Business Bank Account Tips
Opening a business bank account is a critical task for a new business owner. Even if you are a sole proprietor, having a business account is the best way for you to keep track of your finances and your business records. Putting this simple barrier between your personal and professional finances helps to make day-to-day transactions easy to follow and document.
“It is just good accounting practice to keep your business [finances] separate from your personal, and setting up a business checking account is the first step to making this possible,” said Kevin Ravenscroft, president of Timberwood Bank in Tomah, Wisconsin. “You can track your income and expenses for IRS filing purposes, more easily identify potential business deductions from the IRS, maintain clear records for potential audits, and you may be able to limit your personal liability.”
Choosing a bank and account services
Business banking is different from consumer banking, so the bank where you have your personal checking account may not necessarily be the right one for your business. When deciding where to open your business account, consider the financial institutions in your area. Talk with each of them to discover their specialty and see if it is a fit for your company. Some banks are small business specialists, whereas others focus on property or equipment loans.
Today’s business banking customers can also find lines of credit and cash management services in addition to checking accounts. Starting a relationship with bank personnel familiar with your field or industry gives you another resource for inquiries and the ability to tap into their experience and expertise when it is needed. They may have suggestions or be aware of programs that you did not know about to make your business bigger and better. However, be aware that some bankers might try to encourage you to use their products and services — even if you don’t necessarily need them — just to make more money. Be sure to do your research and ask questions so that you understand what you’re signing up for.
Business banking costs
Many banks offer business checking accounts for free, with a minimum balance requirement and a limited number of transactions. At JPMorgan Chase & Co., for example, business owners with revenues of up to $10 million can open an account with just $25. At First National Bank of Omaha, business owners can take advantage of a Business First Free Checking account that requires a $100 minimum opening balance but has no minimum balance requirement.
As your business grows, you may need to change the type of checking account your business uses. While enhanced accounts might also charge a fee, the benefits of being able to handle an increased number of transactions efficiently and having access to more bank services offsets the cost. However, David Ely, professor of finance at San Diego State University, cautioned business owners to keep the total cost of balance requirements and fees in mind.