What is a Business Account: A Comprehensive Guide

A business account is a bank account created specifically for business owners to manage the cash flow of the business. As a business owner, you must understand the significance of a business account and know how it manages finances. 

Managing your business finances using a personal bank account can be challenging. A business account is the best option to handle your business funds clearly. Any business can highly benefit from having a business account regardless of business type, size, or operations.

In this article, we deeply explore a business account, including its types, features, benefits, importance for all types of businesses, and everything you need to know about it. 

Let’s dive into the details!

What is a Business Account? 

A business account is a bank account that is used for business purposes rather than personal finances. These accounts are opened at a bank or financial institution under the company’s name, providing a place to keep business funds. 

A business account makes it easier to manage cash flow, pay bills, collect payments, and keep track of transactions. It offers business owners a convenient way to keep their personal funds separate from the company’s funds. This separation is essential for tax purposes and can lower the risk of audits. 

Types of Business Account 

Here are the common types of business accounts that are essential for day-to-day business operations.

1. Checking Account

A checking account is the backbone of any business. This is the most popular type of business account that offers features to manage daily business funds. A checking account is used to deposit and withdraw money. Payroll, bill payments, and sales deposits are all made from this account. However, you’re not eligible to receive interest on your earnings through a checking account.

2. Savings Account

A business savings account is used to accrue funds and earn interest over time. While saving accounts offer lower interest rates than other business accounts, they are an excellent choice for businesses looking to save money. You may benefit from different APY rates based on the money flowing in. Additionally, some savings accounts charge fees.

3. Money Market Account

Money market accounts and savings accounts are similar, but the former offers greater interest rates. A money market account is for businesses that need regular access to their money. It combines some features of both a checking account and a savings account. However, these interest-bearing accounts frequently require a higher minimum balance and may have withdrawal limitations. 

4. Payroll Account

A payroll account is a type of business account that is only used for managing payroll services. Companies can pay employee salaries and fulfill payroll tax liabilities with this account. Money from the checking account is transferred into the payroll account. A payroll account can be perceived as an additional burden because it is another business account to handle. However, paying employees from separate accounts makes tracking payments for tax and accounting purposes easier.

Advantages of Using a Business Account 

Setting up a business account offers plenty of advantages to businesses. Let’s take a look at the benefits that make these accounts essential for a business.

1. Separate Your Finances

The primary advantage of having a business account is that it keeps your personal and business finances separate and helps provide clarity. This separation keeps finances organized and prevents business money from flowing into personal funds. In addition, it simplifies financial management, cash flow monitoring, and expense tracking.

2. Better for Business Growth or Expansion

If you want to grow your business into a partnership, you’ll require a business bank account to make this transition easier. Besides, if you sell your company, a business account makes tracking business performance easier and gives a transparent overview of the business to the buyer. 

3. Establish Company’s Credit Rating

Another excellent benefit of having a business account is that it helps establish your business credit, which is necessary to be eligible for loans. Establishing a business credit rating using a separate business account is easier because all transactions are recorded. Lenders consider business credit history when deciding whether or not to provide the loan.

4. Maintains Professional Appearance

Last but not least, a business account makes your company look more professional by allowing you to make payments with funds that are branded with your company’s name. If you keep paying business expenses with personal money and giving personal bank account information to customers, it will give the impression that your company is unreliable and unprofessional.

Features of Business Accounts 

Business accounts offer a host of features, which are the main reason to set up them for your business. These unique features have made financial management easier than ever. Here are a few features of business accounts. 

Online Banking: Business accounts usually offer online banking services and mobile apps. This feature allows business owners to access their accounts and conduct transactions from anywhere via the Internet. Also, it is helpful to pay bills and monitor account activity.

Credit Cards: Some business accounts offer business credit cards that can be used for purchasing and earning rewards. This might be a convenient way for businesses to make purchases, particularly if they qualify for rewards.

Lines of Credit and Overdraft Protection: Both these features are available with certain business bank accounts. Lines of credit offer access to money when needed. Additionally, overdraft protection covers overdrafts or bounced checks on checking accounts. These features can be highly useful in managing finances and ensuring uninterrupted transactions.

Flexible Payment Methods: You can take card payments from customers with a merchant account. If you run an e-commerce store, a merchant account is the best account to have as it offers flexible payment methods, helping you boost your sales.

Transaction Limit and Fees Associated with Business Account

Most business accounts will charge fees and have transaction limits. Some banks demand an annual fee, and others deduct quarterly. Fees related to business accounts include transaction fees, ATM fees, maintenance fees, deposit fees, and early termination fees. As a business owner, check the transaction limits and the costs associated with a business account across banks to choose the right account option for your company. 

How to Open a Business Account

Here are the easy steps to open a business account:

Step 1: Choose the bank or financial platform where you want to open the account. Different banks offer different accounts and charge different fees associated with those accounts. So, choosing the right bank that best fits your business needs is essential.

Step 2: Prepare all the required documents before opening an account. Different banks have different eligibility requirements, so it is important to confirm the requirements with your bank. You will need to present evidence of your company in order to open a business account. 

Here are the necessary documents you’ll be required to provide:

• Employer identification number (EIN) from IRS or social security number
• Proof of business registration
• Business License
• Ownership agreement

Step 3: You can open the account in person by visiting a bank branch or online via the financial institution’s website. The online process may differ throughout banks. After submitting the documents and verification process, your online business account will be set up successfully.

Choose the Right Bank for a Business Account

Choosing the right bank or financial institution for a business account is imperative so your business can fully leverage the features and benefits of a business account. If you’re looking for the best business account options in Singapore, no need to worry. As the financial hub, Singapore offers a broad range of options from local, regional, bank, and non-bank providers. 

Read this helpful guide, Best Business Bank Accounts in Singapore, to choose the perfect option that matches your business needs.

Open a Dedicated Business Account with Fazz Business and Grow Your Business

Fazz Business offers all the tools you need to manage your business from a single account. Fazz Business is a Neobank trusted by startups and established Web3 companies across Southeast Asia. Manage your cash flow and send and receive payments locally or internationally, all from one online account.  Our multi-currency accounts allow you to manage finances in multiple currencies more easily at competitive foreign exchange rates. 

Traditional banks come with monthly fees, subscription fees, and additional costs associated with transactions. That’s where Fazz Business comes in. We’re transparent in our pricing and features. With Fazz Business, you can open your business account free of cost without any minimum balance requirement and have a cost-effective way to manage finances in multiple currencies. 

Fazz Business is a smart online banking alternative. Our business account is an excellent option for businesses looking to simplify their financial operations, organize transactions, and separate business and personal finances. Using a Fazz business account, you can grow your business without worrying about hidden bank fees. We charge zero monthly fees or subscription fees. With Fazz Business, you get hassle-free online banking to pay and receive money worldwide.