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:
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.
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.
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.
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.
Explore Bonsai Banking - the integrated small business banking solution providing financial services for interior designers and other self-employed professionals. Compare your options and discover the Bonsai advantage.
A common question asked by many business owners is: how many business bank accounts can you have? Well, technically, as many as you want. You just need to meet certain requirements. We'll discuss it in this article.