A business checking account can have a variety of benefits for your small business. In addition to keeping your business finances separate from your personal checking account, the right account can expand your bill payment options, streamline your accounting and bookkeeping, and make it easier for you to apply for business credit in the future.
Why does my small business need a business bank account?
Opening a business bank account should not be viewed as an optional task for small business owners. Mixing business and personal expenses is grounds for the IRS to deny certain deductions when you file taxes, and nobody wants to be subject to an audit. Paying employees with a personal check puts an added tax liability on the company, especially if you don’t have an employer identification number (EIN).
Business owners should be able to track business income and expenses separately from their personal financial transactions. It’s difficult to measure profitability if your finances aren’t separate, and any type of real financial reporting is impossible. You also can’t build your business credit without a business bank account, so banks won’t approve you for a business line of credit or loan.
Sync your business bank account with accounting software
Let’s take a moment to review the proper way to set up a business. Operating as a sole proprietor is okay, but a single-member LLC or corporation offers more tax benefits. Both require filing for an EIN, which you’ll need to open a business bank account. You can do all this online, including applying for the account.
Once the bank account is open, you can connect it to accounting software like QuickBooks® Online.1 These platforms track your income and expenses for you. They also alert you when you need to submit quarterly tax deposits and tell you how much they should be for. You won’t get any of that if you’re using your personal checking account.
Give your accountant controlled access to your account
Certain banks allow you to share your business checking information with an external accountant. The accountant will be able to securely view your transactions and balances using a dedicated login. This does not give them the ability to withdraw or transfer funds because their access is “read only.” You should be able to do the same thing with your accounting software.
Small business owners should not try to be their own accountant, even if they have an education in accounting and finance. Hiring a licensed CPA to do your financial reporting and tax filings gives your business added protection from errors and audits. It’s an added expense, but it’s also an investment. A good accountant can actually save you money in the long run.
Keep your money separate but together
Some companies choose to open separate accounts for payroll, taxes, or special projects. There are banks that allow you to do this with sub-accounts that sit under your main business checking account but come with most of the same features as your main account. It’s not necessary to open multiple accounts when you do it this way. Each sub-account can have a different budget to keep things organized.
How to find the best bank account for your small business
Most traditional banks and credit unions offer business checking accounts. You can also find them online. Look for useful business checking features like no monthly fees, high-yield interest, and built-in bill pay solutions. You might want to open your account at a 100% online bank that offers a diverse product line that includes business credit lines, small business loans, and lines of credit. Those could come in handy for cash flow management as you grow, especially if you can manage all those financial accounts in one place.
