Why It’s Important to Have a Small Business Checking Account
You’re wrapping up a meeting with a new vendor. You write him a check – not from your personal account, but from your brand-spanking-new small business checking account.
What you did isn’t just a small point of pride as a small business owner – some minor marker along your journey to entrepreneurial success. It was an important moment for your budding company that has more real-world significance than you might realize.
If you haven’t yet set up a small business checking account for your company, here’s why you should get one soon, and what to consider when opening a new account.
Why Should You Have a Small Business Checking Account?
You can reap a host of benefits from opening a checking account for your small business, but you’ll want to take care of one thing before you do:
Apply for your Employer Identification Number (EIN).
The EIN is your federal-level tax ID. And you need it before you can engage in a some business basics, including applying for permits, hiring new workers and, in most cases, opening up a small business checking account.
So, why is it so important to have a separate account for your company?
- Flexibility: You naturally can’t have employees cashing checks made out to you or writing checks out in your name. However, obtaining a small business checking account allows multiple employees to make financial transactions on behalf of the company. The larger your business becomes, the more important this benefit is.
- Legitimacy: You might be the most honest person you know. You might run an airtight operation. But there’s a clear difference in optics between asking a business partner to write out a check to you, and asking them to write out a check to your business.
- Keeps the IRS Happy: One of the easiest ways to fall afoul of the IRS is to accidentally commingle your personal and business expenditures when you file your taxes. Having a small business checking account virtually ensures your finances will remain separated.
- Liability Protection: In the same vein, keeping your personal and business finances separated can also help keep your personal assets safe from entities that might have a financial claim against your company.
Another note: If you want to complete the separation of your finances from your company’s, also consider getting a business credit card. That can help you build your small business’s credit score.
What Should You Look For in a Business Checking Account?
Don’t just walk into the first bank you come across and open an account. Like with many things, it pays to shop around and do your research. As you search for a bank to handle your needs, you’ll want to ask about a few things.
Most importantly are fees and interest rates. A small business bank account loses a lot of its utility if it bleeds you dry. So, you’ll want to inquire about details such as how transaction fees, ATM fees and maintenance fees are structured – and especially in the case of the latter, whether there are any circumstances in which those fees might be waived. Typically, banks will waive certain fees if you maintain a minimum balance.
You’ll also want to make sure the bank will offer other financial options you might need down the road, such as business loans, lines of credit, credit cards and merchant services.
Ask about introductory offers – after all, it’s nice to save or get extras wherever you can. But don’t strike a questionable banking partnership just to land a little bonus cash, either.
Make the Right Banking Choices for You
A banking relationship is something that you want to get right from the get-go. Switching out your checking, savings and credit providers after years of using the same bank can be a cumbersome process.
Fortunately, we can help. McManamon & Co.’s consulting services for small and midsize businesses cover a wide range of topics, including helping to recruit, interview and implement new corporate banking relationships.
Take this next step in your company’s growth on the right foot. Reach out to us at 440.892.8900 or contact us online today.
Tags: accounting, McManamon, McManamon & Co., small business, small business accounting, small business banking, small business finances | Posted in accounting, McManamon & Co., small business, Small business finances