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If you’re a business owner, it’s important to understand the difference between a business checking account and a personal checking account, and to utilize the right checking account for the right purpose.
Business checking accounts function the same way as personal checking accounts, but they tend to have different fees, limitations and balance requirements.
Personal checking accounts are often free or come with a low fee that can be easily waived, while business checking accounts tend to come with higher monthly fees that might not be waived.
Note that business owners will need to submit additional paperwork and information to sign up for a business checking account. The application process and eligibility requirements differ from those of a personal checking account. The additional information includes, but is not limited to:
- Being actively registered with the secretary of state
- The business’s Employer Identification Number (EIN) or Federal Tax ID number along with the verification letter from the Internal Revenue Service
The exact documentation you need to provide will depend on both your legal structure and the financial institution you're applying to.
One of the biggest differences between a business and a personal account is that business accounts have authorized signers, who may or may not be owners of the business and who are authorized to transact on behalf of the business. Personal accounts are owned by an individual.
Most business checking accounts have more fees
You can expect typical business checking accounts to have minimum balances, maintenance fees and per transaction fees if the business conducts more than its allocated transactions.
While no one likes to pay fees, having fees on a business checking account is understandable. Businesses deal with more money and more types of transactions than individuals do, and as a result they take up more of a financial institution’s resources. The increased fees reflect that.
Unlike most financial institutions, at 7 17 Credit Union, there are no monthly maintenance fees or minimum balance requirements for the Free Business Checking account.
Added Benefits of a Separate Business Account
If you're thinking about whether it's necessary to establish a separate business checking account for your business, consider the benefits. For one, your customers might feel more comfortable writing a check to a business instead of a person; giving a business name for the payee name is more professional.
Grow Your Business with 7 17 Credit Union
Business checking accounts are very similar to personal accounts in many ways, but it’s important for business owners to maintain a separate account from their personal funds.
If you’re a business owner, learn more about opening a business checking account with 7 17 Credit Union. In addition to being able to manage your money through online banking and our top-rated mobile app, you can also benefit from a business account that is specialized for your business.
To learn more about these topics, visit:
https://smallbusiness.chron.com/endorse-check-made-out-business-467.html
https://www.firstalliancecu.com/blog/whats-the-difference-between-business-and-personal-accounts
https://www.fool.com/the-ascent/banks/articles/do-you-really-need-that-business-checking-account/
