The 4 Types of Bank Accounts All Small Businesses Should Have

Small businesses are anything but small when it comes to their collective impact on the U.S economy.

More than 33 million small businesses operate in the United States and together account for 99.9% of all American businesses, according to the U.S. Chamber of Commerce. Small businesses are credited with creating nearly two-thirds of the country’s new jobs over the past eight years or so.

The U.S. Small Business Association notes that “as soon as you start accepting or spending money as your business, you should open a business bank account.” The most common business bank accounts are similar to what you’ll find with personal bank accounts. The main difference is that most business bank accounts offer perks that don’t come with a standard personal bank account. These include:

  • Protection against personal liability by keeping your business funds separate from your personal funds.
  • Payments that go to your business instead of directly to you.
  • The ability to authorize employees to handle day-to-day banking tasks on behalf of the business.
  • Bank lines of credit for your business that can be used as needed, such as if you need to buy a new piece of equipment or cover some other unexpected expense.

The process of opening a business bank account is pretty straightforward. In most cases you can open one online, though if you prefer to do it in person you can visit a branch.

Not all small businesses need the same bank accounts, but all should have these four: checking, savings, credit card and merchant accounts. Here’s a look at why each is important.

Checking Account

One of the main advantages of setting up a business checking account is that it lets you separate your business finances from your personal finances. This is the account you’ll use to make day-to-day transactions such as purchases, bills, and deposits.

Many banks give you different checking account options to fit different small business needs. For example, Chicago-based BMO offers four different checking account options for businesses. All offer access to fee-free banking at more than 40,000 BMO and Allpoint® registered ATMs nationwide1. They also allow you to simplify billing and invoice processing with BMO Bill Connect.

BMO Digital Business Checking Account

If your small business does most of its banking online, this account is a good fit because you get unlimited free ACH transactions and incoming wire transfers. There is no monthly maintenance fee if you maintain an Average Collected Balance of $500 or more. Otherwise, the fee is $10 a month.

BMO Simple Business Checking Account

This account is designed for sole proprietors and micro-businesses that want a low-fee checking option that offers all the banking basics. You get 100 free transactions2 and can deposit up to $2,000 in cash per statement period with no fee. You’ll also pay no monthly maintenance fee with an Average Collected Balance of $100 or more. Otherwise, it’s $10 a month.

BMO Premium Business Checking Account

This account offers the basics you need from a business account with a low monthly fee. It’s a good option for businesses that maintain lower balances and have more transactions. You get 200 free transactions2 and can deposit up to $5,000 in cash per statement period with no fee. You’ll pay no monthly maintenance fee with an Average Collected Balance of $1,500 or more. Otherwise, it’s $15 a month.

BMO Elite Business Checking Account

This account is designed for businesses that tend to have more monthly transactions. You can also earn interest3 on your checking balance. You get 500 free transactions2 per statement period as well as free domestic and foreign incoming wire transfers. You’ll pay no monthly maintenance fee with an Average Collected Balance of $10,000 or more, or with a Monthly Combined Business Balance of $25,000 or more. Otherwise, it’s $25 a month.

Savings Account

Business savings accounts come in handy when you have profits left over that don’t need to be used immediately. You’ll get a higher APY with savings accounts, but also more restrictions. Some banks limit you to six fee-free withdrawals per month. In addition, most business savings accounts don’t let you write checks or use an ATM card to directly withdraw cash.

Many banks also limit the number of deposits you can make to business savings accounts each month, including cash deposits. A regular savings account is a must for small businesses, though you can also put your money into business CDs and Money Market accounts.

Merchant Account

With a merchant bank account, businesses can accept and process electronic card transactions, making these accounts a necessity if you sell products directly to consumers. In fact, any business that accepts credit cards or other forms of electronic payments from consumers for its products and services must have a merchant account.

These accounts create an agreement between the business, their bank, and their credit processor stating how the business will receive money after a transaction is processed. Merchant account providers require a monthly or annual payment for the use of their services and charge the business per transaction.

Business Credit Card

Small businesses should also open a business credit card account to give them more payment options. A business credit card is also important in terms of keeping your business and personal expenses separate. Business credit cards let you monitor your spending and streamline your recordkeeping to free up more time to grow your business. Plus, many business credit cards come with perks such as rewards points or airline miles.

1Foreign Transaction Fees will apply at Allpoint® ATMs located outside of the United States.

2Each additional transaction is $0.40. Transactions means non-ATM deposits, checks deposited, checks paid, and ACH credits and debits, excluding BMO Bill Connect ACH transactions.

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