What to Look for in a Business Bank Account | Business Funding 101 (2024)

FAQs

What to Look for in a Business Bank Account | Business Funding 101? ›

As a general rule of thumb, it's recommended that businesses have at least three to six months' worth of cash on hand to cover operating expenses if possible, though you should make sure your business can afford whatever amount you set aside.

As a general rule of thumb, it's recommended that businesses have at least three to six months' worth of cash on hand to cover operating expenses if possible, though you should make sure your business can afford whatever amount you set aside.

Since a business checking account is essential for most small businesses, you'll want to open one immediately. But if you have even a small cash reserve, there's value in opening a savings account too. Doing so can boost your line of credit, earn interest, and help you maintain minimum balance requirements.

You Should Have At Least Three Key Bank Accounts

Let's start with a basic strategy where a business has three separate accounts: Reserve savings account – All excess funds are kept and swept (moved) here. The account number should never be given out to protect the funds.

Having an EIN proves to your bank that you're running a legitimate business. That's why sole proprietors with employees, LLCs, partnerships and corporations are typically required to provide one when applying for a business bank account. But there are exceptions.

Disadvantages of a business bank account may include higher fees, minimum balance requirements, and more paperwork during the account opening process.

How Much Should You Have In Your Business Savings Account? Aim to save at least 10% of your monthly profits, with 3-6 months' operating expenses in reserve. This is especially true if your business is seasonal and receives most of its profits over a few months.

If your business is established and profitable, pay yourself a regular salary equal to a percentage of your average monthly profit. Don't set your monthly salary to an amount that may stress your company's finances at any point.

One simple and effective technique is to set up three different bank accounts. Each has a separate purpose and it allows you to effectively manage your money. By setting these up and using them wisely, you will always have enough money to do the things that you want to do in your business.

Opening a business bank account for your LLC doesn't just help streamline bookkeeping and operations (though it does that, too). A dedicated LLC bank account is an essential step to maintaining the legal distinction between the business and its owners, which is necessary to preserve limited liability protections.

Do I need a business bank account to run a business? ›

The IRS recommends that all small business owners have separate bank accounts. While a sole proprietor—an individual who owns a business and is personally responsible for its debts—is not legally required to use a business checking account, it's still a good idea from a tax perspective.

There is no specific limit on the number of bank accounts that an LLC can have. It's common for LLCs to have multiple bank accounts for different purposes, such as separate accounts for business income, expenses, and taxes.

A joint bank account provides both you and your partner (or partners) with equal access to bank withdrawals, deposits, and other financial transactions. Everyone who is a part of the joint account will also have a debit card associated with said account.

Finding Two: The median small business holds an average daily cash balance of $12,100, with wide variation across and within industries. Balances refer to the amount of cash held by a business across all its business deposit or savings accounts.

Business Bank Accounts Offer More Services

One of the most important features of business bank accounts is controlling the level of access your employees have to your accounts. You can decide who has check-signing authority, can only make deposits, and can use a debit card.

A business bank account puts your business's name on checks, credit cards and other payment methods, sewing credibility and trust into each financial touchpoint you have.

A business bank account allows checks to be made to the business – which is more professional than asking customers to make checks to your name. Your customers can also pay with credit cards, and employees can handle banking tasks on behalf of the business.