What is a checking account?
This question is asked by many novice entrepreneurs who for the first time have to deal with non-cash business settlements. A checking account is a special account of a legal entity or individual entrepreneur designed to store funds, as well as for settlements and payments related to entrepreneurial activities.
To identify the client, the bank assigns him/her an individual account number. For the organization, this number is an important part of the bank details.
For an individual entrepreneur, a checking account is a convenient tool for doing business. The current account can receive proceeds, it is easy to pay for goods and services (for example, rent), taxes and contributions to state funds from it.
What is a checking account used for?
To understand why a businessman needs a checking account, let’s consider what it is used for. A checking account allows its owner to:
- Hand over the proceeds to the bank and keep it in a cashless account;
- Accept non-cash payments from partners and clients (including through the acquiring system);
- Pay for goods, materials, rent, services provided to the business;
- Transfer salaries of employees to bank cards;
- Pay taxes, pay cricket bill with checking account.
The following areas of entrepreneurial activity imply the presence of a checking account:
- Large payments under one contract. By law, such transactions must be paid exclusively by bank transfer;
- Trade acquiring. Outlets today rarely do without a POS terminal that accepts card payments. Cashless payments received in this way are credited to the seller’s account;
- Payment of taxes and contributions to government funds. Theoretically, individual entrepreneurs can pay taxes through the cashier, but in practice, there are many problems and disputes with such payments.
Benefits of opening a checking account
LLC does not have to think about whether to open a checking account or not. They are required to do so by law. Individual entrepreneurs have the right to choose, so they try to weigh all the pros and cons, correlate the benefits with the costs.
More and more individual entrepreneurs decide that it is necessary to open a checking account since it has a number of advantages:
- It’s convenient to pay taxes and contributions to funds;
- You can conclude contracts and agreements for large amounts;
- You raise the status, enter the market of larger partners;
- When connected to Internet banking, all payment transactions can be made from home. You can also view reports, expense statistics from home;
- You have the ability to use merchant acquiring.
Checking account transactions
Checking account transactions can be classified as follows:
- Account replenishment. The client can put cash into his/her account through the bank’s cash desk or using an ATM;
- Withdrawing cash from the bank account. Withdrawal conditions largely depend on the tariff. Sometimes cash is issued only through the cashier, according to a checkbook;
- Money transfer to legal entities, individual entrepreneurs. To make a transfer, the account holder must create and send a payment order to the bank. Due to the great popularity of Internet banking, such transactions are increasingly being performed online. Another way is to provide the bank branch with a printed payment order (this service will cost more). Examples of completed payments can be found on the website of almost every bank or in the online account;
- Money transfer to individuals, for example, wages. The bank sets a commission for transfers to citizens. For convenient monthly payroll for employees, you can connect a special service package;
- Payments to the IRS, pension fund and insurance fund. They are carried out by payment orders, as well as transfers to business partners. Most banks do not charge a commission for contributions to government funds;
- Transfers from legal entities and individuals. Partners and clients can pay a businessman via wire transfer from their bank account. Individuals can make payment through acquiring terminals, bank cash desks or by transferring from a personal account to a settlement account of an individual entrepreneur or LLC.
How to open a checking account?
What do I need to open a checking account? The procedure is quite simple and quick. Urgent account opening may take just a couple of days.
- Choose a bank;
- Study the conditions for the provision of cash settlement services in a particular bank, the cost of services, the rights and obligations of the parties;
- Collect the required documents;
- Fill out and submit an application (through the branch or online). Each institution has its own form of a document;
- Sign a contract. Registration of the contract, cards with samples of the seal and signature will take some time.
How to choose a bank?
Choosing a bank is a very important stage. How to choose a bank for business and not be mistaken? First of all, let us highlight the most important criteria that need to be taken into account:
- The range of services provided and their cost. The main thing that you need to know about the cost of maintaining a bank account is that the absence of a subscription fee is not always beneficial, and vice versa – the monthly payment may seem large, but it may already include the cost of transfers and replenishment;
- Reliability of the bank – it is determined based on the reviews of existing clients;
- Quality of customer support and ease of use of mobile and Internet banking;
- Methods of account replenishment (availability of ATMs).
How to close a checking account for business?
Opening a checking account is easy, but closing it is even easier. Most banks do not charge any additional closing fees.
If an individual entrepreneur plans to close his/her account, he/she informs the bank about it in the application form. If there are funds left on the balance at the time of closing, they can be transferred to another account or withdrawn in cash. Further, the bank employees will perform the entire closing procedure themselves. If one of the contractors of the entrepreneur mistakenly sends a payment using invalid details, the funds will not be lost, and after a while, they will be returned to the sender.