What Is A Business Savings Account?

The best part about moving from using your personal banking account to a savings business account for all business-related expenses is that you no longer have to keep detailed records of what is a personal cost vs. business cost. This will make it easier in the long run for you in terms of complying with tax law, paying your employees, and tracking business expenses.

If you have decided to structure your business as a limited liability corporation (LLC), partnership, or corporation, you are legally required to separate your personal and business finances. This is because your business exists as a completely separate legal entity.

Besides being a legal requirement, it’s just a good idea to keep your business and personal finances. This is because, in the unfortunate event of a bankruptcy or lawsuit, your personal assets are protected from financial liability. If you do not separate them, you could stand to lose important personal assets in order to cover the costs your business cannot.

On the flip side, however, if your business is a sole proprietorship meaning you are a freelancer, self-employed, or an independent contractor, you can continue using your personal banking account as it will likely be easier for you in the long run. You are your business, and your business is you, so there is no danger in keeping them together.

If you plan on, or already have, hiring more employees to help you with your business, they’re most likely going to need access to business funds at some point. You don’t want to give them access to your personal savings account, so a business savings account is a good way to allow them to use company money without jeopardizing your own.

Some business savings accounts will issue multiple employee credit/debit cards, which saves you from having to complete reimbursements, keep track of receipts, or have a complicated system used to track employee expenses.

Continuing to use your personal account for business expenses robs you of the chance to start building or improving your business’s credit rating.

Without a business credit history, it will be difficult for you to apply for funding in the future, including (but not limited to) loans, lines of credit, and even business credit cards. You can even find a bank that offers business savings accounts and access to Small Business Administration Loans, which you may automatically qualify for with a strong credit history.

Some business savings accounts include merchant services (not included in personal banking accounts) which will allow you to accept debit/credit card payments.

While you don’t need to rely on your business banking account provider for payment processing, it can be an easy option for a small business just starting out and not looking to spend a lot of money to start accepting card payments. Many of the best credit card processing companies require business banking accounts.

You need a business savings account to keep your personal and business finances separate. If your business is incorporated in any way, you legally have to have one.

You can get a business savings account from a traditional brick-and-mortar bank or an online banking service.

To open a business savings account, you need your business name and address, personal information, business tax ID number (EIN or Social Security number), business license, and  Doing Business As (DBA) documentation.

The best banks for business savings accounts are ones that require no fees, give you easy account access, and offer opportunities to tap the credit you need to keep your business growing.

A small business should aim to save at least 10% of your monthly profits, 3-6 months of expenses, and/or enough cash or liquid assets on hand to cover several months’ worth of expenses in case of emergency.