is a company certificate of deposit (CD). You agree to lend the bank money from your company for a fixed length of time at an agreed-upon interest rate. The interest rates are often greater than those offered by a business savings or interest-bearing business checking account.

The following are the major characteristics of a business certificate of deposit:

It pays interest of 1% or higher. We discovered several CDs yielding more than 2% in interest, so shop around for the best deals.
You cannot cancel the account until the period has expired. This implies you won’t be able to spend the money.
The greater the interest rate, the longer the duration.
Term restrictions vary depending on the bank. We discovered CD phrases for a week, months, and even years.

Money Market Accounts for Businesses

If you have a lot of money saved, desire greater interest rates than a business savings account or interest-bearing business checking account, but still want some access to your money, a business money market account is the business bank account for you.

The following are the primary characteristics of a company money market account:

Six withdrawals per month are permitted.
Deposit funds at any moment.
You may deposit as much money as you like.
Higher interest rates (now ranging from.1% to 1.6% APY)
impose a minimum balance (check with your bank to find out what those are)
If you withdraw more than six times in a month, you will face penalties (ask your banker what the penalty is if you withdraw more than that)