If you’re planning to start your own company and are considering starting your own business, the IRS recommends opening an additional checking account for managing business finances. However, do you have to establish a business checking account? Or do you have the option of opening a second checking account instead?
We’ll go over the distinctions between personal and business checking accounts to help you better understand the options available to you and what next step you need to take in your industry.
Business checking as opposed to. Personal checking at the eagle, business checking and personal accounts differ in two ways. They have different options and opening conditions.
Business checking accounts are designed for business owners. It could provide a greater sense of security and professionalism for those managing business expenses.
An individual checking account can be used to manage your everyday financial transactions. Although it’s more straightforward to open and establish than a checking account for the business, you will only be able to access a few options for business.
What is a business check account?
Checking accounts for business are created specifically for business owners. They are available through brick-and-mortar and banks that are online.
It is necessary to have business documents to establish an online business checking account or in the branch. For instance, if you are a partner or corporate entity, you’ll need to possess your Employer Identification Number (EIN), a business license, and other essential business documents that outline partnership, business, or operational agreements. Similar to a personal checking account, you’ll have to present two government-issued IDs and proof of address to confirm your identity.
If you establish an account with a business bank, you’ll get access to additional banking options for businesses at banks. Many banks provide merchant services that permit using debit cards, credit cards, and mobile payments as payment options. Also, you’ll be able to apply for an enterprise line of credit, and it’s worthwhile to consider if you’re in an emergency and need your finances to be separated from the business.
A quick tip: When you have personal and business banking accounts, you’ll need to know the general bank fees to determine whether a specific bank account is the right one.
Pros
- Professional (You’re using the business name instead of an individual character)
- More excellent protection as you’re able to use merchant services when you require to process payments via credit card
- FDIC and NCUA guaranteed (Up to $250,000 in security in a bank account held at an insured federally-funded financial institution)
Cons
- A thorough process to open the account (A Business bank account requires documentation for business and may require longer than an individual checking account)
- If you have a bank account in a different location in, you may incur fees related to the account (monthly service charges, out-of-network ATM fees or wire transfer fees)
When should you create a business bank account?
Business checking accounts can be the better choice if you intend to use other banking services for business by banks.
“Business accounts can provide advantages not offered to traditional checking accounts, which can be linked with merchant service. Additionally, there’s a risk-free way to separate your funds,” says Marguerita Cheng, CFP(r) professional, RICP Chief Executive Officer of Blue Ocean Global Wealth.
For instance, banks could offer protection against fraud from merchants for your company and your customers with an account with a business bank.
Jeb Jarrell, CFP(r) Professional and the owner of Plentiful Wealth, LLC, is also announcing that a business checking account can make you appear more professional when trying to attract clients or a new company; it also will show other business owners that you’re a legitimate business.
What exactly is a private check account?
A personal check account is a kind of account in a bank that anyone can open to control their expenditures.
Checking accounts for personal use can be set up on the internet or in a branch and aren’t as complicated as checking accounts for business. It usually required the following documents: a US ID, a social security number, and an official address. If you don’t have a Social Security number or a US ID, however, certain banks will allow the use of an ID from another country instead.
Pros
- Opening a bank account is less complicated than opening a business checking account.
- FDIC as well as NCUA guaranteed (Up to $250,000 in security in a bank account held at an insured federally-funded financial institution)
Cons
- It doesn’t provide specific commercial functions
- Based on the bank you use, and where you bank, there could be charges related to the account (monthly service charges, out-of-network ATM fees, fees for overdrafts)
What is the best time to start a checking account for yourself?
Cheng states that if your business is a sole proprietorship, you may create a personal checking account rather than a company checking account as long you keep your finances distinct and separate.
“If the business you run is expanding, it is possible to open an additional checking account,” says Cheng. “Then, when your business expands, it is possible to upgrade and gain additional customer features. This way, you’re not in the middle of your funds, but you’re not setting up all the bells and bells.”
Keep in mind that when operating an independent entity, such as an organization, you’ll have to open a corporate account to keep your personal belongings.
