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The Importance of Having a Business Bank Account For Your New Business

Many small business owners avoid or do not pay too much attention when considering whether to open up a bank account in their business name. They make the mistake of using their personal account to carry out their business transactions, just so they can save a small amount of money required to open a new business bank account.

Having an account in your business name has many advantages. For example it gives your business a more professional look when dealing with your customers or clients. Using your personal account for business purposes gives the impression you are not really serious regarding your business and it is more like a hobby.

Having a separate business account proves to be beneficial when you need to complete the accounts for the business and any related tax returns. Indeed, you can quickly check the income and expenses for the year, rather than having the hassle of separating your personal and business transactions if you only have a personal account.

Another good reason to have a business bank account is to show the tax authorities that your business is transparent in terms of the financial transactions it carries out. All the income and expenses should be accounted for through the business account. Thus, if HM Customs & Revenue want to look at your records, this will demonstrate that you are declaring all your income and only claiming expenses related to business.

Opening a company account with a bank also has other additional perks. For example, you can usually obtain free banking for at least a year as a new business. Also some banks even offer new clients special deals on accounting software to use in their businesses. Lastly, as regards this point, it may be easier for you to obtain a business overdraft or loan if you have a company bank account.

Some entrepreneurs are put off from opening a business bank account because they think it will be complicated in terms of the formalities and legalities. This is a misconception as it is very easy to open a bank account most of the time.

A few points that one needs to keep in mind while opening a business accounts are:

  • The account maintenance fee
  • Different transaction modes available e.g. online banking, debit card etc.
  • Overseas transaction charges
  • Interest rate charges
  • Minimal balance that you need to maintain

A company bank account may initially seem to be an extra overhead on your business, but the amount paid will be worth in terms of the time and money you will save by not having to separate out your business transactions from your personal transactions. Having a business bank account also sends a clear message to other businesses you deal with and the tax authorities that you are a proper business with nothing to hide.

How to Perform a Business Bank Account Comparison

With all the financial institutions in the world clamoring for more and more business, hype is at an all-time high in the financial district. Terms and conditions that are applicable to certain trial dates can lead to confusion once these “free trials” end and can leave the business owner feeling used and defeated with an account that no longer suits their needs. Fortunately, there are a few guidelines to follow to ensure that your company gets the account it needs by performing a bank account comparison.

Company Size and Business Account Options

The business checking options will vary depending upon the size of your own. Incentives that hook small businesses aren’t necessarily applicable to big corporations and vice versa. Each size of business requires a different set of account options in order to optimize financial support and services.

Small businesses tend to make fewer transactions than larger corporations and therefore greatly benefit from a preset limit of free transactions. Typically with this type of package, once the preset limit is reached, a small fee is charged to each applicable transaction thereafter. Some business accounts even offer an interest earning option that is beneficial to businesses with low to moderate transaction volume. Conversely, larger businesses require a moderate to high number of transactions and usually pay a small monthly fee to allow for this difference.

Minimum Balances

Small business accounts tend to forgo monthly minimum balances but usually sacrifice interest earnings for this advantage. Moderately sized businesses usually have accounts that require a minimum daily balance or a monthly averaged balance that exceeds a predetermined limit. Minimum balances for larger businesses tend to be slightly more complicated; these can be determined by an average daily balance, average combined deposit balance, or average combined deposit balances and outstanding credit balances. The specific amounts are different for each institution, be sure to contact individual banks for detailed information.

Maintenance Fees

Many business owners neglect to factor in maintenance fees when performing a bank account comparison. This usually isn’t a big deal for a small business account since most do not have a monthly maintenance fee. However, moderately sized and larger businesses must take these fees into consideration when comparing business accounts. Nowadays, most financial institutions only charge maintenance fees if the balance falls below a predetermined minimum limit. Once again, the amounts of these fees vary by institution so be sure get an accurate number when comparison shopping for an accounts.

Business Type

Even though you may own a certain sized business, not all accounts suggested for that sized company will suit your needs. Some business accounts are geared toward non-profit organizations, community groups, and public agencies while others lean more toward small or growing businesses. Research and investigate each business account you consider to determine the right business checking account for your company.

Business bank account comparisons can be confusing and daunting chores; however, if you take into account your business size and style with business account options you desire, it should be a relatively easy task to choose a business account that will carry your company well into financial security.

Tips For Opening a Small Business Checking Account

Business accounts are important for small businessmen, dealers or shop-owners. Banks usually offer a variety of accounts such as saving accounts, current accounts, fixed deposits; etc.According to the need and requirement, an individual can select an account for his use. For businessmen involved in businesses on a lesser scale, opening a small business checking account is indispensable. Ideally the businessman should open an account in the initial stages of business expansion. Before opening a small business checking account, there are several noteworthy features to consider such as daily transaction process which includes deposit and withdrawal as well as borrowing costs. Also banks have various offers to suit ones needs. Some of the tips to help you in opening the right account are as follows:

Analyze your business needs.An approximate measurement of your daily transactions such as deposit and withdrawal should be carried out. This helps a long way in laying down the right foundation for your business.

A small business checking account should be created if and only if you are starting a small company or a joint business involving partnership. Sole traders have the flexibility of operating with a single personal account.

Search and analyze the small business checking account schemes offered by different banks. Remember each and every bank has something different to offer than the other. Do not be compelled to open an account with a bank in which you have a existing personal account because your current bank may not offer great deals. So explore before finalizing!

Compare the costs and charges of each bank as negligence on this may create lots of hassles later. Also look out for hidden charges which your bank representative may avoid to inform you!

Opt for well-established banks which have a good track record.

The most important point to be kept in mind is bank charges. If the monthly or daily transactions are large, your bank may levy some extra charge. So be well informed about this! Some banks provide free charges for small period of time.

Your small business checking account becomes even more flexible if there are facilities for online payment and transactions. Online business banking has become popular and most banks provide this service. Transactions can be viewed from the comfort of your pc.

Lastly the bank which has a dedicated team to look after these business banking services.