After 18 months of various freelance endeavors, I finally decided to change my web design business from a sole proprietorship to an LLC last week. (More about the actual process to come later!) It doesn’t really change much as far as the way I conduct business, except it creates a better separation between my business and personal finances. Now if someone sues my business, my personal assets are protected and vice versa.
Anyway, one of the major things I need to do is open a separate business checking account. Even though most of my income and spending flows through PayPal, I still need to be able to write and accept checks for certain things. It will save a TON of headache at tax time. (Shout out to all my accountant friends who have provided info and advice!)
So I have two options – I could either open a business account at a local bank, or I could look at bigger banks. Both come with advantages, but they also have caveats that make this decision one of the toughest I’ve faced in awhile.
The Pros and Cons of a Local Business Account
This fall, I plan to expand my design services by offering them to local businesses in my area. As you guys know, I live in a very small town, and there are all kinds of little stores and shops, none of which has a presence on the web. There is also literally no one within 50+ miles who provides the services I do.
Part of small town life, especially when you own a small business, is supporting other small businesses. That means I might pay a little more to have t-shirts made or marketing materials printed versus ordering them online, for example, because it gives me the chance to build relationships with potential clients. Word of mouth is absolutely everything if I want to work locally. And naturally that should include using a local bank, right?
There are five banks in my county, all of which are tiny banks that no one has ever heard of (except maybe Old National, but it was ruled out immediately because of a bad past experience). And when I looked at the other local options for business checking accounts, I found “features” like these:
- No online banking (or very limited online banking, and in one case there was a fee)
- Really huge minimum balances that aren’t possible for my little newborn baby business
- Monthly maintenance fees
- Services that are clearly geared toward bigger companies
Basically, if I want a local banking relationship, I have to pay fees and/or give up things I need. Plus there’s always the risk of someone “sharing” the details of my business finances with people in the community. If you think that would never happen, you’ve obviously never lived in a small town.
The Pros and Cons of a Business Account with a Bigger Bank
My regular readers know how I feel about my personal bank account with PNC. I have the Virtual Wallet account and it is simply the best thing on the planet. So naturally I wanted to see what PNC offers in a business checking account; I didn’t even consider any other “big” banks.
As I expected, I can get a free business checking account with online banking, free bill pay, and no minimum balance. There is a limit on the number of transactions in a month, but at this point it’s way more activity than I would ever have. There are also options to upgrade if my income and expenses grow beyond the limits on the account.
The only problem? The nearest PNC branch is 50 miles from my house. With Virtual Wallet, it’s not a problem because I can do everything online or from my phone. But with a business account, I don’t have the option for remote deposit from an app – I would have to drive all the way to the nearest branch. Right now I don’t receive payments in check form, but I’m sure that will change if I start working with local businesses.
PNC does offer a cool solution – they have this little check scanner called DepositNow that lets you deposit checks right from your desk. However, it costs $50 a month. It would be cheaper for me to drive the 100 miles round trip to make the deposits in person (assuming I only did it once a month), though that’s certainly not a convenient option. So if I want to stick with my current bank that offers all the other stuff I want, it’s going to cost me. Then again, the fees are deductible as a business expense.
What Would You Do?
I’ve completed my research with the same question I started with – do I choose a local bank with monthly fees and limited options for online banking, simply because it could help me get my name out into the “good ol’ boy” network in my town? Or do I choose the bank I use and love for my personal accounts, but pay a little more in fees to be able to make deposits?
I’d love to hear your perspectives on this one! What would you choose in this situation? Any small business banking stories I should consider, good or bad?
Edit: After I wrote this post, I contacted PNC and found out that they do, in fact, allow mobile check deposits for business accounts. This is a recent change. So basically I wrote a big long post for nothing, but that’s okay. It isn’t the first time and I’m sure it won’t be the last.