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 Banking: Best Overall Bank
Chase offers three tiers of business checking accounts: one for small businesses, one for medium businesses, and one for large corporations.
Chase Bank offers business solutions including:
- Business checking accounts
- Business credit cards
- Business lending; term loan starting from $5,000
- Lines of credit starting from $10,000
- Commercial real estate loans
- Merchant services
- SBA 7(a), SBA 504, and SBA Express loans
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.
- Built-in card acceptance. Accept card payments anytime, anywhere in the U.S., and get transparent pricing with Chase QuickAccept℠.
- Same-day deposits with QuickAccept. Free up the cash you need to keep your business moving forward with same-day deposits at no additional cost.
- Alerts to help you stay on top of your account activity.
- Easy account management through Chase Business Online and the Chase Mobile® app.
- Unlimited electronic deposits, ACH and Chase QuickDeposit℠
- Convenient access to more than 16,000 ATMs and more than 4,700 branches.
Bank of America: Best for Cash-Rich Businesses
With nearly unlimited deposit capabilities and cash flow monitoring, BofA has a lot to offer to businesses with high cash flow.
You can make up to $20,000 in cash deposits per month and receive unlimited ACH, debit card, electronic check, and paper check deposits per month free of charge.
Bank of America also offers debit cards for business owners and employees, which can be customized to keep you in control of how your employees use their business card.
Out of the 2 BofA checking account options, this is the best account for small businesses. It's easy to waive the monthly fee and it offers a decent number of free transactions and deposits.
Wells Fargo: Best Cost-Conscious Large Bank
Chase and Bank of America both require fairly steep balance minimums or other requirements to waive their monthly fee.
Wells Fargo, on the other hand, only requires $500 to waive their $10 monthly fee.
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.
Wells Fargo also offers a wide range of business banking services:
- Four business accounts for different checking needs
- Full-service payroll features and employee benefits
- Customized merchant processing options
- Tax programs
- Business credit cards
- Various business loan options
- Secured and unsecured lines of credit
- Small business insurance
This is one of the best checking accounts from a big bank. The Wells Fargo Initiate business account is ideal for growing small businesses. It's pretty easy to waive the monthly fee. The opening minimum deposit is just $25.
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.
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 $300 Google Ads credit, $20,000 in fee-free card processing with Stripe, and 30% off GoDaddy.
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
- Auto save for taxes
- Track write-offs with a swipe
- Prefilled annual Schedule C
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 you can find by searching the web.
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.
- Built-in card acceptance. Accept card payments anytime, anywhere in the U.S., and get transparent pricing with Chase QuickAccept℠.
- Same-day deposits with QuickAccept. Free up the cash you need to keep your business moving forward with same-day deposits at no additional cost.
- Alerts to help you stay on top of your account activity.
- Easy account management through Chase Business Online and the Chase Mobile® app.
- Unlimited electronic deposits, ACH and Chase QuickDeposit℠
- Convenient access to more than 16,000 ATMs and more than 4,700 branches.
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
- Auto save for taxes
- Track write-offs with a swipe
- Prefilled annual Schedule C
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 Business Banking for the Self-Employed
- $0 monthly service fees or minimums
- Automatically find tax write-offs and track expenses
- Auto-save for taxes
- Free unlimited custom invoices
- Easy sign up; no credit check
No-Fee Business Checking
- $0 monthly service fee
- $0 minimum opening deposit
- Open up to 20 individual business checking accounts
- Issue up to 50 Mastercard® debit cards to your team
Free Business Checking
- $0 monthly service fee
- $50 deposit to unlock all features
- Unlimited ATM fee rebates
Silver Business Checking Package - $500 Bonus
- Enroll in business online banking within 60 days of account opening.
- Complete $3,000 in new money deposits and maintain for 60 days from account opening.
Basic Business Checking - $200 Bonus
- New business owners get a $200 welcome bonus!
- Zero monthly maintenance fees
- Unlimited Transactions
- Unlimited domestic ATM fee reimbursements
- $0 Minimum Opening Deposit requirement
- 2 Free Domestic Wires, monthly
- Cash Deposit capability via MoneyPass and AllPoint networks
Small Business Checking - $150 Cash Bonus
- Earn $150 when you open a Live Oak small business checking account between 2/15/2023 and 3/31/2023.
- Deposit at least $2,000 into your business checking account within 90 days of opening.
- Make at least 20 qualified transactions within 90 days of opening your account.
- Must be a first-time Live Oak small business checking customer to be eligible for this offer. See full terms and conditions
NorthOne Business Banking
- Unlimited envelopes for all your business budgets
- Integrations with popular accounting and payment processing apps
- Free invoice maker
- $50 minimum opening deposit
- $10 monthly fee
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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