Small Business Checking Options

Factual Questions
1

I’m starting an online business. It will have an online store which collects payments over the web and takes all orders. All I will have to do is compile orders, forward them to my suppliers with payment and count my profits. :smiley:

So, I need a checking account to pay my suppliers.

I stopped in at my bank today and asked Carol the Helpful Account Manager what my options were. It seems that they are:
[list=a]
[li]At one end of the spectrum, I can open a Personal Checking account. Since all of my various accounts total enough to make me a “Private Banker” (lah-dee-dah!), this would be a no-fee, free-checks account. The checks would be pre-printed with my name and address.[/li][li]At the other end of the spectrum, I can open a Business Checking Account. Such an account will cost me a monthly fee, plus per-transaction fees (for each check, deposit, etc) and I will have to pay for checks. But, those checks will feature a business name, not my name.[/li][li]In the middle seems to be a third, hubrid option, called something like a Sole Proprietership account. This is a Private, free account, up to a point. More than X transactions per month (a limit I’m not likely to reach) would cost me $10 in fees, unless I keep a minimum balance of $2,000. The checks will be preprinted to show, "sdimbert, (dba) “Some Company.”[/li][/list=a]

So, my question is, which account type should I chose? I’m leaning toward the cheapest, free account, because the few people who will receive checks (my suppliers, a consultant, perhaps the phone company, etc) already know who I am. Besides, I’m not ashamed of being in business. I simply can’t forsee a situation where having the check show my name or, at worst, my name with a “dba” would hurt me.

Is there any advantage, in my case, to using official Business Checking accounts?

2

It can help keep you organized for tax purposes. But you can also make your own checks with Versacheck or other brands. You can write your biz name on them. There should be no problem transacting them as long as you have your correct account info. on them. Those check refills, etc. are sold at places like Staples and Best Buy. See http://www.g7ps.com/ and http://www.ibiztips.com/bonus06.htm

Best of luck on the new venture!

3

In my adventures as a sole proprietor {shameless plug} one thing I ran up against was that my bank would NOT allow me to deposit checks made out to my business name to my personal checking account. So, for now, I have to admonish all my clients to make their checks out to my personal, legal name. Kind of annoying, since most people’s first instincts in regards to paying vendors is to write the business name.

Also, I’ve attended a number of seminars on how to do accounting for tax purposes for small businesses. Everyone recommended that you keep all business and personal finaces separate, to the point of “paying” yourself a salary from your business account to your personal account. Have a separate credit card exclusively for business purchases, separate checking to pay for business expenses and deposit payments to your business, etc. Now I personally have not done this YET, since at this point my business doesn’t make enough money to make the business checking account worth it, and the chance that I’ll be audited is relatively small. At the same time, it saves a LOT of headache when doing your tax return. If my business ever makes a real amount of money, I definately plan to have separate accounts.

For the record, they also recommended incorporating as soon as feasible, but at the cheapest it’s around $400 to do so, so that’s also beyond my means at this point. It adds some paperwork come tax time, but it also protects your personal assets from liability in case someone decides to sue your business. That is, if you’re incorporated, they can go after your business assets, but they can’t go after (for example) your house.

All that is to say, you’ll probably have the least headache with the “hybrid” DBA account, especially since it’s likely to remain free to you. (I sure wish my bank offered that…)

Though I would check with the bank or possibly a lawyer if you know one to make sure you don’t have to register your DBA in that case. (I’m not sure what the rules are for this, and it probably differs from one municipality to the next anyway.) IF you have to register with your city as DBA, then just go with the personal account. The DBA reg is, from what I understand, expensive.

4

Oh… also meant to say, it’s not doom if you ARE audited and you haven’t kept business and personal finances separate. It’s just easier to prove your profits/expenses/deductions to your friendly IRS person if it’s not all combined with unrelated personal stuff.