What Type of Bank Account Should You Have as a Small Business?

For many small business owners, the line between business and personal finance is blurry. At the start of the business venture, savings and other forms of personal finance may drive financial operations for the business. At this juncture, it seems easier to track everything from a single account. 

With business growth, financial management becomes more complex. The small business owner must understand how crucial good bookkeeping is right from the start. There has to be a clear distinction – personal and business finances should never mix.

There are several reasons for this, but the two most important are legal requirements and tax returns. So, what type of bank account should you have as a small business? Ideally, you require an account that enables seamless transactions, cuts back on costs, and offers you attractive benefits and opportunities as you grow. Here is a quick look at some available options.

Business Checking Account

For any business that has daily transactions, this is an excellent option. This account offers different transaction methods, including checks, wire transfers, electronic transfers, and debit cards. Furthermore, most business checking accounts integrate with accounting software for ease of tracking and reconciliation. Earning interest with this account is unlikely, so the primary advantage is transacting without limits and with ease of access to your funds.

Business Savings Account

An excellent option when you make a profit and want to save a percentage. The money you put aside earns interest at a competitive rate. To encourage fund retention, only a certain number of withdrawals may be permitted each month. The charges for taking out cash could be higher than other accounts. Furthermore, writing checks for withdrawals is not possible with this type of account.

Business Term Deposit Account

How about an account where you can set aside some money for a specific period and earn high interest? A term deposit account allows you to save for a particular goal, like business expansion or launching a new product/service. You can lock money in this account for the predetermined period without withdrawing. If you choose to withdraw before the period is up, you may face a steep penalty.