"@bonsaiinc is probably my all time favorite freelance tool. hands down. the team is super responsive and accessible when i have questions."
David Urbinati
Motion design / animation
Which Problem Would Be Best Addressed By a Business Bank Account?
7
Min Read
Many small business owners are still using their personal accounts instead of business banking services, but some cannot help but wonder: "which problem would be best addressed by a business bank account?" Is it worth it to look into business checking accounts at your financial institutions of choice?
As a new business owner, you may want to separate your personal and business finances and look for a retail bank that can offer you the best business bank accounts.
But before you do that, you should also know why you need such an account. Having business checking accounts at the right commercial bank can solve various problems you would normally have. Let's find out why.
Note: if you want to try the best business bank account and address the problems that could be solved, try Bonsai Cash. Our business account has no hidden fees or monthly minimums and allows you to create as many sub-accounts as you need. No application process or credit checks. Open a new account today.
What Is a Business Bank Account?
A business bank account, as its name suggests, is the type of bank account that caters to small business owners. This can be a checking account, a savings account, a merchant account, or a credit card.
Business bank accounts have various features that a personal account may not have. For instance, they may have accounting software to help a tech company keep track of their finances, or they may provide business loans for those in need of financing.
Why Do Businesses Need Business Banks?
For the most part, almost all banks offer a business account, but there may also be some financial institutions that will not. As a small business owner, you need to look for the kind of bank that offers proper investment opportunities to businesses.
A business bank will provide tailored services that fit the exact needs of a business, allowing more efficient cash flow management. Some features such as checking and savings accounts may be available in both circumstances, but a business bank will fix issues such as credit cards or business transactions.
Problems That a Business Bank Would Solve
Business banks and their associated business banking accounts can solve various problems, including but not limited to:
Unprofessional Image
By not having a small business bank account and using your personal account instead, you risk looking unprofessional. Whenever you make or receive a payment, the person on the other end will know that everything is coming and going from a personal account.
This type of unprofessional image can also increase client insecurity. As they won't see a business bank account, they'll believe that you're just sort of running the business, usually as a side hustle. On the other hand, if you go for banking profitability banks to get an account, they will know that you actually mean business. Being more professional is one of the many benefits of having a business account.
Cash Management Difficulties
As a new small business owner, you may have difficulties separating your business and personal expenses. For instance, if you are working at a tech company, you'd have to organize your money properly and gear it towards taxes, equipment, subscriptions, and many more.
If you only use your personal account, you might end up spending more than you should on personal matters, leaving your business expenses uncovered. However, business checking accounts help you avoid that.
Not only do you get access to a separate business savings account, but they also come with a variety of business-oriented features for cash management.
For instance, our freelancer bank account for business has a feature called "Envelopes," where you can deposit money for various savings goals. You don't really have a limit to those expenses, which is why small businesses can use these banks to keep themselves organized.
Personal Liability
Many people simply use their old personal accounts so that they no longer have to browse through financial institutions, opening separate accounts. The problem is that if you use your personal account, then you are making yourself personally liable for the problems that go down with your business.
Small business bank accounts will separate your personal funds from your business funds. This means that even if you have debt, it will not be pulled from your personal account - mainly because it will only have the business account to pull from.
Credit Card Payments
The issue of credit card payments usually would be best addressed by a business bank account. Personal accounts at a small bank in the banking industry may not be able to help you much, as they do not offer credit cards or a credit line.
That being said, primary measures banks catering to businesses will likely give you the option of credit card payments. Many clients prefer to pay with a credit card - so, if they see that a business does not accept payments with a credit card, they will simply look somewhere else.
Business bank accounts will solve these issues. Even when you go for basic checking account services, you should unlock credit card payments if you are a registered small business.
Poor Credit History
If you have a poor credit history for your business, then a personal account won't be able to help you much. A retail bank, on the other hand, will likely have credit options for you, such as a credit line with associated credit cards.
When you use those credit cards and pay your debt on time, you will be improving your relationship with the bank. You will show them that you are good at making payments and that you won't be defaulting on your debt. This can help give you a better interest rate when you are looking for a business loan.
If you have bad credit, check out our online no credit check business bank account.
Lack of Business Funding
Small businesses may need funding now and again. Still, without a business account, you may only get access to a personal loan. This may not be enough to cover all of your expenses.
On the other hand, if small businesses were to choose the best business bank account, they will be able to receive entrepreneur financing. Plus, not only will this help with your finances, but it will also help you have a better relationship with the bank.
Tax Preparation
A business account will have accounting software that can help you during tax time. When you use a personal account, your personal finances will get mixed up with your business finances. Upon tax time, this can cause a great deal of confusion.
You may use a tax preparer to separate your expenses, but even they may not know exactly what transaction was personal and what was business. This way, you may end up missing crucial deductions.
This problem would be best addressed by getting a separate business bank account. You will no longer get your payments mixed, and you won't be missing deductions. For instance, by getting a Bonsai Cash account, you will also get access to their tax preparation software.
This way, you will not be penalized for trying to deduct something that you shouldn't. Your accountant will also be happier, as you will be making their job easier.
Business Incorporation or Partnership
When you incorporate your business or form a business partnership, someone needs to handle official transactions for your business. This is the kind of thing that cannot be done with a personal account, as there are some legal ramifications that you will have to cover.
On the other hand, small business checking accounts should be able to solve this problem. This way, your business will be viewed as a separate legal identity, and you will be able to incorporate it easily.
Try Bonsai Cash
By choosing from the best business checking accounts, you will solve various problems. Not only will your business officialize, but you will also get access to other additional financial services that can help you out.
We'd recommend the best business checking account, Bonsai Cash. No hidden fees or monthly minimum requirements. Also, there's no application so it is virtually guaranteed and can help your poor credit history needs.
Our online banking is easy to set up and allows you to create envelopes or sub-accounts instantly. You can set up a vacation savings account or retirement fund and have funds automatically deposited there when you receive any payments.
There's no application process so our new accounts are guaranteed.
Research your options and compare their features, and then find the best bank that works for your purposes.
What Defines a Verbal Contract?
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.
When is a Verbal Agreement Legally Binding?
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:
- Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
- Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
- Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
- Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.
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.
How strong is a verbal agreement 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.
Are you a freelancer?
Join 150,000+ freelancers using Bonsai's free contracts & invoices.
get started nowWhen are verbal agreements not enforceable?
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:
- The sale of real estate or vehicles
- Real estate leases lasting longer than one year.
- Property transfer following the death of the owner.
- The case of a party agreeing to pay debt for someone else.
- Any contract that requires more than a year to fulfil.
- A contract involving and exceeding a specified amount of money (which varies by state).
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.
How are Verbal Contracts Enforced?
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?
How can you prove an oral contract?
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.
Written vs Verbal Contracts: What's the Verdict?
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.
Say hello to digital contracts
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.
Benefits of written contracts
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.
Create Professional Contracts with Bonsai
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?
Join 500,000+ freelancers using Bonsai's free contracts & invoices.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
