4 Benefits Of A Business Bank Account

When you are first starting a business, there are several things you need to get set up. One of the most important is a new business bank account. Let’s talk about some of the benefits of a business bank account.

There are many benefits of using a business account, but one of the most important is that it makes bookkeeping a lot easier.

When you have your personal and business transactions running through the same account, things get confusing and tax time becomes a nightmare.

If you’re not convinced that separating your personal and business banking is the right move, we’re sharing the benefits of a business bank account in this article. 

Why Your Business Needs a Separate Bank Account

When you are first starting out, you might find it easier to make business purchases with personal funds, but as your business grows, it only makes sense to apply for and start using a separate business account. While you can use your personal bank account for business expenses, it isn’t usually a good idea.

4 Benefits Of A Business Bank Account

There are several benefits of a business bank account – here are a few of the most obvious ones we could come up with. 

• Financial Management: As we’ve already discussed, one of the biggest reasons to open a business checking account is to separate your personal and business accounts separate. While it is possible to use a personal account for business expenses, it becomes a headache when you are trying to separate out the expenses for bookkeeping, accounting or tax preparation.
• Professionalism: Having a separate business account makes your business seem more professional. As your business grows and you look to raise capital, potential investors may be hesitant to invest in a company still operating out a personal bank account
• Prepared for Growth: While business bank accounts can be more expensive to operate than personal accounts, no-fee business checking accounts do exist. Not only that, but many business accounts come with features that can make it easier to run your business. This includes setting up automatic transfers and payments, integrations with online accounting software, merchant services solutions, and business investment products. By using a business account, you can prepare your company for future growth. 
• Credit History and Loans: Just like most individuals have credit scores, businesses also have credit history and a business credit score. Setting up a business bank account and using business credit cards can help your business increase its business credit score. Without a solid business credit history, it may be harder to qualify for business loans, if and when you need one.

How A Business Checking Account Simplifies Tax Reporting

A business bank account simplifies accounting and tax reporting. Depending on your business structure, i.e., sole proprietor, corporation), your profit and loss information may be included on your own personal tax return or you may need to file a separate business tax return.

In either case, you or your tax preparer will have to separate out any business income and business expenses. Generally you can’t deduct personal expenses on your business tax return. 

Choosing The Right Business Account For Your Needs

With so many options, it can be challenging to find the best business checking account for your specific situation. As you compare accounts from different banks, here are a few things to consider:

• Fees: While it can make sense to pay fees depending on the services you are getting, you should consider a no-fee business bank account before making your final choice. You might be surprised at the many features they offer. You can check out our list of the best business bank accounts with no fees here. 
• Perks: When shopping around, look for accounts that come with valuable perks. This could include higher interest rates, bonus offers or a cash back rewards program. 
• Location: If having access to a physical bank branch and/or a personal banker is important to you, you’ll want to make sure to choose a traditional bank in favor of an online only bank, which are becoming popular. 
• Transaction limits: Some business checking accounts limit the number of transactions you can do each month. If you require a lot of transactions, you’re better off with an unlimited banking account. 

The Bottom Line

To summarize, while you might consider using personal funds or your personal checking account when your business is first starting out, you’ll want to quickly sign up for a separate business checking account. There are many benefits of a business account, including access to business-specific banking features, a more professional look, and more streamlined accounting and tax preparation.

Review our list of the best business bank accounts for startups or the best overall business checking accounts to find the right fit for your business.