Individuals and business have very different banking needs.
Businesses often handle large volumes of cash, write a huge number of checks, and need bookkeeping help from the bank. Individuals are more likely to use a ATMs and have a lower volume of transactions.
To serve the differing needs of business and customers, banks offer checking accounts specially designed for businesses.
Opening a business checking account can be a good first step towards starting your own business.
Though many banks offer business checking accounts, you may wonder whether it makes sense to just open your business accounts at the bank that you use for your personal banking.
There are upsides and downsides to this strategy.
What is a Business Checking Account?
First, you need to know what makes a business checking account different from a personal checking account.
Business checking accounts operate very similarly to personal checking accounts. You get a checkbook that you can use to write checks for your business’ purchases. You can also easily transfer money into and out of the account. However, there are a few key differences from a personal account.
One common difference is that there is a charge for cash deposits to business accounts. You may only be allowed to make a few thousand dollars in cash deposits each month. Cash deposits above that amount will incur a small fee, usually less than 0.5%. This is important to know if you run a cash-heavy business. The other fees attached to the account will also be different.
Business checking accounts are designed to meet the specialized needs of businesses. They give business owners a way to separate their personal finances from their business finances. This is important for a few reasons.
One is that keeping your finances separate makes it much easier to keep track of your business’ income and expenditures. This can help you when it comes time to file taxes as you can clearly see your revenues and business expenses.
Another reason is that keeping your finances separate is essential to maintaining the legal protections that businesses get.
For example, mixing your personal and business finances is one good way to lose the limited liability protection offered by an LLC.
Who Can Open a Business Checking Account?
Anyone can open a business checking account, so long as they own a business. Thankfully, it’s relatively easy to start a business in the US, and you can get a business checking account even without a lot of extra paperwork.
If you have a hobby that generates some income for you, such as woodworking, painting, or writing, you are a small business owner.
Just like people who own more typical businesses such as a landscaping company or a restaurant, you’re eligible to open a business checking account.
Most banks will require some proof of your business’ existence to open an account for you. Income statements, invoices and similar documents can help.
Having an Employer Identification Number (EIN), which you can get from the IRS for free, will help.
Opening a business checking account will help your business appear more professional.
For example, your checks will include your business’ name in addition to your own.
You’ll also get access to the services offered by your bank to business customers, and any applicable legal protections. The only downside is the fees and having a new account to manage.
Why It Makes Sense
There are a few reasons you might want to open your business checking account at the bank you use for your personal account.
Easier to manage and transfer money
The first reason is simply convenience.
You already have your accounts with a bank, so why not use it for your business accounts? You can handle your business banking needs when you visit the bank for your personal banking needs.
No need to make an extra trip. You’ll also already be familiar with the bank’s services, website, and mobile application. That will make it easier to know how to use your new account.
Another benefit is that transfers between your business checking and your personal checking accounts will be immediate.
If you have your accounts at different banks, it could take days for transactions to clear and for money to become available.
Another benefit of keeping your business and personal accounts at the same bank is the potential for relationship discounts.
Banks want their customers to deposit as much of their money as they possibly can. The bank uses the money you deposit to fund loans and do other things that generate a profit for the bank.
Each dollar you deposit at another bank is one less dollar that your bank can use to make a profit.
Because banks want to manage as much of your money as possible, they will give customers who deposit a lot of money discounts.
You might get the fees on premium accounts waived, get lower interest rates, or receive better service. Keeping all your money at one bank will let you get the most out of your relationship with the bank.
Appear more creditworthy
If you’re hoping to get a loan from your bank in the near future, keeping multiple accounts at the bank can help.
Your bank knows you better than other lenders do, so it can look at more than just your credit score when you apply for a loan.
If your bank sees that you can successfully manage a personal checking account a business checking account, it shows that you know how to manage money well.
That can help your odds when you apply for a loan.
Why You Should Use Separate Banks
There are also arguments in favor of using a different bank for your business checking account.
You can find a better deal elsewhere
Just as business checking accounts and personal checking accounts serve different needs, some banks specialize in serving different types of customers.
You may find that your bank has great personal accounts, but mediocre business accounts.
If you look at other banks in your area, you may find a much better deal than what is offered by your current bank.
Maximize your FDIC insurance
One of the benefits of bank accounts is that they keep your money safe. The Federal Deposit Insurance Corporation adds to this safety. FDIC insurance applies to the first $250,000 you have in a bank account.
If you deposit money into your account, and the bank is later unable to return it, the FDIC will reimburse you for the lost amount.
This insurance actually applies to each account type you hold at an individual institution.
If you have $250,000 in a personal checking account and $250,000 in a joint checking account, the whole $500,000 is protected.
If you have two personal checking accounts in the same bank, each with a $250,000, only the first $250,000 in combined balance is insured.
Business checking accounts are considered a type of checking account for insurance purposes. If your personal and business checking account balances combine to exceed $250,000, your full balance won’t be insured.
If you open your business checking account at a different bank, you get another $250,000 in protection from that bank. This can let you get more insured money than if you used one bank for both accounts.
How Do You Open a Business Checking Account?
You can open a business checking account in much the same way you can open a personal checking account.
Visit your local bank or an online bank’s site and apply to open an account.
The main difference will be the documentation you need.
This will vary by the type of business you’re running
Sole Proprietorships will need to provide:
- Social Security Number or Business Tax Identification Number
- Business license or
- Business name filing document
General Partnerships will need to provide:
- Business Tax Identification Number
- Partnership Agreement showing business name and name of partners, and
- Business name filing document, such as Fictitious Name Certificate or Certificate of Trade Name, showing business name and name of partners
Limited Partnerships will need to provide:
- Business Tax Identification Number
- Limited Partnership Agreement showing business name and name of partners, and
- Business organizing document filed with and certified by state official, such as Certificate of Limited Partnership, showing business name and name of partners
Limited Liability Companies will need to provide:
- Business Tax Identification Number
- Articles of Organization or Certificate of Formation
- Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Organization or Certificate of Formation
Monthly Fees for Business Checking Accounts at Top 10 U.S. Banks
|Bank||Account||Monthly Fee||How to Waive Fee|
|Wells Fargo||Simple Business Checking||$10||
|Suntrust||Simple Business Checking||$5*||
*Fee is automatically waived for first 12 statement cycles.
|TD Bank||TD Business Simple Checking||$10||Product is only eligible for a non-profit waiver of the monthly fee.|
|Bank of America||Business Fundamentals Checking||$18||
|Chase||Chase Total Business Checking||$15 (or $12 if you enroll in paperless statements)||
|Santander||Basic Business Checking||$7.50||
|BB&T||Business Value 200 Checking||$12*||
*Fee is automatically waived for first 65 days.
|Fifth Third Bank||Business Standard Checking Account||$11||
|PNC Bank||Business Checking||$12*||
*Fee is automatically waived for first 3 months of account opening.
|Citizen's Bank||Clearly Better Business Checking||$0||N/A|
Opening a business checking account is an important step in the start of your small business. It gives you access to essential business banking services.
It also helps you separate your personal and business finances.
Take the time to decide whether to open your business account at the same bank that you use personally.
Also, make sure to look for the account that offers the services and features you need.