It’s a good idea to keep your business finances separate from your personal finances and you might do this by opening a business checking account. Having a separate account makes it easier to track your tax-deductible expenses and helps you manage your money better. But, business checking accounts are a little more complex than personal checking accounts. For some of us, they’re not the best option.
Business Checking Basics
Most banks have tiered business accounts and may have higher fees on the higher level accounts. Fees range from $10 to $40 depending on the type of account you open. Each tier lets you make certain number of transactions. For example, you may be able to make 150 transactions on the lower tier, including payments and deposits, each month for free (or whatever that account charges) and unlimited transactions on the higher tier. You’ll have to pay for each transaction over the allowed amount.
With many business checking accounts, you have to maintain a certain minimum balance or receive a certain dollar amount of electronic transfers to avoid paying a monthly fee on the account. (The monthly fee on a business account would be tax-deductible, but you could spend that $10-$40 a month on something else, like a book, subscription, or new domain.) Be aware that your combined business account and personal account balances are subject to the FDIC insured amount of $250,000 – that may leave some of your balances uncovered if you have more than that at the same bank.
Most business checking accounts come with a debit card, so you may not need to order business checks, which are generally more expensive than personal checks. You can always order checks through a less-expensive, but reputable third-party. Another reason you may not need business checks: with business checking accounts, direct deposit is much cheaper and sometimes free (transfers are often $25 or more with a personal checking account).
If a business checking account sounds like more than what you need, you can always open up a second personal checking account and use it for your business only. It would accomplish the same purpose of keeping your finances separate for a lower cost and less hassle. On the other hand, a business checking account would come in handy if you ever need to establish credit for your business.
Of course, two accounts means you have two balances to track, two accounts numbers to remember, two logins to keep up with, and two debit cards to keep separate. But, such is the life of a business owner.
I use two separate personal checking accounts - one for business and one for personal. Have any of you opened a business checking account as opposed to a personal checking for your freelance writing business?