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Business vs personal checking: What small business owners should know

For small business owners, any given day can include the smallest details from preparing bid proposals to changing printer ink cartridges. Not enough hours ever seem to be spent doing the work you truly enjoy, like engaging with your favorite customers and building your business into a successful way to support you and your family. You likely discovered pretty early on that running a home and running a business are entirely different creatures. While you may be outstanding at wrangling both on any given day, you also can see how your approach to each is unique from one another.

 

The same is true between your personal checking account and your small business checking account. Sure, when your sign your name on your check or set up a recurring payment to your supplier, you're moving money nearly identically, but also like your business, there are dozens more implications for your employees, your customers, your clients, your vendors, and you. Making the right choices when it comes to your business checking account will impact the success of your business.

 

If you're just getting started, while it may seem to be a simple extension to continue to use a personal check in the realm of business, or even adding a separate personal checking account, a business check is both significantly different in what it represents and what it can do.

 

Where business begins

 

Like any other starting point, you may turn to the world wide web to begin your search for a small business account. If you do, you'll find the top five results are the top big banks in America: Bank of America, Wells Fargo, Chase, Capital One, and USBank. That makes sense, right? They handle the business for the biggest companies across the country. Surely they will make your business successful, right?

 

But what do they know about your business? Finding the right business checking account is primarily about finding the best business partner to help you and your four, five, six, or even dozen employees serve your customers. Your financial partner should have a stake in your success. They should both want your business and want your business to thrive.

 

Start with the financial institution with whom you can have a conversation, including one who can answer the questions you have about your business's financial health, and who wants to help your business improve the financial well-being of your staff and your community.

 

It's not just business

 

Whether your small business belongs to just your family, or you need a corporate business account, you must maintain a clear delineation between personal and business expenses. You may have a personal interest in your business's success, but there are times when your business isn't personal. Establishing and utilizing your checking accounts are some of these times.

 

If you already knew you need separate accounts, good. But just like you may not have known all the business rules in your state for creating an S Corp versus a C Corp for your business, you may not know all the nuances you will encounter in your business's finances. From payroll to accounts payable and receivable to taxes, every business owner has to learn about the importance of having not only a separate account but specifically a business checking account. You will need to provide additional documentation about your business, too, including your business tax ID number (TIN) if you have one.

 

You'll likely share access to your business account with more people than your personal account, but it's necessary to operate your business. A community banker can help you get started determining what financial tools you will need to build your business.

 

Tools of the trade

 

You'll find a small business checking account comes with many more options than a personal checking account, most of which will depend upon your current business needs.

Merchant services 

Being able to serve your customers will absolutely top the list of your business plan. This will include the easy ability to accept payments in a retail business. Your business bank account needs to support your daily transactions. For example, if you have retail customers, you will need to manage the transaction fee from Visa® or Mastercard® and other business services associated with operating a storefront.

 

The type of business service you offer may determine the banking service you need. Will you be making a cash deposit on a regular basis? Will you need to set up a large number of bill pay features for your vendors? If you are opening an account at the same time you are starting your business, it may be tricky to determine which business checking service you may need. 

 

Having a checking account that can help manage those fees and payments will be important, but so will talking to your business banker to help determine which features and services will be needed for your business and your business account.

Shared account access

You might also want debit cards for employees who make purchases from the company account. You might even want a system to approve and review payments made by others conducting business banking for you. Whether your accountant or your spouse, the processes for authorizing or reviewing payments to the IRS or your suppliers need to be defined and clear. Business checking account make this easier.

Online and mobile banking

Online banking for business checking allows you levels of approval and limited permissions that personal accounts do not. In fact, many mobile banking apps offer an alternative business app in the app store that includes many of the features that a business bank account will need.

Business credit card

You may also choose to open a business credit card to cover equipment purchases, fuel company vehicles, make office supply purchases, or cover travel expenses for employees. Having your business credit card connected to your business bank account will make payments and money movement easier.

Business payroll

Your small business checking account may also be the source of your payroll, whether you are paying just you, or you and your crew. This feature allows you to utilize direct deposit services for your employees, which certainly makes payday easier for everyone.

If you offer health care to your staff, you may also want to set up an HSA, or health savings account, for your employees. This might be an additional option you will want to discuss with your local business banker.

Business tax payments 

It's as much of a certainty in business as it is in your personal life, but making tax payments for your business will be quite different. Payments are due quarterly, for example. You will be responsible for both taxes on your business earnings, and employment taxes from your payroll. Managing these through your business checking account will be one more important feature of your financial business plan. Your business account will also make tracking these payments important and easier.

Free business checking

Given the range of additional services offered for commercial checking and small business checking, it's not surprising that most accounts do come with more fees than personal checking accounts, such as a monthly service fee or per transaction service fees, but there are still financial institutions that offer free business checking.

 

These accounts may come with limited-time introductory offers or minimum deposit requirements, so consider your business's cash flow and revenue before committing to an account that may not provide you with the best services and rates for your size business. Saving on a monthly maintenance fee for the first few months you are in business may not be the best option for your long-term growth plan.

Business checks

You may not write a lot of personal checks, but it is still common in business. Having a supply of business checks is much more than having a stash on hand for those few vendors that don't accept electronic payments. Business checks can be a variety of sizes, including the size to run through your printer if you use enough of them. They should also include your business information and logo. Since a business check represents one more piece of the branding puzzle, this type of check generally includes the company name, logo, and address.

Accounting services

Ultimately, a business check may be a necessary part of managing your business cash flow, but tracking that money movement may require more advanced integration. In addition to shared account access through online banking, many options exist for how a business checking account can seamlessly integrate into direct tie-ins with Quicken, QuickBooks, or other small business accounting software.

 

Get your business growing

 

Starting the first forays into the personal finance realm with a personal checking account was just the starting point into a new world of possibilities.

 

Opening your first business account will be similar as you enter the professional world of business services. From an entrepreneurial standpoint, business checking accounts are one of the most essential pieces of your company's brand image and professional persona — when you write a check to a vendor or print out a receipt for your customer, your business cash flow is building your business and your reputation.

 

When you've made the decision to go pro, you want to have a financial partner whose goals align with your own. As a small business owner, you see the value of both controlling your own fortunes, but also contributing to your local economy. Find a financial partner and a business account that will grow with your business and that will help your business grow.

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About Kasasa

We believe your money should do more... for you and your community. Founded in 2003, Kasasa is a financial and technology services company working to help empower consumers to take control of their finances and be proud of their money by banking locally with community banks and credit unions in your neighborhood, that you know and trust.

These local institutions have roots in their communities, care about people over profits, and are actively invested in local businesses to help keep the economy strong (unlike some of the megabanks we could name).

We believe you shouldn't have to choose between the best banking products, the best customer experience, or keeping your money local, where it can do more good. We've created ethical banking products and partnered exclusively with community banks and credit unions. So you can have it all.

Kasasa accounts are available at community financial institutions around the country. Find one near you at Kasasa.com to get free checking that pays cash rewards, the only loan with Take-Backs, and more. All while keeping your money in the community, so you can always be proud of your money.