The Advantages and Disadvantages of Having a Business Account
By Amy Peterson
If you have a business, even a home business, chances are you are going to be looking into getting a business bank account. Having a business account is an excellent thing to have with your business because there are many advantages that are tailored for businesses. Typically, you will choose to have a business account but whether you choose to have one initially or wait until later on, depends on your business and the business account that you choose.
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Advantages of Business Accounts
There are many advantages to having a business account, but these are the most applicable to a home business:
- Business transactions are usually cheaper. When you have a money transfer, or have to bring money in from a merchant internet account, you either won't be charged for your transactions, or you will receive a large number of free transactions before you pay. Don't be surprised if you get as many as 50 to 100 free transactions for your account. A personal account usually gets five to 10 transactions for free before they have to pay.
- With a business account, it is much easier to get a business credit card. Generally the bank will be more open to providing you with a credit card than if you are using your personal account.
- When you incorporate a business, it is very important that you have a business account since it makes things easier in terms of taxes. You can easily keep track of your business finances with a business bank account.
- Further to taxes, some banks actually provide you with software that can integrate with your business account to manage your finances and even do your taxes for you.
- Having a business account will lend legitimacy to your business. If you are asking clients to make checks out to you under your name, they may not take your business seriously. However, if checks are made out to your company name, it makes your business hold more weight.
Disadvantages
There are of course disadvantages to having a business account, which you may want to think about before you get one.
- Generally your interest rates will be lower than with a personal savings account. To offset this, you can open a savings account under your business name.
- While you do save money with lower transaction fees, you do have other types of fees that you may have to pay, which you wouldn't with a personal account.
- Interest rates may be higher for your business account overdraft because there is no real history for your business finances, therefore there is a greater risk of the business failing from the bank's perspective.
- Sometimes a credit check will be done before you get a business account, which means if you have poor credit you may not be able to get the bank account.
- You usually need more paperwork for your business to open a business account, then you would to open a personal account. You also have to go through an approval process with some banks to ensure that if they open an account for you, your business will stay in business.
Having a business account is something you should have for your business. The question you need to ask is when you want to open a business account. Opening a business account can help you add legitimacy to your business, it can help you when you need to get a loan from the bank and it can help you with other business matters including taxes. Always make sure you weigh the advantages and disadvantages of any business banking decision.
Amy Peterson is a business consultant and contributing writer for Home-Based-Business-Opportunities.com