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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Can You Have Multiple Business Bank Accounts?
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."
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.
Drafting Accurate Budget
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.
Healthy Cash Reserve
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.
Saving for Different Purposes
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.
How to Set Up Multiple Bank Accounts
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:
Register for EIN
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.
Apply for a Business Checking Account
Once you have all documents along with the EIN in order, you need to open a business checking account.
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.
Decide On Your Business Bank Account Needs
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.
Considerations when Opening Multiple Bank Accounts
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.
BonsaI Cash: One Checking Account With Multiple Envelopes
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.
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