What Is a Corporate Account? Definition, Benefits and Tips
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A corporate account is a type of bank account businesses can use to manage and store their funds. If you work in business, you may hear this term, and if you move into a senior position, you may have access to a corporate account. Learning more about these accounts can help you succeed in your business role and effectively manage an account for your organization. In this article, we explain what a corporate account is, provide the benefits, explain who can open one and provide tips to help you manage a corporate account during your business career.
Related: 18 Career Paths in Business
What is a corporate account?
A corporate account is a bank account specially designed for businesses. A business can use a corporate account to manage its financial assets. Typically, business professionals use corporate accounts for one of the following purposes:
Saving: Corporate accounts can keep business funds safe for the future. Some companies use these accounts as a type to hold their company's savings for future purchases.
Banking: Companies may use a corporate account to manage daily banking interactions, such as completing vendor payments or purchasing new items. This can help them complete operations easily and efficiently.
Investing: Businesses can use a corporate account to automatically invest dividends or extra revenue. This can help the company increase its earnings over time.
Benefits of a corporate account
There are many potential benefits of opening a corporate account, depending on your company's goals and size. Here are some potential benefits:
Increased investment opportunities
Corporate accounts can help businesses easily reinvest their remaining funds. For example, if your company experiences a period of high earning, your organization may place these funds in a corporate account. In the account, you may be able to easily reinvest them to help your business earn more. Some corporate accounts come with additional features, such as automatic portfolio balancing, to help your company organize its funds.
A corporate account may be a secure place to store funds for your organization. If your company has additional revenue, meaning it makes more than it spends each period, you can use a corporate account to store the additional funds safely.
There may be other options available to store a business's funds, including a traditional business account. These accounts typically offer many of the same features, but may not have the same liability protection. A corporate account keeps the company's funds and assets separate from the business owner. This means the company is responsible for the funds, rather than just one person.
More flexible options
A corporate account can help businesses change funds. If your company experiences periods of profit, it can store the funds securely in the account for holding or investing purposes. If your company experiences a loss or temporarily high expenses, it can use the funds to pay for business expenses. For example, if your company decides to open a new office, it may require more funds than a typical period to pay for the new building. It can use the funds in the account to manage this expense.
Who can open a corporate account?
Companies with a board of directors can open a corporate account. If you work in a smaller business, such as one with a sole proprietorship or partnership, you may explore different options, such as opening a business account.
To open a corporate account, corporations or companies first get approval from the board of directors. They typically conduct a vote to decide on a corporate account. They may also discuss features, access options and the account's main purpose. For example, they may decide whether the account is primarily for investment or saving.
Tips for managing a corporate account
Consider following these tips to help you manage a corporate account during your business career:
Review local regulations
Corporate accounts may have unique tax laws and regulations. This can vary depending on your particular business, location and type of account. Your company may have a professional trained in the different business and tax laws, and it's important to check the regulations with them and your local area to ensure you comply.
Consider an investment strategy
Consider choosing an investment strategy for your corporate account. There are multiple investment options you may pursue with different financial institutions, depending on your goals. Commonly, banks may offer the following investment choices for corporations:
Dividend reinvesting: This option automatically reinvests dividends, or additional funds, to help companies earn more. This process can happen automatically, although you may make selections for the types of investment you're interested in, such as real estate purchases or stocks.
Portfolio rebalancing: In this investment option, the bank has a special adviser who regularly reviews the company's investment portfolio. They may make individualized decisions based on the market changes, business earnings and company goals.
Explore access options
When managing a corporate account, consider who has access to the funds and at what time. This is especially important if you plan to use the account for savings or transaction purposes. For example, if your company plans to use the account to pay for business expenses, such as employees' salaries and new equipment, certain professionals may need quick access to the funds to make these payments. You may add access to relevant managers or business leaders, depending on your goals and plan.
Consider different interest options
Depending on your company's goals, you may explore different interest options. Some banks and accounts may offer higher interest rates. This means you may earn more when saving funds. Consider taking time to explore different options and discuss them with your team and board of directors.
Explore different features
Different banks and accounts may offer additional features. For example, you may explore mobile access options. Some companies choose accounts with mobile applications to make transactions easier. Also, some banks have fees for certain transactions or balance limits. You may consider these options and your company's goals to help you find the right account for your organization.
This article is for information purposes only and is not intended to constitute legal advice; you should consult with an attorney for any legal issues you may be experiencing.
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