All Check accounts seems to be similar.
But a Business checking account may offer features that are not available with a personal checking account.
Plus, you’ll always want to separate your business expenses from your personal expenses, says Pam Horack, a certified financial planner with Pathfinder Planning in Lake Wylie, South Carolina.
“It’s really important to keep good records,” says Horack.
If you don’t separate a personal account from a sole proprietorship or a “Doing Business as” (DBA) registered company, you may not know whether or not you are actually making money, Horack says.
Commercial banks may provide personal liability protection by keeping your funds away from your personal accounts, according to the US Small Business Administration (SBA).
The difference between business and personal checking accounts
Business and personal checking accounts have some key differences. They are:
- Free transactions can be restricted to a business checking account.
- A business checking account may incur fees for counting cash or ordering coins.
- Business checking accounts usually have more advanced payment methods, such as B. Merchant Services – the ability to accept credit card payments.
- Higher monthly service fees may apply for business checking accounts. Or, the fees on business checking accounts may be more difficult to waive than on some personal checking accounts.
This is how you decide which checking account is best for you
Business owners should compare the key features of the two account types. Business banking offers limited personal liability protection by segregating your business funds from your personal accounts, according to the SBA.
Check out the following fees or features:
- Minimum requirements for the credit
- Monthly service fees
- Banks that offer a cash bonus for opening an account (this bonus may only be available to new customers)
- Minimum amount for opening an account
Here are some fees or restrictions that typically only apply to business checking accounts and not personal checking accounts:
- The number of free transactions allowed – and the price per transaction if you exceed the free limit
- The amount of cash counted for free – and what cash counting fees apply if you exceed the free amount
Business checking accounts Give a business owner options and features not normally available with personal checking accounts. According to the SBA, you will likely need a Federal Employer Identification Number (EIN) to open a business checking account.
Change from private to business
Separating accounts can be a good idea.
“Although there are many legal entity structures for companies, the sole proprietorship is the only one that can be set up with an SSN [social security number] and can therefore open a personal checking account, ”said Lynn Heitman, Executive Vice President, Business Banking Segment Leader at US Bank.
Just like it is better to break up Emergency fund From your daily checking account, it is usually better not to have business transactions processed through a personal checking account.
Bringing your personal and business transactions together in the same checking account can make the accounting process difficult and make tax time a nightmare. To keep your money separate, do the following open a business account.
Who needs a business account?
According to the SBA, a commercial bank account can help you to comply with the law. The following functions can be made available to you with a business current account:
- Authorizations: These allow trusted users or advisors – like an office manager or an accountant – to access the account, says Heitman.
- Positive payment: This is a fraud prevention system that is available to business customers at some banks. It uses a list of checks to aid in the check verification process. An exam that does not match this list will likely be flagged.
- Debit card for non-account signers: This could be a way to get an employee a debit card to cover expenses. You may be able to set limits on this debit card.
- Money Movement Options: Merchant service accounts can help businesses accept credit card payments. Business accounts “typically have the potential for digitally enabled higher cash movements or custom limits on payment transactions,” says Heitman. This can include automated clearinghouse (ACH) transactions or digital single or batch transfers, says Heitman.