By Scott Hines
President and CEO
Business owners know that running a small business means more than just having funds available. Although available funds are essential, it’s also important to have the right business bank accounts to manage your business efficiently.
Business accounts can come in all different sizes. Whether you own or run a business, it’s to your advantage to have one or more business accounts. Beyond complying with IRS rules, opening a business bank account has additional benefits and advantages compared to using a personal bank account to handle your business finances.
A business bank account comes with multiple advantages and protections for your business, including the ability to take advantage of tax deductions and credits. In addition, separating your personal and business transactions keep your funds separate, protecting your personal assets. See the benefits and types of business bank accounts below.
Here are seven benefits to help make the most of your business bank account.
1. Financial protection for yourself and your business
Keep your personal finances separate from your business finances by establishing a business bank account. This can keep your business and personal funds separate and possibly safeguard your personal assets. For instance, if your business is set up as an LLC or Corporation, your personal assets could be in jeopardy if your business can’t pay its debts. At the same time, your business credit score may not be negatively impacted if you suffer a personal financial crisis or setback.
2. Easier, more organized handling of expenses
Tracking expenses, monitoring spending, and avoiding inadvertent overspending – all which figure heavily into the success of any small business – are easier when you have a separate business bank account. In addition, you can have multiple users assigned with debit cards and separate limits, while keeping track of everyone’s expenditures. Generating reports and statements that reflect the true status of your business is much easier.
3. Less issues at tax time
Separating your business expenses from your personal expenses is a must to take full advantage of business tax deductions. This will also improve your accounting efficiency and make it much easier to file taxes quickly and accurately. Individual and business taxes must be filed separately and correctly to avoid IRS penalties.
4. Professionalism
Customers and clients can make payments to your business rather than to you personally, and potentially pay with a credit or debit card when you have a business bank account. This simplifies your finances and gives your business a more professional image.
5. Fund protection and insurance
The Federal Deposit Insurance Corporation (FDIC) provides financial institutions with insurance for all types of deposits, including but not limited to checking and savings account deposits. Ensure that the bank you choose for your business bank account is FDIC-insured.
6. Manageable fees and charges
Banks typically charge maintenance fees for business bank accounts. Some banks waive these fees if you meet a certain minimum balance requirement each month, and many make these requirements relatively low so small businesses have fewer problems meeting them. Before choosing a business bank account, understand how they handle such charges and if they waive these fees if you meet a certain minimum balance.
7. Establish solid financial relationships
Opening and maintaining a business bank account can help establish a trusted financial
relationship. This can prove beneficial when it comes to applying for a business loan, opening a business credit card, and using other bank services. As the financing needs of your business change and grow, you may need to access more credit options. You may eventually need and qualify for larger and longer-term business loans to expand your business, invest in new products and equipment, buy real estate, and otherwise make some other moves for long-term growth. Having a solid financial relationship with your bank is a benefit of having a business bank account.
Here are the basic business bank accounts. Typically, business bank accounts fall into two categories — checking and savings accounts. Each account type has different features designed to meet the needs of various types and sizes of businesses.
Business Checking Accounts
Business checking accounts help simplify your banking including payables/receivables, payroll, checks, ACHs, deposits, withdrawals, and business debit card use. There are various types of business checking accounts depending on the type and size of your business and the number of transactions you typically incur. Your bank will help you maximize your money and efficiency with the correct checking account for your business. Typical business checking accounts include:
- Business Checking Accounts – dependent on size and transactions
- Sole Proprietors & Nonprofit Organizations
- Business Money Market Accounts*
Business Savings Accounts
Business savings accounts allow you to maximize your money while saving for expansions and other initiatives. Business savings accounts often have competitive rates and terms for your immediate and long-term business savings plans. Typical business savings accounts include:
- Business Statement Savings
- Business Money Market Accounts*
- Business Certificates of Deposit (CDs)
* A money market account is a savings account that will usually have check-writing privileges with monthly limits. Money market accounts often pay higher interest rates but will usually require a higher balance to earn the interest.
As a business owner, it’s important to work with a bank who can provide the business bank accounts you need to grow and maintain your business.
Kalamazoo County State Bank (KCSB) has the necessary business bank accounts and services to help you manage your daily operations faster, securely, and easier. To learn more about one of KCSB’s business bank services and loans, see Your Guide To Business Banking, call 269.679.5291, or visit a branch office. See https://kcsbank.com/locations to find a location most convenient for you. Discover a more personal business journey with your community banker today!
Kalamazoo County State Bank is an Equal Housing Lender and Member FDIC.
