A business checking account can make it easier to separate personal and business finances. It can also improve the odds of approval for a business loan or credit card.
When choosing a small business checking account, look for low fees and limits. You should also consider the account’s perks, like 1% cash back on debit purchases or invoicing.
Keeping Personal Assets Separate from Business Assets
Keeping business assets separate from personal ones can help protect your personal property in the event of a lawsuit or bankruptcy. A business checking account is an easy way to do this, and the best small business accounts offer perks like ATM fee refunds, cash back on debit card purchases and interest earned on even the smallest balances.
Business banking accounts also typically allow you to make deposits with checks, ACH transfers and online bill pay and provide limits on transaction amounts and the number of transactions per month that are fee-free. These types of accounts, whether from a traditional bank or a financial technology company, can also offer merchant services and e-commerce solutions that can enhance your business.
Although you can fund your business using a personal bank account, doing so risks commingling business and personal expenses and could open you up to liability if creditors think you’re personally responsible for the business’s debts or losses. Having a business checking account prevents this from happening and can simplify your accounting and bookkeeping processes.
Keeping Track of Business Transactions
A business checking account can help you keep track of business revenue and expenses to better budget and manage your company. It can also help you keep your personal and business assets separate, which may offer protection if your business is ever sued.
Having a business bank account can make it easier to find and qualify for financing, too. According to Nav’s Small Business Banking Survey, lenders are twice as likely to grant businesses with a business checking account financing than those without one.
You can choose from many brick-and-mortar banks, credit unions, and online financial technology providers that offer outstanding business checking accounts. Look for accounts that offer perks like fee-free transactions, unlimited cash deposit, and interest earnings. Some also include tools to simplify invoicing and bookkeeping. These features can save you time and money as your business grows. Many digital banks, such as Novo, even offer free business checking with debit card access and zero monthly service fees if you meet transaction requirements.
Keeping Track of Personal Expenses
When running a business, the line between personal and business expenses can become blurred. That’s why keeping track of every little expense is so important.
Having a dedicated business checking account is one way to avoid mixing personal and business transactions. It also makes tax time much easier. But aside from that, how do you keep track of those tiny purchases?
For example, instead of just putting everything into one big “miscellaneous” category, break down each category to include things like gas, groceries, and clothing. Then, write down the exact amount you spend for each item.
Some small business checking accounts come with built-in bookkeeping, budgeting, and tax planning tools. They may even let you waive monthly fees by meeting certain transaction and balance requirements. These accounts are ideal for freelancers and new businesses. Some even have perks like ATM fee refunds and cash back on debit card purchases. But be sure to read the fine print.
Keeping Personal Assets Safe
A small business checking account allows you to separate your personal assets from those of your company, which can help shield you from financial liabilities if your business is sued. It also simplifies bookkeeping and makes it easier to file taxes and apply for business loans.
When shopping for a business bank account, find out what kind of security features are available. Ask about two-factor authentication, for example, which will send you a verification code to your phone or email every time you log in from a new device. You should also find out how many transactions are free per month, as that can be a big consideration for businesses with lots of cash or check deposits.
In addition to fees and requirements, be sure to compare interest rates. A higher rate can grow your money faster, while a lower one will slow down your growth. Find a bank that offers a competitive combination of both.