Last Updated on May 23, 2023
A corporate account is a bank account that companies can manage and hold their funds. You may hear this term if you work in business, and if you advance in your career, you may have access to a corporate account.
Every business owner must keep their business and personal revenue separate.
To do so, you’ll need to register a corporate bank account in your company’s name to handle all of your transactions. This is true for any company, regardless of its size, operations, or the products and services it provides.
Understanding these accounts will help you thrive in your business role and manage an account efficiently for your company. This blog will explain what a corporate account is, what it can do for you, who can open one, and how to manage one during your career.
What is a corporate account?
Commercial firms and lone traders use corporate accounts to manage whatever money they earn via their business. They function similarly to personal bank accounts, although they frequently incorporate additional account provider services. These services allow the account holder to keep track of items like the account’s cash balance, how much money is owing to the business, how much money the business owes to creditors, and, if applicable, employee payroll.
When a business grows and hires more employees or handles more payments, it’s helpful to maintain a separate business bank account to keep these transactions separate and create clear distinctions between what is a business payment and what is a personal payment.
Any sort of business organisation or entity, including a sole proprietorship, partnership, or private limited company, can create a corporate bank account. To open a corporate bank account, a company must receive unequivocal consent from its board of directors via a corporate resolution. However, if you’re running an incorporated limited company, you’ll need a corporate account.
Benefits of a corporate account
Depending on your company’s aims and size, there are numerous advantages to opening a corporate account. Here are some possible advantages:
Increased investment opportunities
Corporate accounts make it simple for firms to reinvest their leftover funds. If your company has a time of significant earnings, for example, this cash could be placed in a corporate account. You may be able to readily reinvest them in the account to help your firm earn more. Additional tools, such as automatic portfolio balancing, are available with some corporate accounts to assist your organisation in managing its finances.
Maintains a professional image
A corporate account makes your company look more professional regardless of who you speak with or contract with. When you utilise a corporate account to contract with suppliers and vendors, you’re more likely to get better discounts because it seems more professional and establishes your company’s credibility. When you handle and receive payments through a corporate bank account, clients and workers are more inclined to trust you as a company.
Read: How to Create a Budget for Your New Business
Improved financial & personal liability protection
A corporate account could be a safe way to save funds for your company. If your firm generates more revenue than it spends in a given time, you can utilise a corporate account to safely hold the extra earnings.
Other choices for storing a business’s funds may exist, such as a typical corporate account. Many of the same features are available in these accounts, but liability protection may be lacking. A corporate account keeps the finances and assets of the firm apart from the owner. This means that the money is managed by the company rather than by a single person. As a result, if your company fails, you are protected from being held personally accountable for any profit losses.
Simplifies tax returns
When preparing tax returns, having a separate company bank account makes it easier to see your income and expenses. This way, you won’t have to worry about mixing personal and corporate expenses on your tax return. Furthermore, if you ever need to disclose your bank statements to someone or a government agency, all of your business financial information is kept separate from your personal transactions.
Personal accounts have restrictions
If you open a personal bank account, you will often be given particular instructions on how to use it. When it comes to direct debits and collecting cash payments from consumers, utilising your personal bank account for business activities may be restricted. This is a significant risk that you may avoid by creating a corporate bank account to keep your business costs separate.
Furthermore, many banks may give promotional offers on corporate accounts when you first open one. You can receive a terrific deal with free banking for a limited time by taking advantage of such deals. Other advantages include no-cost or low-cost electronic transactions, as well as greater interest rates on business profits.
Business Growth, Expansion, or Sale
If you ever want to extend your company into a partnership, you’ll need a corporate bank account to make the changeover easier. You wouldn’t want your company partners to know about your personal finances, either.
Finally, having a corporate bank account makes it easier to track the operation of the firm and present a comprehensive summary to the buyer if you want to sell it. When you sell your business, the prospective buyer looks into your financial dealings. If you have a personal account rather than a corporate account, the buyer will have access to all of your personal and financial data.
What to consider when opening a corporate bank account
Opening a corporate account has various drawbacks that you may not be familiar with if you have only ever had a personal account. Banks will examine risk more rigorously, requiring significantly more documentation and, in many cases, an interview to assess your business profile.
Introductory Offers
As previously mentioned, several banks offer introductory deals to entice you to create an account with them rather than one of their competitors. Bonus cash for first deposits, maintaining a specified balance for a set amount of time, and a reduced charge for opening an account are examples of these introductory bonuses. You should thoroughly investigate all of the bank’s introductory offerings to discover which one appeals to you the best.
Fees & Other Requirements
A corporate business account is frequently subject to maintenance costs. If you meet the bank’s minimum balance requirements, you may be free from paying this fee.
Banks can charge monthly transaction fees and early termination penalties if you close your corporate bank account early. Furthermore, banks can impose a flat fee for ATM cash withdrawals and set limits on how much you can withdraw and how many times you can withdraw per day.
As a result, based on the kind of your business and how you want to operate, you should choose which bank’s corporate account fee requirements are most appropriate for you.
Insurance & Fund Protection
Before you open a corporate account, double-check that the bank you choose is fully insured for all forms of deposits. Doing this is critical for a corporate bank account since you do not want to jeopardise your business and lose all of your profits if your bank fails or closes. This is why insurance and fund protection are critical since they preserve your deposit and give you peace of mind. Depending on the country in which you bank, you may be covered by a local government insurance scheme.
Other Services & Benefits
You should also consider any additional advantages that come with creating a corporate account with a specific bank. The services and features they offer distinguish companies from one another and might aid you in making a decision. Some banks offer mobile banking to keep track of business spending and transactions, as well as business credit cards.
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