Categorized | Business Banking

FINANCE, TAXES, AND BANKING 2.7. Business Banking

One of the most common mistakes new small business owners make is to use their personal banking accounts for their business. There are many compelling reasons to do this: it’s less hassle, it’s cheaper, it’s easier. However, it’s actually more hassle, more expensive in the long run, and harder. Why?

  • Taxes―the government lets you deduct expenses from your business, but not your hobbies or non-business activities. If you’re using your personal bank account, it looks like your business is a hobby and you may have some explaining to do come audit time. Even if you pass that test, when you do your taxes, you will have to sift through your bank account records separating personal from business expenses. Yow!
  • Image―you want your clients to write checks to your business, not to you.
  • Risk―banks underwrite business accounts and merchant accounts to a greater volume of transactions or riskier transactions, such as credit card transactions. If you want your revenues and profits to grow, you will need to accept credit cards and have an account designed for the additional risk.
  • Web sales―if you’re doing a large percentage of your sales via a Web site, you will need to accept credit card transactions through a merchant account. Without that account, you will only be able to use more costly transaction means, such as PayPal.

You may be more comfortable using your current bank for your merchant account. If your business receives payments in cash, you will want to deal with a bricks-and-mortar banking solution. If your business is totally Web-based and all your transactions are credit-card or Web payment service based, you can save time and expense by setting up your merchant account virtually. Virtual banking has many highly reputable, major banks you can deal with in setting up your banking.

2.7.1. CitiBank

Citi offers a comprehensive line of banking and credit products for small business. CitiBusiness, the package of merchant services Citi offers to small businesses, offers credit programs, including Business-Ready Credit, Business Checking Plus, lines of credit, term loans, owner-occupied business mortgages, and Small Business Administration (SBA) loan programs.

2.7.2. Bank of America

Bank of America’s business checking account offers Easy Online Payroll™ for free by direct depositing paychecks to employees’ Bank of America accounts. The Online Business Suite is a comprehensive set of banking tools designed to simplify your day-to-day finances. Bank of America also offers Small Business Health Insurance and Business Credit Express®.

2.7.3. Wells Fargo

Wells Fargo offers a virtual sign-on Business Online Banking service that lets you move between business and personal accounts with ease along with an integrated Business Bill Pay that enables you to pay personal bills and business invoices from a single online service.

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