Starting a Small Business : Step 6 Getting a Business Bank Account
Last week we looked at how to create a web presence. This week we will look at step 5 of the Small Business Administrations checklist for starting a business getting a business bank account and why it is important.
What is the difference between a personal and business bank account?
There are two main differences between personal and business bank accounts.
The first main difference is ownership. A business bank account is owned by the business, not by you personally. This means that the account stays with the business even if you sell it.
The second difference is the pricing structure. It is normal for personal checking accounts to be free. For businesses, it is normal to have transaction limits, cash deposit limits, and a minimum balance requirement. They also often come with fees for when you don't meet their requirements.
Do I need a separate bank account?
Yes, you do. Having a separate bank account for your business is a requirement if you have a separate legal entity like an LLC, Corporation, or Partnership. If you don't have a separate bank account and have one of those entities, then you are co-mingling your personal and business funds which opens you up personally to legal liability.
What if you are a Sole-Proprietorship?
As a Sole-Proprietorship, you are not required to have a separate bank account, but I highly recommend it. Having your business and personal finances separate makes it easier to:
1) Prepare your tax returns
2) Creates visibility on how your business is performing
3) Prepares your business for growth
4) Gives your business credibility
Where should I open a business account?
I recommend getting a business checking account with a larger bank for the convenience of being able to easily import your data into your accounting solution.
Wells Fargo offers a small business checking account for $10 a month which can be waved when you maintain $500 average balance
BBVA Compass - No monthly fee and no monthly balance requirement but with other requirements.
If you still want to go with a local bank Nerd Wallet has a list by state of the smaller banks which offer free checking here.
The things to look for are, what you plan to use the account for, what the account requirements are, and what are the related fees. Compare them to the type of business you plan to have and choose the bank that best fits your business.
Do I have to go to a physical location to open my account?
In many cases no. Depending on the bank and what type of business you run you may be able to apply for and open an account from your computer. The US Small Business Administration has some detail on what you need to open an account online here.
Having a separate bank account for your business is an important part of being in business, besides keeping your liability limited it help track your income and expenses giving you an easy way to see where your money goes. If you have any questions about starting a business let us know in the comments or send us an email at firstname.lastname@example.org