9 Key Benefits of a Business Bank Account

As a busy business owner, opening a business bank account may seem like an unnecessary step, especially if you’re just starting out or you are a sole proprietor or single-member LLC. But the truth is, there are many benefits to having a business bank account, whether your business is large or small, including some that may not be so obvious. 

Perhaps most importantly, it can help separate personal and business finances, simplifying tax preparation and making it easier to track business expenses. A business bank account can also offer access to valuable services such as business loans and lines of credit. In addition, many business bank accounts come with other perks, such as free check writing and no monthly fees. 

For these and many other reasons, a business bank account is often a valuable tool for small business owners. So if you're running a small business, consider opening a business bank account - it may just be the boost your business needs. Read on to learn more about the benefits of a business bank account, how to choose the right account, and what you need to open a bank account for your business.

Benefits of a Business Bank Account

There are many good reasons to open up a business bank account—even if you're self-employed or don't have any employees. If you've been on the fence about whether or not to get a dedicated business account, read on to learn about the numerous benefits of a business bank account.

1. Keep Your Business Finances Organized

First and foremost, a business bank account makes keeping track of your business finances more manageable. When your personal and business expenses are mixed together, it can be challenging to keep track of business expenses, vendor payments, whether client invoices have been paid, and whether specific transactions are business or personal. Separating your personal and business accounts makes tracking business finances much more organized.

2. Manage Your Business Expenses, Budget, and Revenue 

A business bank account makes accounting easier. Running a business is costly, and if you don’t have a dedicated account, it can be easy to lose sight of your expenses in a sea of mixed transactions. When you can see all your expenses and revenue in one place, you can keep better track of the costs of running your business as well as your revenue and profit. 

Having a business bank account helps you manage your business finances effectively since you can keep better tabs on where your money is going. You can manage cash flow, create a budget, and track all of your transactions easily – and it makes tax time a breeze since you can more easily track your tax-deductible business expenses. This will save you time and money.

3. Simplify Your Record-Keeping 

A business bank account also simplifies record-keeping. Having all of your transactions in one place makes it much easier to keep track of everything—from receipts to invoices to payment records—and having this information readily available can come in handy come tax time or if you ever need it for reference purposes down the road.

4. Financial Protection for Yourself and Your Business

A business bank account is a safeguard if your business gets audited. If your business structure is an LLC or corporation, then you are legally required to keep your personal business finances separate. Sole proprietors are not legally required to, but it’s still a good idea. If the IRS comes knocking, having a different account will make it easier to prove that your expenses are legitimate business expenses. 

Having a separate business bank account can also protect your personal assets and help you avoid personal liability for business debts.

5. Secure Loans and Other Financing for Your Business 

A business bank account makes it far easier to get the funding your business needs through grants, credit, or business loans. When lenders see that you have a dedicated bank account for your business, they’ll be more likely to approve your application. 

Often lenders will ask you to submit 3-6 months' worth of bank statements for their review. Some lenders accept personal bank accounts, but many require a business bank account to provide business loans or credit.

5. Keep Track of Inventory

A business bank account can help you keep track of inventory expenses. If you sell products, it’s essential to keep track of how much you spend on inventory so that you can price your products correctly. Having a separate account for inventory expenses will help you to stay organized and avoid making costly mistakes.

6. Easily Manage Payroll & Taxes

A business bank account can help you manage payroll taxes more effectively. If you have employees, you’ll need to withhold payroll taxes from their wages. Having a dedicated account for payroll taxes will help ensure that the money is available when tax time comes around. 

7. Build Credit for Your Business and Protect Your Personal Credit 

A business bank account can help you build credit for your business. As mentioned above, it can give you access to critical financial tools, like credit lines and loans. If you use personal loans and credit cards and make on-time payments, you’re missing out on building credit for your business. Building business credit can help you qualify for more extensive and favorable lending options for your business in the future.

On the flip side, if you use a personal loan or credit card for your business expenses, you could end up hurting your personal credit score if you fall behind on payments. However, if you have a business credit card in your business’s name, missed payments will only impact your business’s credit rating—not yours personally. 

8. Make Your Business More Professional

A business bank account gives your business an air of professionalism. You need a bank account to accept payments from customers and pay vendors. If you’re meeting with clients or vendors, they’ll be impressed that you have a dedicated account for your business. It shows that you’re serious about what you do and that you’re organized. This trust can help you attract new customers and keep the ones you already have. It can also open the door for more significant business opportunities and contracts as you grow your business.

When Should You Open a Business Bank Account?

So now that you know about the many benefits of a business bank account, you may be wondering, “when is the right time to open a business bank account?” As a small business owner, you have a lot on your plate, so it’s natural to wonder whether opening a business bank account is really worth your time now or if it’s something that can wait. 

Here are some scenarios when you should consider opening a business bank account:

• You got your business's EIN (Employer Identification Number) from the IRS.
  You can get an EIN without having an LLC or corporation. Still whether or not your business is incorporated, the U.S. Small Business Association recommends that as soon as you get an EIN, you should open a business bank account.  
• You’ve registered your business as an LLC or a corporation.
  Because LLCs and corporations are legal entities that offer special protection for the business owner’s personal liability to business debts, they must keep business finances separate from any personal finances. If you register your business as one of these entities, your next step should be to open a business bank account.
• You want to make managing your business finances simpler.
  No matter your business structure, the easiest way to streamline your finances and manage them more effectively is to have a separate business bank account.
• You are interested in accessing capital through loans, credit lines, or grants.
  Having a business bank account makes your business look more favorable and, in some cases, is required to apply for business capital. Often, lenders need your company to provide several months' worth of business bank statements when you apply. If you are considering applying for capital in the coming months, that would be a good reason to open a business bank account. 

Related Reading: The 12 Most Frequently Asked Questions About EIN Numbers

If you’re a sole proprietor, there’s no right or wrong time to open a business bank account since you aren’t legally obligated to keep your finances separate. You may decide you want to access the many benefits of having a business bank account or fall into some of the scenarios above.

While it may seem easier to keep using a personal bank account for your business expenses, having a separate business account will actually make running your business much simpler. And opening a business bank account is pretty straightforward once you have the required business details and documents.

Take Advantage of the Benefits of a Business Bank Account

There are many benefits of opening a business bank account, whether you’ve been in business for a while or are just getting started. One of the main benefits is that it helps to keep your personal and business finances separate. A dedicated account can make it easier to track expenses and income and prepare financial statements. It can also help you to take advantage of specialized services, such as business loans and lines of credit. 

Having a business bank account gives you more credibility with vendors and customers, making it easier to grow your business. Ultimately, a business bank account can provide many benefits, both big and small. 

If you’re ready to open a business bank account, we recommend NorthOne. NorthOne allows you to manage your money from anywhere - whether at home or on the go, everything you need to manage your business finances is at your fingertips. So if you're ready to take advantage of the many benefits of business banking, open a business checking account today!