Why do you need a business checking account?
Businesses have many reasons for using a business checking account, including:
- Fraud protection: One of the biggest advantages of using a business checking over a personal one is that businesses are much less likely to be victims of fraud. Businesses often use checks for transferring large amounts of money, and because these checks are often processed through automated systems at banks, they can be much safer than cash transactions.
- Tax benefits: Another reason why many businesses choose to use business accounts over personal ones is that they can use them to claim certain tax deductions related to their business expenses. For example, if a business uses its business account for paying for work supplies and other expenses, these purchases can be deducted from its taxable income at the end of the year.
- Separate personal and business funds: When you use your personal checking account for your business, it is easy to mix personal funds with business funds. If one of your employees makes an error in entering a transaction, it will look like you are using company funds for personal expenses, when really it was an honest mistake on his or her part. This will result in serious consequences if you cannot provide receipts to prove otherwise because this looks very bad for the company.
- Earn interests: If you have a business checking account, you can often earn interest on the balances that you have in the account. This is great because it gives you a little bit of extra money to help you save or use for other business purposes.
- Protect your money: You can’t get personal savings or money market account insured by the Federal Deposit Insurance Corporation (FDIC) unless you deposit less than $250,000. But most business checking accounts are fully FDIC-insured, regardless of how much you deposit. This means that if your bank fails, you won’t lose any of your money.
What do you need to open a business checking account in Michigan?
A business checking account offers a number of features that differentiate itself from a personal checking account. However, these benefits can be different for each business, depending on their needs. Below are the main benefits to a business checking account:
- Easy Access to Funds: Businesses can deposit checks and cash in minutes, while personal accounts may take days to clear. This is useful if the business owner needs to use the money right away.
- Check Writing with Fewer Restrictions: Business checking accounts allow businesses to write checks up to a set limit each month. After that amount is reached, the business is automatically charged a fee. In contrast, personal accounts often have check-writing restrictions after reaching a certain balance or having too many checks written in a month.
- Improve cash flow management: Cash flow management is crucial for a successful business. With a business checking account, you’ll never run out of money or be surprised by an overdraft fee again because all transactions are automatically posted to your account at the end of the day or at a particular time period. You’ll also have easy access to all records including deposits, withdrawals and outstanding payments which makes it easier for you to prepare for tax time.
- 24/7 online banking: This feature offers round-the-clock access to your account. It’s convenient because it allows you to go online at any time during the day or night to check your balance, transfer funds, write checks, pay bills, and review transactions without having to make a trip to the bank during normal banking hours.
- Online bill payment: Paying bills has never been easier with online banking. Your bank may offer a bill pay feature that lets you create and send payment requests online. The bank then takes care of making sure that the appropriate payments are made on the due date for each bill. If you want, you can even schedule payments in advance so that they’re made on a particular date or at regular intervals.
What do you need to open a business checking account in Michigan?
When you open a business checking account, you will likely be asked to provide:
- A business license issued by your city or town that specifically authorizes you to operate a business at that address—or a copy of your lease agreement and proof of payment for utilities for that address.
- Proof of business ownership, e.g., copy of lease agreement or articles of incorporation/organization (if applicable).
- Federal Employer Identification Number (EIN), which is obtained through the IRS.
- Proof of address: Utility bill (gas, electric, cable) or telephone bill with your name and address on it.
- DBA or Fictitious Name Registration: This is for your business name. It shows that your company has a legal name and not just a single owner’s name. You can get this from the town or city clerk’s office where you are opening your business checking account, depending on where you live in Michigan.
- Social Security Number(s) for all owners.
Common business checking account fees in Michigan
The following are some of the common business checking account fees in Michigan:
- Teller fees: Depending on where your bank is located, you might have to pay a fee to use a teller.
- ATM fees: Federal regulations also allow debit cards to be used at out-of-network ATMs up to $2.50 per withdrawal. Many banks charge more than that, so check with yours before making a trip.
- Overdraft fees: Banks provide overdraft protection for items paid for with your checking account. However, most banks charge per-transaction overdraft fees, which occur when you make multiple purchases with your debit card that pushes your balance below zero.
- Check printing and paper statement fees: You may have to pay extra for checks and/or paper statements from your bank.
- Minimum balance fee: If your balance falls below a certain level, some banks will charge you a fee. This is one of the most common business checking account fees in Michigan, and it’s usually due to cash flow problems. Ask yourself if it’s really necessary to keep that money sitting at the bank instead of being put back into your business.
- Service Fee: Some banks will charge small businesses for regular use of the account. These types of accounts usually have high minimum balance requirements and the fee is usually waived if the balance requirement is met.
How to choose the best business checking account in Michigan
So, you’re looking for a business checking account, but which one should you choose? To help make the decision easier, here are some of the most important factors to consider:
- Fees: Most banks charge at least one fee for their business checking accounts. Some may charge monthly fees, and others may charge per-check fees or ATM usage fees. You’ll need to compare these costs and decide which are most important to you.
- Customer service: Look into what types of customer service are available through the bank you’re considering. Do they have a 24/7 customer service phone line? Is there a customer service representative who can answer your questions about your account?
- Mobile banking: You might consider using your smartphone to deposit checks or pay bills online with your mobile banking app. Some banks also allow you to check your balance through text messages or use geolocation technology to find nearby ATMs that work with your mobile app.
- Minimum balance requirements: Some banks require that new customers maintain a minimum balance to avoid fees or keep their interest rates in check. If this is important to you, it’s worth looking into before opening an account.
- Accessibility: Does the bank provide mobile apps? Can they be downloaded onto smartphones and tablets? Do they offer a remote deposit service? Depending on the nature of your business, having easy access to your funds might be crucial.