Updated May 5, 2024

Why You Need a Business Bank Account

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Learn about the benefits of business bank accounts, the best accounts available, and the consequences of using a personal account for business expenses.

Do you run a small business? Then you should probably have a business bank account.

In fact, you may even be legally obligated to do so.

In this guide, find out how a business bank account benefits your business and what you need to apply. Plus, get our top picks for the best business bank accounts right now.

Do You Need a Business Bank Account?

The first step is to determine whether you are legally or contractually required to have a business bank account for your particular type of business. Let's review.

  • LLC: Yes, required by law
  • Sole Proprietorship with DBA: Yes, required by law
  • Sole Proprietorship without DBA: Optional
  • C-Corporation: Yes, required by law
  • S-Corporation: Yes, required by law

5 Advantages of Having Business Bank Account

There's no single primary reason to have a separate business bank account - there's actually three: Simplified bookkeeping for tax season, professionalism, and access to business loans.

Review those factors, plus other important considerations, below:

  1. Easy Bookkeeping: When tax season comes around, a business bank account makes it simple to track revenue and separate business expenses from your personal purchases.

  2. Proving Legitimacy to the IRS: In the event of an audit, you need to be able to prove to the IRS that your business is not just a hobby. Well-maintained books and a dedicated business bank account go a long way in this regard.

  3. Access to Business Loans: If you want to apply for a business loan, many financial institutions may require you to have a business account.

  4. Showcasing a Professional Image: If you write checks for business expenses, having your business name on the check helps you appear more professional.

  5. Building Bank Relationships: Your odds of getting a business line of credit or loan are better if you have a good relationship with your bank. Opening a business bank account is the first step toward establishing this relationship.

Can I use my personal bank account for my small business?
If you are a freelancer or sole proprietorship doing business under your own name and Social Security number, you are legally allowed to use your personal account.

3 Consequences of Not Having a Business Account

If you use your personal bank account for business purposes, you run the risk of facing consequences that range from mildly inconvenient to financially destructive.

  1. Increased Fraud Risk: More activity means a higher likelihood of fraud (intentional or not). Plus, you can protect your personal information by opening a business account using your Employer Identification Number (EIN) instead of your Social Security number. In the event your business account gets hacked, the scammer won't have access to all of your information.

  2. Can't Receive Business Loans: If you ever require a loan to expand, make a significant purchase for your business, or pay off debt, a business bank account may be essential depending on your business type.

  3. Overcomplicated Record-Keeping: Combining personal and business expenses in one account makes keeping track of expenses for tax write-offs like trying to find a needle in a haystack. A dedicated business account keeps things simple.

The 5 Best Bank Accounts for Small Business

When searching for the perfect business bank account for you, look for low fees, high rewards, and features and services tailored to business owners. Here are five of the top business bank accounts available today.

Chase Business Complete Banking: Best Overall

Chase offers a unique business checking account that comes with built-in payment processing. This makes it great for local retailers, food, and service businesses that take payment by credit cards.

When you take card payments with Chase QuickAccept, you can get the funds deposited into your checking account the same day. This is really helpful to keep your cash flow moving.

If your business also takes cash, you get up to $5,000 in cash deposits for free each month.

Chase Bank also offers complete business solutions, including business credit cards, loans, and merchant services.

Chase often offers a bonus offer to new account holders for opening new business bank accounts, so make sure you check out the current promotions.

Bank of America: Best for Flexibility

Bank of America's Business Advantage Banking is a flexible business account with 2 settings.

The basic tier has no fee for the first 200 transactions per statement cycle, plus no fee for first $7,500 in cash deposited per statement cycle at an ATM or Financial Center.

As your business grows, you can upgrade to the next tier with higher no-fee transactions and cash deposit limits. If your business needs change, you can switch between the tiers anytime.

Another cool feature is the Cash Flow Monitor tool. You can connect with apps like Quickbooks and Expensify to get an overview of your business in one place. It'll even give you cash flow projections so you have an idea of what to expect.

Wells Fargo: Best Cost-Conscious Large Bank

Wells Fargo Initiate Business Checking Account is one of the best checking accounts from a big bank. It's a solid choice for new small businesses, as it's pretty easy to waive the monthly fee. The opening minimum deposit is just $25.

We also like Wells Fargo because of its comprehensive offerings and convenient locations. It's a good choice if you want everything in one place.

Besides banking, Wells Fargo also offers:

  • Full-service payroll features and employee benefits
  • Customized merchant processing options
  • Tax programs
  • Business credit cards
  • Various business loan options
  • Small business insurance

Bluevine: Best Bank for Smaller Businesses

Bluevine, a fintech banking platform, is super popular for the high interest rate on your checking balance.

Bluevine also boasts no monthly service fees, no minimum balance requirements, no overdraft or returned check fees, and participates in the MoneyPass ATM network for fee-free cash withdrawals.

You can also deposit cash at Green Dot locations and Allpoint+ ATMs (fees apply) and you get 2 free checkbooks per year. You can also issue up to 4 additional debit cards for authorized users at no extra cost.

Novo: Best Bank for Sole Proprietors

Novo may not offer APY, but they do offer an extensive list of business perks that are sure to turn heads.

The Novo app seamlessly integrates with popular business services such as QuickBooks, Shopify, Slack, and Stripe.

This up-and-comer also offers steep discounts on business utilities, such as discounts on payroll tools and card processing with Stripe.

How to Open a Business Bank Account

Step 1: Choose the Right Account for You
Different business bank accounts will be better for your needs depending on the type of business you run and how established your company is.

For example, Novo might be great for freelancers and startups, but they frankly would not be able to accommodate the cash flow needs of more established small businesses.

Step 2: Search for Offers
Banks — especially giant traditional banks like JPMorgan — don't stay in business by handing out free money. However, many banks have business checking bonuses throughout the year.

Step 3: Gather Necessary Documentation
The final step before you apply is to gather all required documentation. This can include:

  • Your Social Security number or EIN number (whichever you use to conduct business and file taxes)
  • Two forms of identification, such as a valid driver's license, passport, state issued ID card, or Social Security card
  • "Doing-business-as" (DBA) certificate if your business operates using a different name than your own (also called a "fictitious business name certificate")
  • Business licenses (applicable only if you run a business that is required by law to be licensed)
  • Corporation documentation such as corporate resolution, corporate charter, and articles of incorporation (applicable to S-Corp and C-Corp companies)

What the Experts Say

CreditDonkey asked industry experts to answer readers' most pressing questions. Here's what they said:

The Bottom Line

Opening a business banking account can make your life easier, simplify tracking expenses and income, and may even be required by law depending on the type of business you run.

In the unlikely event of an audit by the IRS, a business bank account will help protect you by providing a clean and easily accessible paper trail of all your business activities.

One last tip: Always be sure to shop around online for the best deals and promotions.

Write to Justin Barnard at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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