What Is a Business Account?
A business account is a bank account used for businesses to manage their cash flow and track their assets. These accounts are used to track their cash balance, payroll paid to employees, and other money owed to the business or its creditors. A business checking account is the backbone of a business. Sales are deposited into the account, payroll is deducted from it, and bills are paid. A business checking account is the first relationship a business has with a bank. Proper maintenance of this account can lead to a positive relationship between you and your bank.
When choosing a business bank account, check the minimum deposit amount and fees for both personal and business checking accounts. Personal accounts typically have low or no fees, but a business account will have higher balance requirements and other limitations. It is important to check whether the institution you’re considering offers a mobile or online banking app, as well as a minimum opening deposit. The Bench blog has a helpful guide to determining how much money a business should have to start operations.
When looking for a business bank account, make sure the initial deposit is manageable and the minimum daily balance is manageable. Consult a business banker to find out which account requires the lowest initial deposit. Many banks will waive the initial deposit for qualifying new business accounts and contribute a monetary offer toward the account. Besides offering tax advantages, a business bank account helps you separate your personal and business finances. You won’t get confused over business and personal expenses if you separate them.
When opening a business bank account, you should consider the type of business you have. While some businesses can open an account online, others must go into a branch and apply for an EIN. Businesses should open a business bank account as soon as they obtain their EIN. Once the account is open, the business will be able to accept payments online or through a merchant service. A business bank account is useful for businesses that need a merchant account.
Different banks charge different fees for business checking accounts. Some charge a monthly service fee and may charge you if you exceed the limit each month. Some banks charge a monthly maintenance fee or overdraft fee, so it’s important to compare different business checking accounts before you choose one. While a free business checking account is the best option for a small business, keep in mind that some fees apply for overdrafts, excess transactions, and wire transfers.
To open a business bank account, you’ll need to provide certain documents that prove the legitimacy of your business. Typically, this documentation includes a business license or an Employer Identification Number (EIN).