What You Need to Know When Setting Up a Small Business Bank Account

What You Need to Know When Setting Up a Small Business Bank Account
  • Personal checking accounts are used for individual finances. 
  • Business owners should always open business accounts.
  • The FDIC insures up to $250,000 per account. 
  • Check out a list of the bank’s fees before opening an account.

Business Owner Alert: Don’t Open a Bank Account Without Reading This First

(NewsReady.com) – Opening up a bank account is fairly easy. However, did you know the type of bank account you should open depends on what you’re going to use it for? There are many different types, but the two most popular are personal and business. Before opening one, it’s important to know which to choose.

Personal Bank Accounts

A personal bank account is exactly what it sounds like: a bank account for personal use. This is the one a person would use to pay for their household expenses. They would deposit their paychecks into the account, then use it to pay for electricity, water, and other expenses. Sometimes, a person can tie their savings account to their personal checking and easily move money between the two.

Business Bank Accounts

A business account is what someone would use if they own a business or are a contractor. It makes it much easier to pay business expenses if the account is separate from their personal one. That’s because the money for the company is just moving in and out of a single account. This is really important when it comes time to do taxes.

You can use a business account to deposit money from customers, make tax payments, pay employees, purchase necessary goods for the business, and make other necessary financial transactions related to the company.

How to Choose a Business Account

If a person does business in more than one state, they’ll probably want to pick a bank that is in the areas where they most frequently work. After they narrow their choices down, they should call around and find information about opening and maintaining accounts at those financial institutions.

Many banks have minimum deposit requirements to open an account and want a person to maintain a specific balance. If the business owner’s account falls below that threshold, the bank may charge a fee. Speaking of the fees, it’s good to have a clear understanding of what those will be so the bank account holder won’t experience any shock.

Before opening an account, the business owner will also want to find out what benefits the banks offer. For instance, do they allow them to earn interest on their balance? Or, does the bank have access to merchant services?

Doing research beforehand can save lots of headaches and confusion, but also ensure the company’s transactions are separate from personal, so you have a clear outlook on where both sets of finances stand.

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