Business Banking: Rules and Regulations
05/24/2023
Business Banking: Rules and Regulations
There are many things to consider when opening your own business, and opening a business bank account is a topic that requires thought and research. Finding the right business bank account for you requires an understanding of why you need a business account in the first place. We have created a helpful guide to business banking accounts to help ease the burden.
Why You Need One
Many people see the increased fees usually associated with a business account and wonder why they even need a business account in the first place. The truth is that business banking accounts are crucial to running your business in a way that promotes progress while remaining protected and compliant.
Progress –Having a business account can help display professionalism to your customers because they allow customers to make credit card payments and write checks out to your business rather than to an individual. Furthermore, a business account can help you open a line of credit or credit cards that can help grow your business.
Protect – A business account can protect you as the business owner and your customers. A business account can offer limited liability coverage for the business owner depending on your corporate registration. This means that your personal funds could remain separate from business funds in the unfortunate event of a lawsuit or other loss. Furthermore, services like merchant services (usually offered with business accounts) protect your customers and keep their personal information secure.
Comply – Businesses have many federal and state regulations they must remain in compliance with. Having a business account is one step in maintaining your compliance and signals to the IRS that your business is legitimate and not a hobby. Your accountant will also thank you for having a business account when they begin preparing your taxes! It is much easier to prove business expenses with a business account.
Finding the Right One for You
As soon as your business starts selling products or spending start-up money, it is recommended that you open a business account. First, make sure all your paperwork is in order. To start a business account, you will need your business formation paperwork, EIN, ownership agreements, and a business license (if required). Next, it is important to shop around to find the right business account for you.
Finding the right account for you can take a little bit of work and research. Common business products include a checking account, savings account, credit card, and merchant services (to accept credit and debit card transactions). You should also consider the bank’s interest rates, transaction fees, minimum account balances, and charges per transaction.
Associated Regulations for Business Accounts
Business accounts occupy their own space when it comes to federal rules and regulations and “most consumer protection rules to not apply…” (NAFCU.org). The most common regulation that does not apply to accounts held by a legal entity (business) that applies to individuals is Regulation E. Regulation E protects consumers from fraudulent charges and incorrect electronic fund transfers into or out of their bank accounts. The official regulation from the Federal Reserve Board specifies it only applies to accounts held by an individual.
Regulation CC, however, applies to accounts generally. This regulation sets limits on how many days a bank can hold funds from a check deposit and the disclosure of funds availability to the customer. This regulation does not only apply to accounts held by an individual and will apply to your business account.
The main rule to keep in mind with business accounts is that checks made out to a business must be deposited into a business account with the name of that business attached. The name must appear as the main account owner or as “Doing Business As” on the official account documents.
Conclusion
While you need to be aware of the rules, regulations, and specifications of business accounts, your business relationship banker is here to help! If you would like to speak with a Business Relationship Banker at The Savings Bank, please call us at 1-800-582-2265 or visit us at TheSavingsBankOhio.bank.
Sources:
https://www.nafcu.org/compliance-blog/regulations-business-accounts
https://www.sba.gov/business-guide/launch-your-business/open-business-bank-account
https://www.forbes.com/advisor/banking/checking/who-needs-a-business-checking-account/