Benefits of a Business Bank Account
Establishing a separate business bank account is an essential step in running your small business. While you may only have one personal bank account, your business likely needs multiple accounts.
According to the U.S. Small Business Administration, most business bank accounts offer benefits and perks that personal bank accounts do not. Here are four reasons why you need a business bank account.
- Limited liability protection
Business banking helps limit your personal liability by keeping business funds separate from your personal funds.
“No matter what type of business you own, you should always separate your personal and business finances,” said Chas Rampenthal, general counsel at LegalZoom. “The first and most important step toward successfully separating your finances is to have separate bank accounts.”
- Purchase protection for customers
Many banks offer merchant accounts as a business banking option. Merchant services are a business advantage because they provide purchase protection for your customers and also protect their personal information.
A business bank account allows checks to be made out to the business – which is more professional than asking customers to make out checks to your name. Your customers can also pay with credit cards, and employees can handle banking tasks on behalf of the business.
- Credit options
Some banks provide an option for a line of credit that you can use in an emergency. Many also offer business credit cards that you can use to start building a credit history for your fledgling business.
Key takeaway: A business bank account keeps your business finances separate from your personal funds. The benefits of a business bank account are that it helps limit your personal liability and customers can pay your company directly. Further, the bank may also provide you with a line of credit and a business credit card that you can use to build a credit history.
4 types of business bank accounts to consider
As with personal banking, there are several types of business bank accounts. Depending on your needs, you’ll likely need to open more than one account.
Here are the four common types of business bank accounts:
Checking account: A business checking account is a great choice for managing payroll, expenses and other basic financial tasks that keep your business running.
Savings account: In addition to a checking account, you’ll likely need a business savings account to hold your earnings.
Merchant account: If you plan to accept credit and debit card payments, check with your bank to see if you can set up a merchant account. “Depending on whom you bank with, some banks offer merchant services as well,” said Julia Spahiu, founder and CFO of Edi and Sienna Group. “I suggest to all my clients [that they] shop around before settling for one particular account, and renegotiate your rate at least once a year.”
Credit card account: You can use a business credit card for emergencies or miscellaneous items for your business. The chief benefit of a credit card for the owners of startups or if one has bad credit is that it can help build or improve your business credit score.
Key takeaway: The four main types of business bank accounts are checking, savings, merchant and credit card accounts