Different governments have different policies that individuals and businesses must abide by. In certain countries, businesses must open a corporate bank account and you can do so using a corporate bank account opening service. In this article, we highlight some pros and cons of opening a bank account for your business.
What are the benefits of opening a corporate bank account?
Some of the benefits of opening a corporate bank account are as follows:
- Privacy and Security:
Depending on the jurisdiction of your business, your business may receive high levels of privacy and security. This is because of the strict regulations and policies issued by the government and also the banking authorities which guarantee high confidentiality and protection of the business’s assets, funds, and other information. This will subsequently provide you with the financial flexibility that you may require in certain crisis situations.
Additionally, since the bank account will be in the name of your business and not yours, you will receive a degree of privacy when making certain transactions.
The process of opening a corporate bank account is becoming more convenient as businesses need to meet fewer requirements, business owners are not required to travel to the bank to complete the process but rather can do so online, and more.
Besides the above, businesses are offered various facilities including internet banking which allows individuals to access the bank account remotely from any part of the world and transfer funds elsewhere easily. However, it is not necessary for these facilities to be provided by all the banks and therefore, you must be careful in choosing a suitable bank for your business.
- Access to international markets:
Opening a corporate bank account may result in an increase in access to investment opportunities in the international markets. This allows you to take advantage of all international trends regardless of their locations (in the home country or another international market). This diversification of investments leads to a lower risk faced by businesses.
- Multi-currency banking facilities:
Various banks provide businesses with multi-currency banking facilities. This essentially means that banks provide currency exchange services to businesses. Thus, businesses can have a diversified currency portfolio which could potentially reduce the risk of fluctuations in the different currencies. Moreover, this facility could also allow you to make transactions when the currency rate is relatively lower.
Some banks can provide a better and more competitive currency exchange rate as well, which is another factor you should keep in mind.
Additionally, the availability of such facilities allows businesses to make transactions in the currency of their choosing which also offers the business’s stakeholders such as the suppliers and customers some certainty.
- Separate personal from business bank account:
The opening of a corporate bank account allows for a separation of personal finances and business finances. It becomes easier to track the funds of the business, keep accurate financial statements and other accounting books, file for taxes, and more. Moreover, corporate bank accounts provide more services and facilities than personal ones do.
Additionally, since the personal asset of the individual is separated from the business, in case of problems where the business’s assets are frozen, the individual can continue to access the personal bank account. This, thus, ensures the protection of the personal assets of the individual.
Besides the above, having a corporate business account shows the professionality and seriousness of your business which improves your business’s reputation and credibility.
- Provide clear business records:
When your business’s bank account is separated from the personal one, it would be easier to extract the information of the business’s finances which is required in case of an audit of the business’s financial statements (may be required by certain governments) or a tax audit. However, if both the bank accounts were joined, then it would lead to a lot of complexity and may result in additional questions being asked.
- Business credit:
Opening a corporate bank account may allow you to obtain business credits that you may need in order to conduct your business activities in the jurisdiction of your choosing. This credit will be provided based on your business’s credit rating and not your personal credit rating.
What are the drawbacks of opening a corporate bank account?
Some of the drawbacks of opening a corporate bank account include the following:
- Costly process:
Usually, corporate bank accounts are costly to set up and maintain. Banks usually charge relatively higher fees for the set up of a corporate bank account than for a personal one. Moreover, banks also require corporate account holders to meet a minimum balance criterion which is also relatively high. This minimum balance is determined by the government and banking authorities. If you do not meet this criterion, you may be subjected to additional banking fees. Therefore, opening a corporate bank account may be a costly endeavour.
- Time-consuming process:
Setting up a corporate bank account can be a time-consuming process. Before you can begin to open a corporate bank account, you need to understand the facilities each bank provides and decide which bank is the best suited for your business. You will need to also keep in mind the requirements of each of these banks which may include minimum deposit, documents to be submitted, and more.
Only once you have decided on a suitable and reputable bank can you begin the bank opening process. This process is usually completed within a period of one month, but it may differ depending on the jurisdiction in which you plan on opening the account. Throughout the process, you must also keep in mind any government regulations and requirements that your business must meet.
Thus, we see some of the advantages and disadvantages of opening a corporate bank account. Since it is compulsory for businesses to have a bank account for their business, we do not have any choice but to move past the disadvantages and open an account. The best that can be done is to select a suitable bank account that provides your business with various facilities and benefits that outweighs the disadvantages for your business.