Receiving payment from your business is rewarding. However, after getting your hard-earned money, you are bound to ask yourself where to take the money. Should you deposit it in your personal account or a business checking account?
Separating your personal and business funds is a good idea if you want to keep proper records and understand your business finances. Separate accounts can also be mandatory depending on your business, and understanding how they compare is necessary.
Difference Between Personal and Business Checking Account
If you own a personal or online business checking account, you can deposit, withdraw, and purchase with your debit card and draft checks. Also, both accounts allow online banking and have overdraft protection.
Despite the above similarities, a business checking account will differ from personal accounts in the following ways.
An online business checking account features an employee debit card that allows employees to purchase or withdraw money with this account. However, as the primary owner of this account, you can set withdrawal limits for your employee cards.
Monthly Charges and Balances
Unlike a personal account, an online business checking account features higher fees and balance requirements. Most accounts will charge a standard $10 but may waive depending on your daily balances. Still, waiving the fees on these accounts is more challenging than on personal accounts.
Opening most personal accounts will require your social security number. On the other hand, you will present your Employer Identification Number (EIN) and additional documentation as the bank deems necessary when opening an online business checking account.
Limited Free Transactions
Business checking accounts have a limitation on the free transactions you can do every month, after which you will incur some fees, unlike most personal accounts.
How To Choose an Online Business Checking Account
Operating a business as a legal entity requires you to separate your personal finances from your business. You can do this by opening another personal account, but banks will advise you to consider a business account, especially if you are applying as a corporation or LLC.
A sole proprietorship does not require using a it but establishing one will make financial management easy. The following are some criteria you can use to select the right business checking account:
- Consider a bank that meets the needs of all businesses: small, medium, and large businesses.
- Consider an account with lower monthly fees.
- Check the interest rates as they bring the difference in the long run
- Check the minimum requirements and limits on the account
- Check the ease of accessing cash
- Easy ATM accessibility.
Open a Business Checking Account for Your Business
As a business owner, separating your personal from business finances is necessary through a personal and business checking account. It is different in terms of account opening, maintenance, and transactional fees requirement, but a business can navigate these costs without straining. If you want clean bookkeeping for your business, useful in determining your business sales, revenue, and taxes, consider a business checking account.
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