Setting profits aside in a specific business savings account is one of the best ways to ensure that your company has the funds it needs to grow or weather an emergency. However, not every business needs a business savings account. That’s particularly true for small-business owners who are just starting out.
Rather than a business savings account, small-business owners may want to start by establishing a business checking account. Separating your personal and business checking accounts makes recordkeeping easier. Great records make it easier to file taxes and to keep your business and personal finances separate. Having a separate business checking account can also offer your company a degree of business credibility, and business checking accounts often allow multiple signers to have signing authority.
Even though business checking accounts don’t pay very much interest, the Small Business Administration recommends it as your first business bank account. A business checking account allows you to make regular payments for business expenses, but a business savings account is designed to hold savings and may not allow frequent withdrawals to pay expenses.
Once your company starts making a profit, you’ll want to start thinking about opening a business savings account. A business savings account will offer a modest return on your deposits, and it can work as collateral for a business loan if you want to expand your business. A business savings account is also a great place to set aside funds for mid-term needs, such as quarterly tax payments.
Keep in mind: All savings accounts are limited to six withdrawals or transfers per month by Regulation D. Excessive withdrawals and transactions may carry a fee, which will vary by bank. The bank can also close your account or convert it to a checking account if you make excessive withdrawals or transfers.