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.
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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:
- 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.
- 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.
- Access to Business Loans: If you want to apply for a business loan, you will be required by the financial institution to have a business account.
- Showcasing a Professional Image: If you write checks for business expenses, having your business name on the check helps you appear more professional.
- 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.
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.
- 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.
- Can't Receive Business Loans: If you ever require a loan to expand, make a significant purchase for your business, or pay off debt, you must have a business bank account.
- Overcomplicated Record-Keeping: Combining personal and business expenses on 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 6 Best Bank Accounts for Small Business
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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 six 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 Business Complete Banking® - $300 Bonus
- Earn $300 when you open a new Chase Business Complete Checking® account. For new Chase business checking customers with qualifying activities.
- Multiple ways to waive the Monthly Service Fee, including maintaining a minimum daily balance or purchases on your Chase Ink® Business credit card.
- Full-service business banking. Convenient access to all your business banking services in one place -- lending, checking, credit card and payment solutions.
- Your choice of payment types. Choose from a full range of options for accepting payments and making deposits that include Zelle®, Online Bill Pay, wire transfers and ACH payments.
- Convenient access to payment processing. Process all major debit and credit cards with QuickAccept®. It's a built-in feature with your Business Complete Checking account.
- Helping you save money. Multiple ways to waive service fees and unlimited digital transactions helps you keep more of your money.
- Full-featured banking online and on-the-go. Manage your business' finances on your terms with the latest online and mobile banking technology.
- Trusted and secure financial partner. We're committed to helping you grow and protect your business.
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 transaction 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.
Business Advantage Fundamentals™ Banking
- No fee for first 200 transactions per statement cycle
- No fee for first $7,500 in cash deposited per statement cycle
- Waive the $16 monthly fee in a variety of ways
- Minimum Deposit to Open: $100
- Balance Requirement: None
- Monthly Fee: $16 (can be waived by maintaining a $5,000 combined average monthly balance or using your Bank of America business debit card to make at least $250 in new net qualified purchases each month)
- APY: N/A
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
Initiate Business Checking
- 100 free transactions each fee period
- $5,000 in cash deposits processed free each fee period
- $25 minimum opening deposit
- Waive the $10 monthly service fee by maintaining a $500 minimum daily balance or a $1,000 average ledger balance
- Balance Requirement: $500 minimum daily balance to waive $10 fee
- Monthly Fee: $10 (can be waived)
- ATMs: 12,000+ nationwide
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 (fees apply) and you get 2 free checkbooks per year.
Business Checking - Up to 2.0% APY
- 2.0% APY on your balance up to $250,000 for customers that meet monthly eligibility requirements
- $0 minimum opening deposit
- $0 monthly service fee
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.
Free Business Checking
- $0 monthly service fee
- $50 deposit to unlock all features
- Unlimited ATM fee rebates
Lili: Best Bank for Freelancers
If you don't have an EIN number or consider yourself a freelancer, Lili offers one of the simplest ways to transition into business banking.
With Lili's app, you can categorize and separate business expenses from personal purchases with a simple swipe of your finger. Better yet, it automatically tracks your business expense reports for tax season.
Lili also offers an AutoSave feature that lets you set aside 10% to 40% of your deposits for tax bills. As an added bonus, Lili offers hundreds of articles (and even a free handbook) with helpful advice for business owners.
Free Checking Account for Sole Proprietors and Single-Member LLC
- Sign up in 3 minutes; no credit check
- No account fees - $0 monthly fee, overdraft fee, foreign transaction fee, or ATM fees at 38,000+ locations
- Automatic Savings
- Get paid up to 2 days early
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, Lili or 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 sign-up 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.
Chase Business Complete Banking® - $300 Bonus
- Earn $300 when you open a new Chase Business Complete Checking® account. For new Chase business checking customers with qualifying activities.
- Multiple ways to waive the Monthly Service Fee, including maintaining a minimum daily balance or purchases on your Chase Ink® Business credit card.
- Full-service business banking. Convenient access to all your business banking services in one place -- lending, checking, credit card and payment solutions.
- Your choice of payment types. Choose from a full range of options for accepting payments and making deposits that include Zelle®, Online Bill Pay, wire transfers and ACH payments.
- Convenient access to payment processing. Process all major debit and credit cards with QuickAccept®. It's a built-in feature with your Business Complete Checking account.
- Helping you save money. Multiple ways to waive service fees and unlimited digital transactions helps you keep more of your money.
- Full-featured banking online and on-the-go. Manage your business' finances on your terms with the latest online and mobile banking technology.
- Trusted and secure financial partner. We're committed to helping you grow and protect your business.
Business Checking - Up to 2.0% APY
- 2.0% APY on your balance up to $250,000 for customers that meet monthly eligibility requirements
- $0 minimum opening deposit
- $0 monthly service fee
Free Checking Account for Sole Proprietors and Single-Member LLC
- Sign up in 3 minutes; no credit check
- No account fees - $0 monthly fee, overdraft fee, foreign transaction fee, or ATM fees at 38,000+ locations
- Automatic Savings
- Get paid up to 2 days early
Bank of America Business Advantage Checking Account - $200 Bonus Offer
- Open a new eligible business checking account by December 31, 2023
- Make Qualifying Deposits* of $5,000 or more in new money within 30 days of opening the new eligible business checking account
- Maintain an average balance of $5,000 for the next 60 days (day 31-90) during the maintenance period**
**The maintenance period begins thirty-one (31) days after account opening and ends ninety (90) calendar days after account opening.
Member FDIC
No-Fee Business Checking
- $0 monthly service fee
- $0 minimum opening deposit
- Open up to 20 individual business checking accounts
- Earn up to 3% APY with automated savings
- Issue up to 50 Visa® debit cards to your team
Free Business Checking
- $0 monthly service fee
- $50 deposit to unlock all features
- Unlimited ATM fee rebates
Free Business Banking for the Self-Employed
- $0 monthly service fees or minimums
- Automatically find tax write-offs and track expenses
- Auto-save for taxes
- Photo receipt capture
- Free unlimited custom invoices
- Easy sign up; no credit check
Silver Business Checking Package - Up to $800 Bonus
Earn up to an $800 bonus when you open a new, eligible U.S. Bank business checking account online with promo code Q3AFL23 and complete qualifying activities, subject to certain terms and limitations. Offer valid through January 8, 2024. Member FDIC. Complete these steps to earn the offer:
Earn your $350.
- Complete $5,000 in new money deposits within 30 days of account opening and maintain for 60 days after account opening.
Earn your $800.
- Complete $25,000 in new money deposits within 30 days of account opening and maintain for 60 days after account opening.
Basic Business Checking - Up to $200 Bonus
- Business owners get up to $200 welcome bonus!*
- Choose smarter business banking by September 30 and enjoy up to $200.* Just use promo code NEWSBC on your application.
- Zero opening deposit and cash deposits accepted
- Zero minimum monthly balance requirements
- Two domestic wire reimbursements monthly
- Unlimited domestic ATM fee reimbursements
- Enhanced Visa benefits and first 50 checks free
- Dedicated relationship manager and more
Revolut Business Account - Do Business Globally
- Earn up to 1.9% cashback. Limits apply per plan
- Exchange money in 25+ currencies and spend in 150 global currencies
- Set up as many subaccounts in each currency as you need
- Issue physical and virtual cards to your global team
- Stay in control with spending limits and custom permissions
Write to Justin Barnard at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.
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