To common users of banking services, money transfers are money transfers. As in, you don’t consider them complex: just a tool to send and receive funds. But then, you face a plethora of terms like bank transfers, wire transfers, electronic payments, online transfers, and so on. And you start to wonder – “is there a difference between all of these?” and “what should I use?”. Well, let’s figure it out together! In this article, Genome will primarily focus on bank transfers and wire transfers and how they differ and compare wire payments to other transfer options as well. Wire transfer:
Among the multiple types of bank accounts, a business one is mentioned commonly. No wonder – many companies can benefit from having the account and using its tools to grow their revenue.
But the question stands: in which cases do you need a business bank account? In today’s article, Genome will explore this topic. We will advise you on how to choose the best business account.
What is a business bank account?
Business accounts are used by individuals and companies to carry out solely business operations. Such as storing funds, transferring money, paying salaries, etc.
Moreover, a company is required to have a business account if they want to apply for a merchant account, but more on that later.
Generally, you do not store your personal finances on a business account. Not only the money mixing can be confusing, but it complicates the taxation process a lot. Not to mention that you can accidentally spend too much business funds on something not business-related, and vice versa! In the long run, situations like these can cause problems with your bank, resulting in your account being suspended.
Who needs to open a business bank account?
Here we will list some of the more common situations when you need a business account. We will elaborate on some of them later on in the article.
So, we recommend you get a business account if:
- You have a company of any size and need to perform business transactions, pay employees, etc;
- You want to open a merchant account to receive money from your clients for goods and/or services. The thing is that merchant accounts are only used to accept payments, you can’t withdraw money from that. But, the funds you’ve earned will eventually be transferred to your business account, where you can access them. For more information, check out the article about business and merchant accounts;
- You have a limited company;
- You are a sole trader or a freelancer. Although you are not obliged to do so legally, starting a business account might be a good idea, and we will explain why in the next section;
Does a sole trader need a business bank account?
A sole trader also referred to as a sole proprietor, is a person that exclusively owns and runs their business. Therefore, this person is the one who carries all legal responsibilities for the business, and the business is not considered a separate legal entity. As an example, photographers, personal assistants, small retailers, etc. can be sole proprietors.
Generally, a sole trader is not legally required to open a business account and can use personal accounts instead. But is it a good idea? This is why you may prefer opening a business account to a personal one as a sole trader:
- Deal with taxes easier. Even as a sole proprietor you can’t avoid taxes. But what you can do is simplify your tax return filing. All your business transactions will be in one place, making it simpler to track without any mixups.
- Separate different types of finances. If you keep your money and business funds in one place it is more difficult to keep up with all the expenses. You might even get into the situation when you spend too much business money on personal purchases, which can lead to unfortunate declines in business.
- Get additional services. Getting a business account opens more possibilities for growing your revenue with the tools the account offers. There are reports and analytics that are great for tracking business performance, you can apply for a loan, etc.
- You can get your account suspended. Not all banks and financial institutions allow using their personal accounts for business purposes. As a result, your account can get closed.
At the end of the day, no matter which type of account you choose, you can apply for both personal and business accounts within Genome! Apply online – pass a quick verification and experience quality services!
Does a freelancer need a business bank account?
A freelancer is a self-employed individual who’s not committed to a particular employer for a long time. Typically, freelancers work with different businesses on a wage-per-task basis.
For instance, a freelance musician can be hired by a media company to record a song for a commercial. Once the song is ready, the musician gets money for the service and moves on to work with another employer.
Sole traders and freelancers have some things in common. For one, they go through self-assessment to pay taxes, are classified as self-employed, and aren’t obliged to open business accounts.
So, if you are a freelancer, you can use a personal account for business transactions. But, just as in the case with sole proprietors, we advise you to look into business accounts because of the benefits we described earlier.
Does a limited company need a business bank account?
A limited company is a form of incorporation, the owners of the company share legal responsibility for it to the extent of the investment they made. The company is a separate legal entity and you are required to open a separate business account for it.
What are the benefits of having a business bank account?
Are you still asking yourself: “Do I need a business account”? Maybe some of the advantages of having one will help you make the decision:
- Concentrate on your business exclusively. This can’t be mentioned enough: keeping your corporate expenses from personal ones not only shows your professionalism but simplifies the management of funds. For one, it is easier to file the tax return when funds are separated, the transaction monitoring is more clear, and you get more precise analytics based on your company’s performance. Not to mention that if a company audit will take place at some point in time, it will go more smoothly.
- Services catered specifically to companies. Business accounts have more features that allow running the financial side of your business more productively. You can access business reports, can transfer bigger sums of money than via personal accounts, pay salaries, and even take a business loan. Moreover, banks and PSPs develop different additional features for their business clients. For instance, Genome allows multiple employees to securely access the company’s business account to share the workload. Find out about our access management feature.
