by Michael Palmer, COO
Understanding the difference between personal and business bank accounts can be especially helpful if you're thinking about starting a business or already lead a successful organization. There are a number of benefits to keeping these two aspects of banking separate and distinct, and you can do so while working with a single banking partner for simplicity and convenience. Let's look at how these two categories of bank accounts are similar, and the important areas in which they differ.
A checking account serves the same purpose, whether it's the one your company uses to pay bills and deposit checks or the one you use in your personal life. It's meant to offer easy access to your liquid assets - your money - in a variety of circumstances. The same is true of savings accounts, which in both circumstances are a place to store money while maintaining regular access to it. However, a number of factors that differentiate the two can easily come into play.
It's not technically required to keep your business and personal accounts separate in some situations, such as operating a sole proprietorship business. This strategy is by far the simplest, since it means you just have one set of accounts that are used for your company as well as your personal needs.
The Houston Chronicle pointed out some drawbacks that are involved in this approach. One is that it's simply difficult to keep business and personal transactions separate within a single account. Additionally, having a business checking account in place allows your company to build its credit score separately from your personal score, which can pay off over time. There are also liability risks to consider - the owner of a sole proprietorship is completely responsible for all debts incurred and other responsibilities taken on by the business.
Beyond sole proprietors, you need to have business bank accounts in place to make it easy for your organization to manage its money, both to receive payments from clients and to pay vendors and suppliers. Having a dedicated account that you and trusted staff members can access and review is simply critical. There aren't many options beyond having business checking and savings accounts in place to help your organization manage its funds.
While all bank accounts have basic similarities whether they're used for personal or business use, many of the details can differ drastically. Because of these variations, it's especially important to find a provider of each type of account with a distinct frame of mind. When it comes to personal checking accounts, you'll want to look at key attributes like interest rate, common fees, such as those related to a minimum balance and to ATM usage, and any bonuses or other advantages offered.
With business checking accounts, companies should keep an especially close eye on cash deposit limits and fees charged when that limit is exceeded, as financial advice website PocketSense pointed out. This is especially important for companies that bring in a large amount of cash on a regular basis. Fees tied to the number of checks your business issues that are deposited each month is an other important consideration.
Business and personal savings accounts, meanwhile, can offer significantly different interest rates. This is due in part to the differences in the amount of money expected to be kept in each type of account. While one of the underlying goals of a savings account, to find the best interest rate, remains the same, business owners shouldn't just settle for a rate similar to a personal account when it comes time to choose one.
TAB Bank is here to help you manage your banking needs with a wide variety of personal and business accounts. To learn more, get in touch with us today.
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