As a business owner, the thought of opening more than one account may have crossed your mind - but how many business bank accounts can you have? Are you limited to just one business bank account, or can you open as many as you need?
Opening more than one business account may be the answer to many of your problems, but it can also raise a few challenges. If the bank allows you to, then you need to consider all the possibilities, as well as create a strategy.
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You can open as many business bank accounts as you need - you just have to meet the conditions set by your chosen financial institution.
For instance, some of these institutions will set a limit for the number of bank accounts that you may open, whereas others may allow you unlimited checking and savings accounts.
It is important to check the requirements of every financial institution before you consider opening multiple business checking accounts. Otherwise, your bank application may get rejected.
That being said, even if there are limits, you may open multiple checking accounts at different banks. This will help you separate your personal and business finances while organizing your cash flow.
One word of advice would be not to mix your personal account with your business accounts. Many business owners transfer money to and from business and personal accounts, which often causes even more confusion. If you want to open multiple business accounts, they should be all "business."
Having one business bank account can offer several benefits. Opening multiple accounts for your company can help you organize your finances even more as you can see below:
Let's say that you want to keep an eye on payroll and payments from incoming clients, but differentiating between the two gets rather confusing. In this case, you might want to open a separate business checking account for each.
If you have quarterly taxes to pay, multiple business bank accounts can also prove beneficial. This way, you will be able to transfer the money necessary for the payments in the other account. Until the day you need to make a payment, you won't accidentally spend your company's tax money.
Bear in mind that if tax saving is your purpose, a business savings account might be the better alternative to business checking accounts. With a savings account, you will be able to gather interest on your funds.
If you get several accounts for different expenses, you may get a better idea of the money coming and going from your company. This should help you get a better snapshot of your transactions and how much money you will need to put aside for each.
For instance, if you use different accounts for equipment, you may notice that you spend around $2,000 every month to keep things going. This way, you will draft better budgets for the expenses you need to make in the future.
If you have a healthy cash flow for your business, then multiple business bank accounts might also seem the financial-savvy solution. For instance, if you go for a certificate of deposit (CD) or a business money market account, you'd be able to gain more interest on your funds than you would with a regular savings account.
Bear in mind that unlike a business savings account, where you can withdraw money any time you want (at the cost of interest), a CD must remain untouched until the maturity date of the account.
However, the lengths for these business accounts are varied. Therefore, if you have a healthy cash flow and some money that you can spare to add every month, this type of bank account can actually bring you profit.
The average company will have one business bank account for incoming money, and a second business bank account for savings. However, one savings account may not be able to keep track of your savings.
For instance, let's say that you are trying to save money for emergencies, but you also want to put some money aside for a potential equipment upgrade. In this case, two business bank accounts may be needed in order to keep these two separate.
Or maybe you got a loan for which you need to save up the repayments. To ensure that you do not accidentally tap into your loan money, you may need to open separate savings accounts. Many California finance lender loans need to be connected to this type of account once the loan is approved.
When you make all of your transactions from one account, there is a good chance that you may fall victim to hackers or scammers. If your business account is compromised, then you may want a separate account to fall back onto.
When you have multiple accounts, you will not be forced into stalling your transactions until the problem gets resolved. You can simply use your other account until the bank fixes the issues for your first account.
Each business has its own needs, but when it comes to setting up a second checking account or even a third, a small business owner will have to go through the following steps:
When you are setting up your first business account, you need to apply for an employer identification number (EIN). EINs are free to apply for and most banks will require this number when opening a first or second account.
Aside from the EIN, the financial institutions might ask for other documents. This can include a photo ID issued by the government, a business license, or other relevant documents.
Once you have all documents along with the EIN in order, you need to open a business checking account.
Review our list of the best business checking accounts.
This should be the main expense account that you are planning to use for your business.
A small business or sole owner will need a business checking account in order to manage payroll, pay bills for the company and receive payments from the clients.
You might want to refrain from using your personal account as your business account. Not only will you receive less financial protection, but it can become difficult to differentiate between business and personal finances. It's best to keep your company's finances separate from your personal ones. Review the requirements for business checking accounts and then proceed if you qualify.
Once the bank approves your first account, it is time to think about your business needs and what you are looking for in a second one.
If you want to open a checking account, you may have to meet the qualifications for the bank you've chosen. For instance, if the new account requires a minimum balance, then you need to start putting money aside to cover the first deposit.
You also have to determine whether you need a checking or a savings account. If you go for the latter option, you need to remember that you should not touch the funds, lest you lose the interest.
If you are considering opening multiple accounts for your business, you might want to think about why you need those accounts in the first place. This applies especially if you are opening two business bank accounts of the same type. Although you could technically use the same bank account for two businesses, it is highly not recommended
When you are juggling two business bank accounts, bookkeeping can turn out to be more troublesome. For bigger businesses that manage multiple accounts, you might even need to hire an accountant.
Moreover, if you are handling multiple accounts, keep in mind that you'll have to remember the different account features. For instance, while one account might have no minimum balance requirements or transaction limits, others might have these.
Different banks might also ask for different fees, and sometimes it can be very difficult to remember all of them. For instance, some banks may offer unlimited transactions, whereas others can charge a fee if you go past a certain number. Take into account all the business bank account fees and costs before you open a new one.
By juggling separate accounts, you might end up forgetting which one is which and compromise your business's finances. As a small business owner, it's important to keep track of these limits so that your finances do not have to suffer.
If you are looking for one business account to help your small businesses stay more organized and perhaps even bring their business finances on a better track, try Bonsai Cash. With one account, Bonsai Cash allows you to create "envelopes" or other checking accounts to organize all of your businesses finances for tax purposes. You won't need to think about the effort needed to create multiple accounts.
Bonsai Cash lets you instantly create a separate account or envelope. Having multiple hubs or accounts will help you easily track your expenses and track your deductions.
Remember that while more than one account may not be the right choice for you right now, it can become a possibility in the future. As your business matures, you may need multiple hubs to track expenses.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?