- Security reasons. Separating personal and business funds is a good idea not only because it will be simpler to file the tax return. It will also ensure that you won’t accidentally spend too much of your own money. Also, business accounts are usually strongly protected from fraud, as there is more money at stake.
- You are one step closer to merchant account opening. At some point, your company may require a merchant account to accept card payments from customers. In this case, you will definitely need a business account. More on how to set up a merchant account in this article.
Choosing the right bank account for your business
There are so many options on the market that you might feel intimidated at first. But don’t worry, at the end of the day, you are the one who knows what your company needs, and you should make decisions based on that.
Start with researching banks and payment service providers you think will make it work for you.
- Find out what services they provide. For instance, if you are a freelancer and confident that you will only use the account to get occasional payments from different employers, you don’t need an overly complicated business account. On the other hand, if you run a sizable corporation, you will need additional services, like, for instance, joint account management, or even a dedicated account manager.
- Learn about their terms and limits. Some banks may not work with certain business categories: startups, sole traders, massive corporations, etc. If you need to send and receive massive transfers each month, find out if there are any transfer limits. Do you plan to start a merchant account down the line? Learn if the financial institution provides these.
- Check out the fees. Study the pricing carefully to understand what you will be paying for. Sometimes paying extra is justified if your bank provides extra security features or other necessary tools.
How to open a business account
Once you have chosen a PSP/brick-and-mortar bank to work with, you may wonder: “what do I need to set up a business bank account”?
Turn to the financial institution to start an application process. To get the account, you will need to provide some information, which differs depending on your bank’s requirements. Generally, if you are a freelancer or a sole trader, you will need the identification and business registration documents, while bigger businesses are required to provide a certificate of incorporation, the shareholders’ list, etc.
Genome significantly simplifies the account opening process, as it takes place completely online and you can do it anytime!
This is how you can start a business wallet with us:
- If you don’t have a personal account at Genome yet, you will first need to sign up with your email/phone number. Then fill in your full name, address, and date of birth; Pass the verification process – you will need to take a photo of your ID and film a video selfie to verify your identity;
- Now apply for a business wallet. Fill in the following details about your company: its name, type, activity description, registration number, VAT number (optional), the registration address, email, and phone number. Finish the onboarding process by disclosing the ownership structure!
- That’s pretty much all! Once you get a business wallet, you can start up to 5 accounts within it in each of the currencies: EUR, USD, GBP. With our business account, you can store corporate money, make business transactions and transfers, allow your employees access to the accounts to manage them together. You can also apply for Genome’s merchant account to accept card payments.
What do you need for a business bank account?
These are the most common documents banks require when you want to apply for a business account:
- A document that proves your identity (an ID, driver’s license, etc.);
- An employer identification number or a social security number;
- A business license + business formation documents;
- A certificate of assumed name;
- Articles of incorporation;
Is the money in my business account safe?
No bank or PSP is 100% secure, but financial institutions usually make a significant effort to keep their money safe, as it is in their best interest. When choosing a bank/PSP, make sure it complies with PCI DSS and has other instruments for a secure banking experience.
For instance, Genome verifies the identity of its users before wallet issuing. We protect our clients’ accounts and outgoing payments with two-step verification and offer the services of Covery anti-fraud platform.
How long does it take to open a business bank account?
The account opening process differs between financial institutions. Some banks require weeks to complete the onboarding, as they need to verify the information about the business.
Meanwhile, with Genome, you can start using your business account within 72 hours after the onboarding. The process takes place completely online – you won’t need to visit any bank branches and fill in tons of documents.
How do I open a business bank account in Germany?
The business account opening process for Germany doesn’t really differ from other countries. You first need to choose a bank or a PSP you want to open the account at by comparing certain parameters, like:
- The features available;
- 24/7 support;
- Security services;
Once you’ve chosen the financial institution, apply for the account. You are required to provide proof of your identity, as well as additional documents, such as business registration, certificate of incorporation, list of shareholders, etc. Find out what you need to apply for Genome’s business wallet.
Do I need a business bank account if self-employed?
You are not obliged to use a business account if you are self-employed, your personal account will do. On the other hand, there are benefits to separating your personal and business funds, which our team has described prior. Keep in mind that freelancers and sole traders are classified as self-employed.
What’s the difference between a personal bank account and a business bank account?
People generally use personal accounts for their own funds, while business ones – for corporate money and business-related operations. Not only that, but the accounts usually provide different tools, which depend on what you need as a person vs. as a company owner. Not to mention that the fees for business account maintenance are usually higher.