The best business bank accounts help you stay in control of your company’s finances — regardless of how small or large it may be. Here’s a rundown of everything you need to know about business banking, so you can easily compare business chequing and savings accounts to find the right one for you.
Business banking refers to business-specific products and services offered by financial institutions, which are designed to help business owners better manage their money. It can encompass many different services, including chequing and savings accounts, as well as business loans, lines of credit and merchant services.
Every business owner — regardless of a company’s size — needs a business bank account to keep their personal and professional finances separate. A business bank account can be used to pay bills, purchase new assets, set aside money for a rainy day and receive payments from customers. In addition, a business bank account can be used to track cash flow for legal and tax purposes.
Types of business bank accounts
The 3 most common types of business bank accounts include:
Business chequing account
This type of account allows businesses to deposit and withdraw cash through ATM cards, electronic debit cards and cheques. Some business chequing accounts may require a minimum deposit and others will require proof of business and identification. Banks have many different types of chequing accounts, some with transaction limits and some without.
Business savings account
A savings account is an option if you want your money to accrue interest. It provides the business with a place to store liquid assets in order to save up for a big purchase or set aside money to get through slow times. A business savings account may require a minimum deposit amount, though it depends on the bank.
Business Guaranteed Investment Certificates (GICs)
A Guaranteed Investment Certificate (GIC) allows you to put aside money for a fixed amount of time with a fixed amount of interest. It provides a guaranteed return on your investment and can be useful for long-term savings, but there’s usually a penalty fee if you need to withdraw money early.
How to compare business bank accounts
There are many different types of bank accounts to choose from. When finding the right account for your business, be sure to factor in:
Fees. Is the account a free business chequing account or does it have monthly fees? If so, can they be waived by meeting achievable requirements? Also, look into ATM, transaction and overdraft fees.
Interest. Choose an account that has a competitive interest rate.
Features. Common features online banking, integrations with accounting software, overnight deposit boxes and lines of credit to maintain cash flow.
Supported transactions. Some accounts don’t support cash deposits, while others put a limit on how much you can deposit each month. Choose an account that aligns with your cash flow.
Accessibility. What options do you have for accessing your account? Look into the bank’s online options, whether there are branches near you, what hours help is available and whether you’ll be able to easily transfer money between your chequing and savings accounts.
Introductory offers. If a bank gives an enticing bonus or introductory APY for signing up, check the fine print to see what happens once it expires. The account may not be worth the offer if it has high fees or low APYs.
Pros and cons of a business bank account
Business bank accounts have quite a few benefits, but there are also some drawbacks to be aware of.
Creates a central place for funds. A business bank account can keep all of your funds in one central place so you can easily track and manage your finances.
Separates your personal and business funds. Separating your business and personal expenses can help keep you out of trouble for making the wrong deductions come tax time, therefore protecting you from facing personal liability if your business gets into trouble.
Looks professional. A business bank account can help establish the business’ credibility with customers and creditors.
Provides accountability. Regular statements from your business accounts help keep you accountable for your finances and are useful at tax time. You can also easily report earnings to your board or shareholders.
Fees. Banks can charge monthly fees, plus fees for not maintaining a minimum balance and for exceeding a certain number of transactions.
May not be able to open online. Although more and more banks are starting to support online applications, many business accounts still need to be opened in-person at a local branch.
Can I use a personal bank account for business banking purposes?
Depending on your business structure, you may be required to open a business bank account. But even if it’s not a requirement, it’s considered best practice to do it anyway. Here are 3 reasons why:
Saves you time during tax season. Keeping your work and personal finances separate ensures you don’t spend countless hours sorting through transactions come tax time and makes it easier to spot what tax deductions and credits you qualify for.
Protects your liability. If you keep your money in a personal account, the courts could come after your personal assets during a lawsuit — even if you’re established as a corporation. That’s why it’s usually a good idea to open a business account as soon as possible, even if you’re not legally required to have one.
Gives you a clearer picture of your business’s performance. If you use a personal account, it’s difficult to separate your income from your spouse’s income, your personal bills from your business bills and so on. But with a business account, you automatically know if your company is on the right track financially.
How to apply for a business bank account
Applying for a business account is a lot like applying for a personal account, but there are a few extra steps you need to take:
Choose a bank. Research financial institutions and choose one that supports your business entity and transaction types and has the features you’re looking for.
Apply for your account. Once you gather all the required information, apply for your business bank account online, by phone or in-person at a local branch. If you’re opening up an account with a business partner, make sure he or she is present when you open the account. The bank will need their information too.
Start using it. Once your account is approved, make sure your debit card(s) are active and get ready to start accepting payments from clients and customers.
4 things to do before opening a business bank account
If you’re planning on opening a new business account:
Determine your business’s savings goals and whether a savings account would help achieve these goals.
Determine if your business needs a greater income stream or more financial stability.
Decide who will need to access the business account and how the account will need to be accessed. If there’s more than one account owner, it’s wise to consult a legal professional who can ensure that all parties clearly understand the purpose of the account and the rules for its usage.
Consider whether or not you want to link your business’ savings and chequing accounts.
Are you looking for other business banking solutions?
The right financial tools can help you start, maintain or grow your business.
Yes. You can deduct bank fees and charges from your business income to reduce the amount of tax your business owes.
Commercial banking is similar to business banking, but it’s primarily designed to serve the needs of large corporations, institutions and government agencies. Commercial banking services are offered on a much larger scale and include things like merchant services, lending, stock ownership plans, treasury management, insurance products, global trade management and more.
Typically, no. Many have associated monthly fees that can only be waived when you meet certain deposit or transaction requirements. However, many banks and credit unions offer low-cost bank accounts for small businesses with monthly fees ranging from $5-$10. So, it’s still possible to minimize your account maintenance costs even if means you have to give up some of the perks that come with more premium accounts such as a large number of free transactions, deposits and cheques.
Jeremy is finder's Global Head of Publishing & Editorial. Jeremy has been with finder since the very beginning and is part of the founding team working closely with Fred and Frank to build finder.com into the comparison network it is today.
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