What is a Corporate Account?

Contents

    Every business owner needs to keep their business income separate from their personal ones.

    To do this, you will need to open a corporate bank account in the name of your business to process all your transactions.

    This applies to every business, regardless of its nature, size, operations, or the type of products and services it offers. 

    A corporate account, also known as a business account, refers to a bank account that a business uses to hold its money.

    Businesses and organizations use corporate accounts for investment and saving purposes and their day-to-day banking needs.

    Regardless of the size of your business, having a corporate account is essential for all business owners.

    Who can open a corporate account?

    A corporate bank account can be opened by any type of business organization or entity, including a sole proprietorship, partnership, or a private limited company.

    A business will need clear approval from its board of directors through a corporate resolution to open a corporate bank account.

    However, a corporate account is only necessary if you are operating as an incorporated limited company.

    Why is it so important for a business to have a corporate account?

    If you are a small business or regularly receiving payments from customers, you should open a corporate bank account.

    Despite a corporate bank account not being necessary for all situations, it offers many benefits to business owners.

    1. Financial & Personal Liability Protection.

    All businesses and corporations are considered to be separate legal entities from their owners and shareholders.

    Therefore, if you have a corporate bank account and your business ends up failing, you are protected from being held personally liable for any profit loss.

    Moreover, simply keeping all your business dealings separate from your personal finances adds a layer of protection to your personal funds and business as a whole.

    This means that you won’t be held liable, and neither will your assets be taken away if your business goes into debt.

    2. Maintains A Professional Image.

    Regardless of who you communicate or contract with as a business, a corporate account makes your business look more professional.

    You are likely to get better deals when contracting with suppliers and vendors when you use a corporate account as it looks more professional and makes your business more reputable

    Clients and employees are also more likely to trust you as a business if you process and receive payments through a corporate bank account.

    3. Simplifies Tax Returns.

    A separate corporate bank account is useful and convenient when completing tax returns as you can clearly see your income and expenses.

    This way, you avoid mixing up personal and business spending and provide an accurate tax return.

    Additionally, if you ever have to provide your bank statements to anyone or any authority, all your business financial information is kept separate from your personal transactions.

    4. Personal Accounts Have Restrictions.

    Personal bank accounts often have specific requirements regarding using your bank account when you sign up with them.

    There may be restrictions on using your personal bank account to make business transactions, especially when direct debits and receiving cash payments from customers.

    This is a huge risk which you can avoid by keeping your business expenses separate by using a corporate bank account.

    5. Helps Build Business Credit Rating.

    Having a separate corporate bank account builds your company credit score.

    If you don’t have a corporate account, you will have to rely on your personal credit rating, which can sometimes complicate things when looking to secure a loan or company credit.

    Banks are more lenient when granting loans to corporate bank accounts, especially if they have a good credit rating.

    By consistently using your corporate bank account for all transactions, you slowly build a credit history.

    6. Access to Business Account Benefits & Exclusive Offers

    When you first create a corporate bank account, many banks will have introductory offers on corporate accounts.

    Through such offers, you can get a good deal with free banking for a certain period of time.

    Other benefits include free or low-cost electronic transactions and better interest rates on business profits.

    7. Better Business Organisation & Management.

    Managing spending and budgeting is more convenient when a business has a separate bank account.

    It is more convenient because all reports and bank statements only include your business and no other finances.

    This not only adds clarity but also makes it easier to show the true financial position of your business when making a pitch to an investor.

    8. Business Growth, Expansion, or Sale.

    If you are ever interested in expanding your business into a partnership, you will need a corporate bank account to facilitate that transition.

    Again, you would not want your business partners to have access to your personal financial situation.

    Lastly, if you wish to sell your business, it makes it easier to have a corporate bank account to track the performance of the business and provide a clear overview to the buyer.

    When you sell your business, the potential buyer conducts an investigation of your business transactions

    If you have a personal account instead of a corporate one, the buyer will have access to all your personal and private financial information

    What to consider when opening a corporate bank account

    Opening a corporate account comes with some downsides that may not be something you're accustomed to when opening a personal account

    Banks will assess risk much more stringently, require much more documentation, and will often require an interview in order to assess your business profile.

    1. Fees & Other Requirements

    Banks usually charge maintenance fees for a corporate business account.

    However, you could be exempt from paying this fee if you meet the bank's minimum balance requirements

    Banks also charge transaction fees each month as well as early termination fees if you decide to close your corporate bank account.

    Moreover, banks can also charge a flat fee for ATM cash withdrawals and also have limits on how much you can withdraw and the number of withdrawals you can make each day.

    Therefore, depending on the nature of your business and how you wish to operate, you should check which bank’s corporate account fee requirements are best in line with your business. 

    2. Introductory Offers

    As discussed earlier, many banks have introductory offers to get you to open an account with them as opposed to their competitors.

    These introductory benefits can include bonus cash for first deposits, maintaining a specific balance over a period of time, and a discounted fee for opening an account.

    You should carefully research all introductory offers that banks have and see which one appeals to you the most.

    3. Other Services & Benefits

    You should also keep in mind any external benefits that come with opening a corporate account with a particular bank

    The services and features offered are what separates them from one another and can help you make a decision.

    Some banks have mobile baking to monitor business spending and making transactions and business credit cards are available as well.

    4. Insurance & Fund Protection

    Before opening any corporate account you should ensure that the bank you sign up with is insured for all types of deposits received there.

    This is extremely important for a corporate bank account because if your bank fails or closes, you would not want to risk your business and lose all your profits.

    This is why insurance and fund protection are extremely important because it covers your deposit and provides a sense of security.

    Depending on the country where you are banking, you could be protected by the government insurance program local to you.

    For example in the US, most bank accounts, personal and business, are protected up to $250,000.

    5. Documentation Required

    Before applying for a corporate bank account you need to identify which documents are required to set up an account.

    Typically banks ask for the business's legal name, its nature, proof that your business is legitimate, your business address, contact information, driver’s license number, and photo proof of identity.

    You may be asked for more documents depending on whether you are a sole proprietor, partnership, or limited liability company.

    The documents required may vary from bank to bank so you should definitely see which bank is more convenient to open a corporate account with.

    Final words

    Opening a corporate bank account for your business can give you access to many benefits

    However, you should carefully think about what your own requirements, preferences, and expectations are from a bank as this can help you make a better decision based on the nature of your business.

    Interested in opening a business account in Hong Kong?

    Don't worry, your business doesn't have to be in Hong Kong to benefit from having a bank account in Hong Kong.

    A Statrys corporate account helps your business stay ahead of the game by giving your business remote access to Hong Kong banking anywhere in the world.

    85% of our customers open their account in less than 48 hours.

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