6 Benefits of Opening a Business Bank Account

Understanding the value of a business checking account

When you start a new business, one of the first and most important tasks should be to open a new business bank account.

Keeping separate records for your financial transactions simply isn’t enough.

Instead, you’ll have to keep a full and robust separation between your personal finances and those of your businesses to ensure ongoing legal protections and guarantee the long-term success of your business.

The following list provides a good springboard of criteria for selecting the right checking account for your business and discussing options with your business banker.

1. Accept credit card payments and other business transactions

By far, the most important function of opening a business banking account is the ability to accept credit card payments.

Most consumers use their credit cards when making a purchase, meaning that accepting such payments is critical to ensuring you can capture the revenue your business needs to succeed.

In most cases, this means partnering with a merchant services provider and/or payment processor who can manage these transactions on your behalf.

The payment processor will function as the intermediary between the customer’s bank (where the money is stored) and your bank account (where you want the money to go) and will handle the transaction behind the scenes on your behalf.

Meanwhile, your merchant services provider will facilitate the transfer of the funds from your merchant services account (where they will land after the transaction goes through) to your business checking account.

Importantly for this conversation, banks that offer business checking accounts will often also offer various merchant services solutions to help empower your business to make sales.

For this reason, one of the fastest and easiest ways to start accepting credit card transactions at your new business is to partner with your bank of choice who will then provide you with the solutions you need to handle these transactions.

2. Simplify your business taxes

Overcomplicating your business taxes—especially when getting your new venture off the ground—is one of the easiest ways to stall your growth.

For this reason, it’s highly recommended to keep things as simple as possible to make your life easier during tax season.

As a rule, you should always have separate financial accounts for each of your legal entities to ensure you can accurately and comprehensively report any income or deductions to the IRS.

This means that all income and expenses for your business should flow through one or more centralized business checking accounts, with absolutely no overlap between these accounts and your personal accounts.

This strategy has a variety of benefits for making your tax preparation easier. For one, creating separate accounts allows your accountant to directly link your business checking account to their tax preparation software without having to filter or prune any of the transactions.

Similarly, having separate accounts makes auditing your business easier by significantly reducing the time needed to categorize expenses or organize your transactions.

3. Automate your bookkeeping and other administrative tasks

Similar to how your accountant will pull the data come tax season, your bookkeeper or financial professional can also link their software to your firm’s finances to help you manage bills, budgeting, invoicing, salary payments and other administrative tasks related to your business finances.

By syncing your business accounts with your bookkeeping software, you can effectively automate many of the time-consuming financial and administrative tasks you would otherwise have to resolve manually.

When it comes to creating and analyzing your balance sheet, income statement and cash flow statement, having a clean set of financial data to start with can be an invaluable time saver: offering you a more accurate representation of your business’s health with less work on your part.

4. Protect your limited liability by separating your finances

When you register your business, whether as a Limited Liability Company (LLC), corporation or other legal structure, you’re effectively formalizing the legal separation between yourself as the owner and the business itself.

In the event that your business goes under or ends up with significant debts and other liabilities, this legal protection is often the only thing standing between the business being held liable for these debts and you, personally, becoming responsible for paying back any creditors.

For this reason, it’s important to ensure a strong separation between your personal finances and those of your business to keep yourself from piercing the corporate veil.

While businesses normally have a strong presumption of limited liability when it comes to their finances, it’s best practice to err on the side of caution.

5. Establish business credit and gain access to loans

While a business checking account will not affect your business credit directly, it helps provide a sense of credibility when applying for a line of credit or other loans.

Banks don’t issue loans to new businesses without first doing their due diligence to ensure the loan will be paid back in full and on time. This means you’ll need to show that your business has its own bank account to receive the loan and a steady form of income (or business plan for generating that income) as a means of paying back that loan.

Put simply, while a business loan itself will often be secured by either your own credit or any assets owned by the business itself, it’s still a requirement for you to have the financial structures in place (such as a business checking account) to properly receive and efficiently use the loan.

6. Gain access to business-only banking services

One of the routine differences between a personal and business checking account is access to business-only services provided by your bank.

A few common and particularly helpful services you should look for include, but are not limited to:

• No or low minimum balance requirements or maintenance fees for the account.
• Access to business debit cards to empower employees with the ability to make purchases on your behalf.
• Access to overdraft protection to ensure you don’t have to worry about fees.
• The ability to create and purchase custom, professional checks with your branding.
• Preferred money market rates to put your business’s liquid cash to good use.
• Cash management solutions and merchant services, to help save you time and money in managing your business funds.

While this is far from an exhaustive list of perks offered by banks, the key takeaway is understanding that opening a business checking account will give you access to a variety of additional services to help you maintain and protect your business’s financial health.

How to choose a bank that’s right for you

When researching the different checking account options, it may be hard to find one that’s a perfect match for your business, especially with all the different perks and account types available.

As you begin looking at different banking options, a good strategy for finding the account that’s right for you is to start with the bank you have your personal accounts with and then compare their offering against other options in the market.

The main benefit of this approach is starting with a bank you already trust to manage your personal finances (meaning you’re already familiar with their level of care and services) and then compare their business finance offerings against other options to see if you can find a better alternative.

A few key factors to look out for include:

• Introductory Offers—Are there any promotions for opening a new checking account with the bank? Some offers include bonus cash for making an initial deposit or lower fees relating to the account for a certain period.
• Interest Rates for Savings & Checking—Businesses frequently keep large sums of liquid funds in savings and checking accounts to save for emergencies or make payroll for the month. For this reason, it’s smart to make this money work for you by ensuring your funds are accruing interest while they’re in the account.
• Interest Rates for Credit—While you don’t have to keep your checking and credit accounts at the same bank, doing so will make things easier when you need to make payments or take out new lines of credit. For this reason, you should always look at the interest rates for any business credit options available to ensure you’ll receive a fair rate.
• Transaction Fees and Other Costs—Some business banking options come with steep fees and other costs depending on the services offered by the bank. Because of this, make sure you have a full understanding of what you’ll be paying for and why before opening a new account.
• Online Presence—It’s important to remember that financial transactions are becoming more digital, meaning your bank’s online presence is more important than ever. Make sure they have a robust website and mobile app so you can stay on top of your funds and quickly perform common financial actions online.

Open a business checking account at your local bank today

Opening a business bank account is both an incredibly important and exceptionally easy step in ensuring the long-term financial health of your business.

In most cases, you’ll simply need to provide certain documentation such as your Employer Identification Number (EIN) for tax purposes and your articles of organization or incorporation.

In return, you’ll gain access to the wide array of business banking options available both online and at your local branch, such as credit card payment processing, preferred rates on money market accounts and various merchant services.

If you’re currently looking to open a new business checking account or you want to learn more about the checking account options available at Associated Bank, schedule an appointment online or visit us at one of our local branches.

We’d be happy to help you find the specific checking account that will make your business money work for you.