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You can waive the monthly maintenance fee with one of the following: U. Platinum Business Checking Package. Premium Business Checking Account. Need a business checking account recommendation? Simply answer a few questions to see which business checking account may meet your needs.
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Sign up now for free access to our Personal Finance Boot Camp. By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Business checking accounts are meant to help business owners separate their finances.
They work similarly to personal checking accounts but there are some key differences. Whether or not you legally need to have a business checking account depends on the legal structure of your business. Business checking accounts function the same way as personal checking accounts but they tend to have different fees, limitations, and balance requirements. Personal checking accounts are often free or come with a low fee that can be easily waived , while business checking accounts tend to come with higher monthly fees that might not be waivable.
That being said, free online checking accounts for small businesses are becoming more common. Interest rates on business checking accounts are also lower on average. Finally, some business checking accounts offer the option to order employee debit cards , which allows employees to make purchases and withdraw money using the business's checking account.
As the primary cardholder, you can set spending limits and ATM withdrawal limits for employee cards. Another big difference between personal and business checking accounts are the application process and eligibility requirements. Just about anyone can open a personal checking account , but in order to open a business checking account, you'll need to show some extra documents. The exact documentation you need to provide will depend on both your legal structure and the bank you're applying to.
In general, sole proprietors mostly provide their own personal information, while LLCs and corporations will need more business documentation as well as personal information from all major owners. You do not need to be making any money yet in order to open a business checking account. In fact, opening a separate account for your business should be one of the first things you do, even before you start selling your products or services. As a sole proprietor, you're not legally required to use a business checking account.
This doesn't mean that a personal checking account is advisable for sole proprietors. Additionally, your bank might have certain terms and conditions that specify their personal checking accounts shouldn't be used for business transactions, so it's best to double-check with them as well.
If you operate your business under a legal entity that is separate from you -- such as an LLC or corporation -- you are legally required to separate your company's finances from your personal finances. While this doesn't necessarily mean you need a business checking account, it does make the most sense, and some banks may require it if you're applying as an LLC or corporation.
What's more, using a personal bank account for your business transactions can invalidate any limited liability you receive through the legal entity you've registered. While you may be able to get away with using your personal checking account for business expenses, it's almost never advisable.
It's worth repeating that opening a business checking account should be one of the first things you do as a business owner. Here are some of the biggest benefits that come with handling your company's finances through a business checking account.
Simplifies your taxes -- Would you rather spend a few minutes opening a business checking account now, or hours sorting through your jumbled up finances come tax season?
Having your business and personal finances completely separate is crucial to getting your taxes done quickly and accurately. Plus, you could lose out on important money-saving deductions by not having a business checking account.
Not only will it be harder to identify expenses you could have deducted, but it will also make it more likely that you get audited by the IRS. Protects your liability -- If you've registered as an LLC or corporation in order to limit your personal liability, your personal assets are generally protected if anyone tries to come after your business.
However, mixing up your personal and business finances makes it more likely that a court could go after your personal finances as well because it doesn't look like you are, in fact, running a separate entity. Personal checking accounts , on the other hand, are designed for personal use. In other words, that means things like:. On the surface, the way each type of account is used is what sets business and personal checking accounts apart. But there are other things that make business checking different.
Both business and personal checking accounts can offer things like check-writing and debit cards. For example, when you open a business checking account, your bank may offer access to helpful business features like:. These are all tools and services that a business owner may need to help run their business more smoothly. In addition to business checking accounts, you may be able to open other accounts, such as a business savings account.
Business checking accounts can also differ from personal checking accounts when it comes to things like:. For example, to open a business account, you typically need to prove ownership of the business. You may also be required to maintain a higher minimum balance in your account to avoid a monthly maintenance fee.
Compared to personal checking accounts, business checking accounts may charge more or higher fees overall. That same protection extends to business accounts as well. FDIC protections do not cover investment accounts, safe deposit boxes, life insurance policies or annuities.
But if you have a business checking account or any of the other account types listed above, then you have the reassurance of knowing your money is covered up to the applicable limit. If you run a business, maintaining a separate checking account for your business can make sense for a number of reasons. You can set up a business checking account to receive payments from customers, make payments to suppliers and cover your operating expenses.
This can take some of the stress out of bookkeeping. You can simplify accounting even further if your bank offers integration tools that allow you to connect business checking to your bookkeeping or payroll software programs. This can make a potentially dreaded task easier to manage if you have employees.
The IRS treats business income differently from hobby income. If you want to be sure the IRS recognizes the income you reported as being related to a business, not a hobby, then setting up a business checking account can serve as proof.
Keeping personal assets separate from business assets can offer an advantage if your business is sued or you default on a debt. According to the Small Business Administration, business checking accounts can offer limited liability protection to business owners. Additionally, enrolling in merchant services can offer purchase protections to your customers and keep their personal information secure. Having a business checking account could make it easier to grow your business in the future.
For example, if you want to expand your product line or open up a second location, you may need a small business loan or line of credit to do it. Just as business checking accounts and personal checking accounts are different, every business checking account is different.
Some banks allow you to open business checking accounts online, while others require you to do so in person. Banks may require you to open your account with a specific amount of money, then maintain a certain minimum balance going forward.
Fees are always an important consideration with both business and personal checking accounts. Being able to access business checking when you need to matters. So take a look at what type of user experience a bank offers in terms of mobile and online business banking.
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