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The advantage of a business account

on Fri, 07/12/2013 - 09:54

"Entrepreneurship and Small Business" series, #6 (#5 How to pay yourself effectively; #4 How to manage your business; #3 Things to consider when you start your business; #2 What you should do before you quit your full time; #1 What needs to be prepared before you start your business; #7 Business budget made easy; #8 Last minute tax saving for corporations; #9 The federal disaster to small businesses and working class)

I had this interesting discussion with an accountant on what is the advantage of having a business account when the business owner is still a sole proprietor. The discussion stared at too many fees on business accounts and too many transaction limitation. Yes, it takes time to shop around and set up a bank account which suits your business. Please do take time interview the business banker at the branch and estimate (if you are a new business) the transaction needs on your business or if you have been running your business for some time and not happy with your current package (which A LOT of people do, trust me on that), take your 3 months' transactions and show your banker (give them a chance at least) or go to some other banks, let them suggest which package is best for you. The fact is, there are just too many packages out there for small businesses, and every business has its own needs, you need to find the one best suits your business. 
So, why do we need a business account when we are not even incorporated? Having a business account separates you from the consumer level, your bank will now look at you differently as you are a business and businesses obviously has different needs that the general public. 
The opening of a business account gives you new creditability to your bank as well as your customers. Normally, after you bank with your business bank 2 years or so, you will likely be eligible to other credit products (like business credit card, business line of credit). If you are looking to expand your business down the road or buy equipments, credit to your business can come in handy. Having a business account shows your bank (both business and personal side) that you manage your finance well, that give the banker a better impression on you, believe it or not. 
More and more business owners are using credit unions for their banking needs. In general, credit unions gives you better rates and some times better service. The fact is: a credit union is a much smaller business and they can be very good. At the same time, since it is a credit union, there is certain risk dealing with them that you, as a customer need to know. Please make sure you understand what is the difference between a bank, a trust company and a credit union.