Every business needs a business bank account to separate personal transactions from business transactions. That's a given. In our Do I Need a Business Bank Accountarticle below, we'll give you more reasons to open a business bank account and we'll help you choose the best business banking service for your unique business. Recommended Service: Check out
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Last Updated: October 19, 2022 by the TRUiC Team 15 Reasons Why You Need a Business Bank AccountHaving a dedicated business checking AND savings account is important because:
How to Open a Business Checking AccountOpening a business account is as simple as gathering some information together and completing an application. However, the thing to note is there are two ways to open a business bank account: online or in person. Here are the steps to open a business checking account:
After you have completed these steps, you will want to sign up with a small business bank. Here are our top five recommendations:
Important: We recommend that all businesses open a business savings account to help build business credit and a money-saving habit. A business loan may be the last thing on your mind, but it is important to plan well in advance for a business loan. A business loan can help you grow your business faster by leveraging other people’s money. Business credit is another asset that increases the value of your business. What Is a Business Bank Account?After naming your business, a business bank account is one of the first assets you acquire when starting a business. Without a business checking account, you have no way to manage your business income or expenses, accept credit cards, write business checks, build business credit, or make business transactions adequately. But what is a business bank account? A business bank is an asset. An asset is anything that makes your business money, whereas a liability is anything that costs your business money. A business bank account is an asset because it:
Types of Business Bank Accounts and Their UsesThe benefits of owning a business bank account far outweigh the costs. But, not all business bank accounts are created equal. That’s why it’s important to distinguish between the good, the bad, and the best business bank accounts. Business Checking AccountsA business checking account is the first business bank account you’ll want to open for your business. It allows you to:
Recommended: Learn more about how your money is protected by the FDIC. Business Savings AccountsA business savings account is a special business bank account that lets you safely save money in a bank. This account is FDIC insured. You should open a business savings account as soon as you have an abundance of capital sitting in your business checking account. It allows you to:
Business Certificate of DepositsA business certificate of deposit (CD) is a term account. You agree to lend your business’s money to the bank for a set period of time at an agreed-upon interest rate. The interest rates are usually higher than you’d receive from a business savings account or interest-bearing business checking account. Here are the main features of a business certificate of deposit:
Important: Before purchasing a business certificate of deposit, make sure you do a cash flow analysis to determine how much capital (and for how long) you can afford to keep your business’s money tied up. Business Money Market AccountsA business money market account is the business bank account you want if you have a lot of money saved, want higher interest rates than a business savings account or interest-bearing business checking account, yet still want some access to your money. Here are the main features of a business money market account:
Frequently Asked QuestionsWhat’s the difference between a personal checking account vs. a business checking account?A business checking account allows small business owners to distinguish between their personal and business transactions — a prerequisite to maintaining their incorporated protections. A business checking account also provides benefits that a personal checking account does not (e.g., can accept credit cards, payroll services, multiple signatures, etc.). How much money do I need to open a business checking account?It depends on both the financial institution and the specific business checking account type you choose to open. Some banks have no maintenance or account opening fees, while others can have either or both. What do I need to open a business bank account?There are some documents required by all banks. These include your tax ID number, business formation paperwork (we recommend that most businesses start an LLC), business license or business name filing paperwork, and a picture ID. Most banks have other requirements so we recommend calling the bank ahead of time to find out what other requirements they have. Do I need revenue to open a business bank account?No. You should have a business bank account first so that when you have revenue coming in, you have a safe place to store it. Can I use my personal checking account for business if I'm a sole proprietor?Legally you can, but we highly recommend you not do this. It is best to keep all personal and business expenses separate. Combining personal and business expenses can be far more expensive than opening a business checking account. Business checking accounts give you more transactions and greater transparency, save you a lot of money when filing your business taxes, and cut down on your chances of getting audited by the IRS. Can I use my personal checking account for business if I have an LLC or a corporation?No. LLCs and corporations are legal business entities that require a separate business bank account. Aside from the legal standpoint, having a separate business checking account and a separate business savings account can add value to your business should you ever decide to sell it. These accounts are assets that are transferable with the sale of your business. Are credit unions better for business accounts?“It just depends,” is our answer. In many cases, credit unions are a better option for businesses as they tend to have lower fees and offer higher interest rates. Banks tend to make up for this, though, by often offering more rewards, free accounts, business credit cards, and additional services not offered by most credit unions. Can you transfer money from a business account to a personal account?Don’t do it. Mixing business and personal accounts is a surefire way to pierce the corporate veil, taking those limited liability protections you have with your LLC off the table in a court of law. Protect yourself, don’t mix your business checking account with your personal checking account. Which bank is best for LLC?It depends. You’ll need a bank that offers business checking accounts and business savings accounts. Match your business with the right bank. Pay attention to fees, interest rates, incentives, business credit card offers, and if the bank offers business loans. Generally speaking, we recommend Relay for small businesses because of the low transaction fees, no monthly fee option, and a high number of third-party integrations and discounts. Can I open a personal checking account for a small business?It is better to open a separate business bank account rather than a personal account allocated for the purpose of doing business. Even if you never mix the two personal accounts, should you get sued for business negligence or unpaid business debts, you are likely to be held liable. This means that your personal assets (e.g., home, car, retirement accounts, personal bank accounts, etc.) could be at risk. Do I need an EIN for my LLC?All LLCs with employees or any LLC with more than one member must have an EIN. This is required by the IRS. Learn why we recommend always getting an EIN and how to get one for free in our Do I Need an EIN for an LLC guide. Related Articles
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