i'm in the process of establishing a small business and have yet to open a bank account for it. what's the advantages and disadvantages of using a business account over a personal account?
Business accounts give you features that are more commonly used by businesses, like several users with different credit cards and limits that all feed into the main credit line, quickbooks export, payroll capabilities, bigger limits and lower fees for wire transfer, etc.
On the more practical side having it completely separate from your personal accounts makes bookkeeping a lot easier. You're keeping your books up to date right anon?
i am. thanks for the reply btw. but are there any terrible downsides to a business account? it seems like most banks want a certain amount of money to sit in a business account each month, which is something i can't guarantee. for this reason i am leaning towards personal.
Mine charges $16 a month unless I meet one of these criteria:
$250+ in net new purchases on a linked Business debit card
$250+ in net new purchases on a linked Business credit card
$3,000+ minimum daily balance in primary checking account
$5,000+ average monthly balance in primary checking account
$15,000+ combined average monthly balance in linked business accounts
It's really easy to meet at least one of those once your business actually starts running. In the meantime $16 is not too bad.
BTW this is a decent credit union so no bullshit like minimum balances or direct deposit mandates. I write off the checks as a tax deduction and 0% interest makes accounting easier so it's not a dealbreaker.
Small business owner here:
The single greatest advantage of the account is Legitimacy. That's it. When the write you a check it is to ABC corp, instead of Bill Smith. You don't look very legit asking for personal checks.
In the beginning of a business the hardest battle is making yourself look legit, ie:
- company vehicle
- online presence
- business cards and media
The other advantage of the account is keeping track of profits and expenses.
But yes if you form an LLC like I did, you def need to open up a business bank account to go with it.