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Tuesday, July 23, 2024

How Corporate Bank Account Works and Why Is It Important For Business

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The corporate bank account is vital to every business, ensuring businesses store and manage their finances efficiently and securely. 

As a business owner, you can set up a separate bank account that must feature on top of your to-do list. Managing your business and personal accounts is always easy when you have two different bank accounts. 

Thus, apart from legal compliances and accounting policies, ensure that the business operation appears more professional and offers financial protection. 

In this article, we will cover everything you need to know about the significance of a dedicated corporate bank account. 

What Is A Corporate Bank Account?

A corporate bank account is a bank account opened by an organization or a company to manage financial transactions. The company usually deposits the funds in its corporate account and withdraws when necessary. The account also has the facility of granting loans to the company as well. 

To ensure that your personal banking is managed separately from the company’s, make sure that you open a new corporate account bank in the name of the business to conduct all the transactions. 

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Thus, a business, regardless of its size or type of product and service offering, has the facility of having one or more corporate accounts. 

Some of the common types of corporate bank accounts are:

  • Marchant Accounts. 
  • Business checking accounts.
  • Business saving accounts.
  • Business money market accounts.
  • Business certificate of deposit accounts. 

Hence, a corporate bank account is integral to business functioning and permits the business to operate and manage its financial activities. 

How Corporate Accounts Work?

A corporate account bank is similar to a personal account, offering a place to keep the money. With the majority types of business accounts, a business can save money, make investments, pay bills, and make payments to their employees. 

Here are some of the reasons why a corporate bank account functions differently from the rest of the bank accounts.

  • A corporate bank account is usually used by companies that are either a single proprietorship or a private limited type of company. 
  • These types of bank accounts are used to manage the company’s finances rather than an individual’s finances. It emphasizes corporate accounts, which are used to process payments and receive funds from customers, vendors, suppliers, and other sources. 
  • Unlike a personal account, a corporate account bank offers features like automated deposits and payments, access to a wide range of investment services, and an online banking facility. 
  • The account also offers additional security measures, such as two-factor authentication, which protects the company’s funds from fraud and theft. 

Generally, these accounts offer the business opportunities to make investments and the potential to increase their revenue. Thus, a corporate bank account is important to a successful business

How To Open A Corporate Bank Account?

Before opening a corporate account, you must identify the legal papers and official documents required to set up an account. Different banks in different countries will indicate a unique requirement, but they typically require:

  • The business’s legal name.
  • Proof of business address.
  • Information about the nature of business.
  • Contact information.
  • A copy of identity documents.
  • Business incorporation documents (that can be a sole proprietorship limited liability, partnership company, and many others).
  • The government-issued documents of an employer (required in some countries).

To learn more about the corporate bank account, you can check for related blogs and articles, as some of the banks offer better benefits than others. 

Why Is It Important For A Business To Have A Corporate Bank Account?

There are surely multiple benefits of opening a corporate bank account, which include:

1. Offers Security 

Corporate accounts offer businesses a secure way to manage and store their finances. Usually, these accounts are held at federally insured banks and are further protected by FDIC insurance. 

These accounts are further subjected to rigorous security protocols in order to ensure safety from fraud or theft. The added security measures include two-factor authentication, which adds an extra layer of protection. 

2. Assisting Business To Manage Business Sales, Expansion, And Growth 

If you wish to expand your business, opening a corporate bank account is necessary. The bank will facilitate you to conduct successful transactions. 

If you sell a business, the corporate bank account should track the company’s performance and offer a clear vision to the suppliers and buyers.

3. Account Is Free From Restrictions Of Personal Accounts

Business accounts are free from several restrictions on personal statements, specifically those related to direct debits and recovering customer payments. 

4. Account Is Easily Accessible 

Corporate bank accounts are highly accessible and permit the business to access funds from anywhere and at any time of the day. 

One of the major advantages is that corporate bank accounts have the facility of an online banking system, which allows the business to manage their money and make timely payments. 

5. More Investment Opportunities 

Corporate bank accounts allow businesses to invest their funds in mutual funds, bonds, stocks, and other types of financial products. 

When you invest in these products, the company tends to grow its revenue and wealth.

Tip For Managing Corporate Accounts

Opening a corporate bank account comes with certain downsides, which might be something other than what you are accustomed to when opening a personal statement. 

Here are some of the tips for managing a corporate bank account:

1. Managing Fee And Other Requirement 

The banks charge a fee for maintenance and a monthly service charge for every corporate bank account. 

In certain cases, banks charge a fee every month or an early termination fee if you wish to close your account.

The banks also charge a certain fee for ATM cash withdrawals and have limited the number of times you can withdraw from a certain ATM.

2. Fund And Insurance Protection 

Before you open a corporate bank account, ensure that the bank you sign up for has a secured banking system and is insured of all types of deposits received. 

This is extremely important for corporate banks because if the banks fail, you would want to avoid risking the business and losing all your profits. 

This is the reason why insurance and fund protection are very important since they cover despots and offer a sense of security. 

3. Other Benefits And Services 

You should remember the external benefits that come with opening a business bank account with a particular type of bank. 

The features and services offered separate from one another and assist you in making a decision. The online banking facility allows for monitoring business spending and making transactions through credit cards. 

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