Separating business income from personal income is very useful and, for some types of businesses, it is nowadays even mandatory. Opening a business current account, therefore, is something you must consider and, where necessary, carry out with great care because it allows you to enjoy certain advantages as well as to meet, in the cases provided for, precise legal obligations.
The first question you need to ask yourself in this regard is, what is a business bank account and how does it work?
Corporate account: what it is and how it works
A business bank account is a checking account that is quite similar to the private one you are probably familiar with: it has an IBAN code, allows you to make payments and receive debits and credits, and can be linked to credit cards, debit cards, or prepaid business cards.
The main difference between a business current account and a private current account lies in the fact that in the former the flow of money pertaining to the working sphere flows, while in the latter the money pertaining to the personal sphere is deposited. In this regard, remember that all transactions made through a corporate checking account are in the name of the company, and that the corporate account should not be used for banking movements concerning one’s private life. Not only that, the company current account cannot be jointly held with a family member.
Another difference between business and private accounts relates to the costs associated with certain transactions: generally, for example, with a private checking account we pay a fee for each transaction made, while in a business account we can find offerings with a certain number of transactions included in a monthly fee, which on average is higher than that of a private account.
We will delve, in detail, into the aspect of costs associated with opening a business checking account later; now, in fact, it is necessary for you to know in which cases this operation is mandatory by law.
Who is required to open a corporate account
In Italy, corporations, partnerships and all businesses under ordinary accounting regimes are required to have a dedicated current account (business).
As for professionals and entrepreneurs under the flat-rate regime, the exemption from this obligation still applies (the obligation was proposed in the first draft of the Budget Law 2022, then immediately withdrawn) although it should be noted that the Law requires the payment of taxes and contributions by F24 proxy debited from a current account in the name of the VAT holder.
What documentation must be provided to open the account
In order to open a business checking account, you should know that you need to provide a number of documents (the full list may vary depending on the type of business and the institution you apply to): in general, you need to present a valid ID, the certificate of VAT number attribution issued by the Internal Revenue Service and, for businesses, updated Chamber of Commerce certificate in addition to articles of incorporation and bylaws for companies.
Depending on the type of business and its corporate organization, then, Business Plan and Financial Plan and details of partners with a share of more than 20 percent may also be required.
Costs and benefits of a corporate account
Before getting into the heart of a question that will certainly be close to your heart, that is, how much it costs to manage a corporate checking account, it is important to point out the advantages that this operation offers: opening a corporate account, even in cases where this is not required by law, allows you to have more efficient control over the company’s income and expenses. This is not something to be underestimated because having this control is what keeps you grounded; after all, quoting IKEA founder Ingvar Kamprad,
“the most dangerous poison is the feeling of success. The antidote is to think every night about what you can do better the next day.”
Having a business checking account also gives you the opportunity to pay taxes and access tax deductions more easily. You would also do well not to underestimate the “credibility” factor: having a business checking account can help improve your company’s image, making it more professional and, therefore, more trustworthy.
With regard to the costs associated with opening a business current account, it should be pointed out from the outset that it is impossible to provide a precise estimate of the amount of money that is necessary to allocate for this operation: nowadays, in fact, it is possible to choose from several solutions, some of which are even almost cost-free. Others, however, can be as high as 249 euros per month.
The difference in cost depends on a number of parameters, such as whether there is a monthly fee and any fees on certain financial transactions, the number of corporate credit cards available, whether it can be managed by multiple users (through a system of roles and permissions), and whether it can be operated online.
To choose the right business current account, therefore, you must necessarily take into consideration your specific needs (current and future) and compare which features the various options available on the market offer (and at what price).
What you need to know before joining an offer
Cost is not the only factor that should guide your choice about which institution to choose for your business checking account; there are, in fact, other assessments to be made. You are about to discover them in the next few lines.
Is it easy to open the account?
In comparing the various solutions on the market, you need to draw attention not only to the costs, but also, as already mentioned, to the various documents required for opening a business current account and the timeframe for verifying them and completing the activation procedure.
Is there an initial offer?
It is possible that some institutions may provide an initial offer that can lower or, even, zero out the cost of running a business checking account for the first few months: in this case, against the initial savings, you have to consider the expected amount of future monthly fees and/or commissions that will be charged.
What are the fixed costs?
As already pointed out, several institutions offer a fixed-cost monthly fee: the advantage of this type of proposal is, of course, related to the type and number of operations included in the fee, depending on the precise needs of your business.
What fees are charged?
Whether there is a monthly fee or in the absence of fixed costs, to carry out certain operations it may be necessary to pay a commission, which can be triggered with each transaction or only once a certain threshold has been exceeded.
How long does it take to process deposits?
In order to manage cash flow really efficiently, it is important to know how long it takes to process deposits and to make sure that this process does not turn out to be excessively long, as this could jeopardize your startup‘s operations.
Is it easy to interface with the institution?
Some business checking accounts, particularly “no-cost” accounts, can only be managed online. Regardless, in any case, it is also important for you to take into consideration the ease with which you can request assistance if you need it. The figure to refer to is the relationship manager, that is, the person who supports you in managing your account.
Does the institution provide counseling services?
You may also need an advisory service, but not all solutions on the market offer such an option. Being able to count on the advice of a team of investment experts is another factor that you must necessarily consider before opening a business checking account.
Is it easy to get an overdraft?
When managing your company, you must also take into account the possibility of resorting to an overdraft: it is therefore important that you are well informed about the conditions and costs associated with this particular request.
Where to open the company account
By now it will be clear to you: when you decide to open a company current account for your startup, you have various solutions at your disposal. There are essentially 3 ways you can take: you can go to your bank, choose an online bank that offers this service or opt for a fintech organization.
Your own bank
Obviously, contacting your bank to open a company current account will appear to you as the most obvious and practical choice, but you must not forget the importance of comparing the different solutions available to you, paying close attention not only to the costs but also to all the questions mentioned in the previous paragraph. You may find, in fact, that the most obvious and practical choice isn’t also the best.
Banks online
For some startups and companies, it may not be necessary to have a credit card or checkbook; there are realities, in fact, whose priorities are different, such as being able to manage the company current account and operations at any time and in any place. Is this your case? Then you should consider opening a current account at an online bank, a solution which, in general, has lower costs than a traditional account at a “physical” bank.
Fintechs
As mentioned, there is a third way to open a company current account and it is called fintech: this term, which stands for “Financial Technology“, refers to the supply of financial services and products provided thanks to the most modern technologies made available by the evolution of ICT and the Internet. Using the technology available on smartphones, this solution offers reduced costs and convenient options. For startups, in particular, fintech represents an interesting option (alternative to traditional credit institutions) to have access to financing through crowdfunding platforms.
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