Different Kinds of Financial Institution Accounts for Businesses

Choosing the Right Business Bank Account

Managing personal checking accounts may be second nature to you, but what about managing a business account? Understanding the different types of business accounts, their requirements, and when they are necessary can simplify the process of choosing the right one for your company.

Common business bank accounts include checking, savings, certificates of deposit, and money market accounts. Depending on the type of account, there may be monthly fees, withdrawal limits, and minimum deposits. Having a separate business account can protect your personal finances and provide additional benefits for your company.

Do You Need Separate Bank Accounts?

Although sole proprietors and small businesses are not required to have separate bank accounts, having one can be essential for growing your business. Keeping business transactions separate from personal finances offers more protection, especially in legal situations.

Benefits of a business bank account include accepting payments, adding authorized users, and opening lines of credit. Certain loans also require a business account. Consider opening an account shortly after starting your business, even if you are not immediately accepting payments.

Checking Account

Business checking accounts function similarly to personal accounts but are in the business's name. This offers a more professional image for invoicing and payments. Ensure to review the account details, including transaction limits and any maintenance fees.

Chase Business Total Savings allows up to 15 deposits and $5,000 in monthly cash deposits with no charge. Be aware of any fees once maximums are reached. Minimum deposits for business savings accounts may be higher than checking accounts.

Certificate of Deposit Account

Certificate of deposit accounts offer higher APY rates but require locking in funds for a specified time. Terms vary by bank, with rates increasing for higher minimum deposits. Ensure the bank is FDIC-insured and choose a CD type aligned with your business goals.

Money Market Account

Consider opening a money market account for higher APY rates and potential check-writing abilities. MMAs offer more flexibility to access funds compared to CDs, and some banks may provide ATM access and link to a business checking account.

How To Open a Small Business Bank Account

When opening a business bank account, research various institutions, determine account requirements, and prepare necessary documentation. Make an initial deposit through electronic transfer, check, or cash. Obtain an employee identification number (EIN) before opening the account.

Frequently Asked Questions (FAQs)

Which bank is best for small businesses? Consider options like US Bank or online banks such as Bank Novo, based on your business needs.

How many bank accounts do I need for my small business? There is no set limit, but start with one and expand as necessary.

Which small business bank accounts allow for ACH debits? Business checking accounts typically allow for ACH debits.