Business Checking: Do I Need One for My Business

As a new business owner, there are many steps to take to ensure you are properly set up so you can run your business with peace of mind. One of the many questions we come across often is why a business needs a business checking account.  There are many reasons why your business could benefit from a checking account, and 5 Star Processing will provide some insight to help you with the decision-making process.

The importance of a Business Checking Account

There are many reasons you may want to consider a business checking account, however having a safe place to track your incoming revenue and outgoing expenses would be one of the most important reasons. Here are some other benefits of having a business checking account

• Most Merchant Accounts require them
• It will help with building your business credit profile
• Helps with your bookkeeping
• Makes your business look more professional

These are just some of the important reasons why having a business account is good for your business.

How to Find the Best Business Checking Account?

With so many options out there in the business checking world today it may be hard to determine which account is right for your business. There are online banks, traditional banks, and now merchant providers like Square and PayPal are offering a checking solution for business, but how do you determine which bank account will be best for your business?

The best way to determine what works best for you and your business is by doing a side-by-side comparison. You might find that one bank may offer better features and rates compared to another. Here are some things to consider when comparing features.

• Rates
• Flexibility
• Transaction limits (to include deposits, withdrawals, and wire transfers)
• Fees (Atm fees, NSF, and other fees that may affect your account)
• Do they offer checks (some businesses may need physical checks to pay vendors)
• Do they offer a Merchant Account solution (some banks are starting to offer this for account holders)

You may find with the rise of more online business banks that there are more features offered to help any startup business. Brex is one example of an online bank that offers some great features for newer businesses. You can find out more information here through our perks program.

Business Checking Account V/s Personal Checking Account

Some of the differences between these two are as –

• A personal checking account is for your personal use as a consumer. While on the other hand, a business checking account is for business-related transactions.
• With a personal checking account, you would pay your personal bill, make purchases with a debit card, write checks, and manage your expenses and income. While on the other hand, with a business checking account, you can accept payments for your business and pay your vendors and business expenses.
• A business checking account may require a higher daily average balance than a personal one and may have different features like wire transfers or merchant services so you can accept payments via credit card.
• A business checking account may have a higher fee and more stringent account balance requirements than a personal one, which may be more difficult to waive.

What Do you need to open a business checking account?

While nearly anyone can open a personal checking account with an only ID and social security number, the requirements for a business checking account can be a little onerous. To open the business checking account, it will be too much essential for you to provide the following documentation:

• Firstly, you will have to provide a social security number if you are a sole proprietor. Or you will have to provide an Employee Identification Number (EIN) if your business is the company, partnership, or the Limited Liability Company (LLC).
• Second, you should have Government Issues ID like a driver’s license or passport.
• Moreover, business license and Articles of Organizations both are very essential for opening a business checking account.
• Organization documents were filed with the state.
• Partnership Agreement with the name of the business and its partners
• Finally, a Certificate of assumed name if you are operating your business under a name that is separate from your legal name

Careful Points To Consider While Choosing The Right Business Checking Account

There are several payment service providers that have business checking account limitations and benefits. This can create a negative impact on your business’s financial health. On the basis of 5-star processing, it is vital to understand these variables when choosing the right business checking account:

Cash Deposit Limits:

Your bank may limit the amount of cash you can deposit into your business checking account for free each billing cycle. After you have reached the limit, you will have to pay the cash handling fee for any further deposits at the time of that billing cycle. In case your business primarily deals in cash. Then, you will need to find a business checking account with an adequately high cash deposit limit.

Fees:

Business checking accounts are more likely to have monthly maintenance as compared to personal business checking accounts; moreover, the requirements for waiving these fees tend to be higher. Hence, it is vital to know the particular minimum balance and transaction needs in order to ignore the account’s fees.

Interest:

Some business checking accounts pay interest on your balance even though it is important to crunch the numbers to see if the interest rate is worth any fees that you may have to pay.

Final Thoughts

5 Star Processing uncovered some reasons why it would be beneficial to open a business checking account. Having a business checking account can only enhance your business, but is optional for you as the business owner at the end of the day. 

If you have questions about business banking solutions, then feel free to reach out to one of our team of experts at 888-253-9692 or [email protected].

Frequently Asked Questions