If you have your own business, you more than likely have business-related expenses. Depending on the size of your business, these expenses could include purchases for business operations, payroll or renting office space. If your business is still somewhat small or you’re just getting started, you may be wondering if you should open separate bank accounts for business-related expenses and income. Here’s how to determine if you need separate business bank accounts for your business.
What are business bank accounts?
Business bank accounts function similarly to personal bank accounts. The difference is business bank accounts are used only for business transactions, and don’t include your personal transactions. When you open a business bank account, you can open it in the name of your business and allow payments to be made and income to be received using your business name.
Why do you need business bank accounts?
If business bank accounts are so similar to personal bank accounts, then why do you need them? Here are the reasons why you may need separate business bank accounts.
Easier to manage your finances
One of the main benefits to having separate business bank accounts is keeping your personal finances separate from your business finances. Most small business owners start out using their personal bank accounts because it just seems easier. However, once your business starts to grow and prosper, it can become more difficult to keep track of your business expenses and income.
Look more professional
Having your business name on your bank accounts makes you seems more professional and creditable to customers and vendors. If only your personal name is on checks and other payment methods, people may view your business as more of a hobby than a legitimate business.
Easier to prepare your taxes
Most individuals who own their own business are required to pay quarterly business taxes. When you have all your business expenses and income in one spot, it makes doing your taxes much easier, and you’ll be less likely to confuse your personal finances with your business finances.
It may be required by law
Depending on the structure of your business, having business bank accounts may be a legal requirement. For example, if your business is operating as a separate legal entity from the owner, like a Limited Liability Partnership (LLP), Limited Liability Company (LLC) or a corporation, you’ll need to open business accounts with your Employee Identification Number (EIN). Having separate business bank accounts helps protect your personal assets by keeping your business separate.
What business bank accounts are available?
When it comes to opening business bank accounts, financial institutions offer a variety of different options. Here are some of the most common types of business bank accounts.
Business Savings
A business savings account lets you optimize your cash flow by having fast access to funds while earning interest.
Business Checking
A business checking account is one of the most useful bank accounts any business can have. You can use it for everyday transactions like making purchases or paying bills. You can make deposits and withdrawals. You can get a debit card to make it easier to make purchases and withdrawals.
Business Loan
A business loan can be useful when it comes to larger business expenses like buying property, equipment, inventory or when you’re trying to expand your operations. You can also open a business line of credit which gives you access to a revolving line of credit so you can easily borrow cash when you need it.
Business Credit Card
A business credit card is specifically designed for business owners. Business credit cards often offer higher credit limits when compared to personal credit cards. It’s a good option for bigger expenses when you don’t necessarily want to take out a business loan. Most business credit cards offer rewards so you can earn things like cash back or travel.
Business Money Market Accounts
Once your business starts to prosper, you may have the funds to put into a business money market account. A Money Market usually offers higher interest rates than most savings accounts. Some even include check-writing abilities.
Business Certificate of Deposit (CD)
Business CDs provide a safe and stable place to put your money and lock in a fixed interest rate for a fixed term. CDs typically offer higher interest rates than most savings accounts and money market accounts.
Having separate bank accounts for your business can help take your business to the next level. Partner Colorado makes opening a new business account easy. You can speak with our knowledgeable business bankers or open a business account online.
