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5 Signs You Need to Open a Business Checking Account

Find out when you need to open a business checking account, whether you are a freelancer,entrepreneur, or small business. Learn how business checking accounts offer different benefits and features that separate them from personal checking accounts. See what you need to open a business checking account.

If you run a small business, you might be tempted to use your personal checking account for business purposes.

This is especially true if you don’t have any employees. It can be convenient because you don’t have to worry about managing a separate account for your business.

As your business grows, you may find yourself having some trouble with your bank. The banking needs of a business differ significantly from the banking needs of a person. 

Most standard bank accounts aren’t equipped to support a business’ needs.

Business checking accounts are designed to offer the services that businesses need. Whether it’s payroll processing to accepting credit card payments, business checking accounts can help.

If you find yourself having trouble with your bank account, it might be time to open a business checking account.

These are some of the key signs that you need to open a business checking account.

Business Savings Cash Deposit and Transaction Fees at Top 10 U.S. Banks

Bank Account Cash Deposit Processing Fees Transaction Fees
Wells Fargo Business Market Rate Savings No fee for first $5,000, then $0.30 per $100 deposited No fee for first 20 transactions, then $0.50 per item
Capital One Spark Business Savings No fee for first $2,000, then $2.00 per $1,000 deposited None
Live Oak Bank Live Oak Business Savings N/A No fee for first 6 transactions, then $10 per item
Bank of America Business Advantage Savings No fee for first $5,000, then $0.30 per $100 deposited No fee for first 25 transactions, then $0.45 per item
Chase Chase Business Total Savings* No fee for first $5,000, then $2.50 per $1,000 deposited


*For all Chase business accounts, fee is only charged if you need a night drop, post verification, or immediate verification.
No fee for first 15 transactions, then $0.40 per item
Santander Basic Business Money Market Savings $0.22 per $100 deposited for Express Cash Pack, or $0.15 per $100 (for deposits $500 or less), or $0.27 per $100 deposited (for deposits $500 or greater), for Non Express Cash Pack None
BB&T Business Money Rate Savings No fee for first $5,000, then $2.50 per $1,000 deposited No fee for first 20 transactions, then $0.39 per item
Fifth Third Bank Business Relationship Savings For deposits $25,000 or less, $0.026 per $1 deposited

For deposits between $25,000 and $100,000, $0.032 per $1 deposited

For deposits $100,000 or greater, $0.037 per $1 deposited
No fee for first 100 transactions, then $0.515 per item
M&T Bank Commercial Savings No fee for first $5,000, then $0.25 per $100 deposited No fee for first 10 transactions, then $1.00 per item
Citizen's Bank Business Savings No fee for first $5,000, then $0.75 per $1,000 deposited No fee for first 200 transactions, then $0.50 per item

1. Clientele is Growing

One thing that many small business owners fail to consider is the legal benefits of having a business checking account.

When you mix your personal and business money, you open yourself up to significant liability.

If one of your clients decides to take legal action against you, you could be held personally liable for damages.

If you keep your business finances separate, you’ll have more protection. In fact, it’s a requirement to form something like a Limited Liability Company (LLC). This can significantly reduce your personal liability.

As your clientele grows, so does your risk of liability. If you’ve just picked up a side gig and are doing one-off small projects, you might not need a business account.

If you have a fully-fledged business with a large client list, open a business checking account. The reduced liability offered by a business checking account is worth the extra hassle.

Ideally, you’ll want to open your business checking account before your client list grows too long.

Don’t be afraid to open a business checking account in anticipation of expanding your business.

2. The Bank is Limiting Deposits

Banks tailor the services that they offer with their standard accounts to the needs of individuals. These days, individuals rarely need to deposit checks.

Electronic transfers and direct deposits allow you to do most of your banking without handling physical cash or checks.

If someone does need to deposit checks, it’s rare for a person to be depositing tens of thousands of dollars a week.

Because of this, banks may limit how much you’re allowed to deposit to your personal account in a day, week, or month.

Businesses, on the other hand, need to deposit money all the time.

Cash-heavy businesses especially make large, regular deposits to their accounts.

Banks tailor business accounts to the needs of businesses, so they’re better equipped to handle frequent, large deposits.

3. Trouble with Credit Card Processing

These days, most businesses accept credit cards for purchases.

Many services that have started in the past few years are designed to help small business owners accept credit card payments.

However, these companies might have restrictions surrounding the type of account they’re allowed to deposit money to.

Your card processor might not allow deposits to personal bank accounts, or they might limit them heavily.

Opening a business checking account will make it easier to handle credit card payments.

Another benefit is that many banks offer card processing services as a benefit to business account holders.

If you don’t want to go through the hassle of finding a company to handle card transactions, a business account can take that worry off your hands.

4. Running Into Tax Issues

Tax season is the bane of many a small business owner. If you have a normal job and a side business, things get even more complicated.

When you file your taxes, you need to provide information about your business’ revenues and expenses.

You also need to provide information on your personal income and expenses. Having your business and personal finances mixed in one account can make accurate reporting very difficult.

Worse, if you get audited, the IRS is going to be taking a close look at all of your accounts. Having your personal and business finances will make the IRS’ job easier, making the audit easier for you to handle.

Many business checking accounts offer some tax-related services. They can help you pay quarterly or annual taxes, prepare the relevant forms, and keep track of your tax records.

5. Bookkeeping is Becoming Difficult

One thing that all businesses have to handle is balancing their books. If you don’t know how much you’re spending or how much you’re making, you can’t work to expand your business.

If you use one account for your personal and business finances, balancing your books can be almost impossible.

You’ll need to filter through every transaction in the account, personal and business, and then you’ll have to differentiate between the two. As you do so, you’ll need to keep a running tally of all your business transactions and categorize them as you see fit.

Opening a checking account that will be used solely for business revenue and expenses is a good idea.

It makes it much easier to manage your business’ finances. You’ll save a lot of time by making your records easy to read.

Many banks that offer business checking accounts offer tools to help with managing your business’ books.

Some banks will offer payroll services, making it easy for you to pay your employees every week. Personal accounts won’t offer any similar service, leaving that burden on you.

Many business accounts also integrate with programs, such as QuickBooks. These programs are designed to give you an easy way to track different types of transactions and generate reports.

Business checking accounts also offer other services like invoicing, tax management, and card payment services.

The convenience of getting all of these services in one place makes business checking accounts a great deal.

What You Need to Open a Business Checking Account

If you’ve decided to open a business checking account, you’ll need to go through a process with the bank you’re working with.

There are many different types of business, and the process for opening an account is different for each.

In short, you’ll need to provide your business’ tax ID information, otherwise known as an Employer Identification Number (or EIN). 

You’ll also have to provide background information for your business, such as when and where it was formed.

Essentially, you must show the bank that you own a bona fide business that has need of business banking services.

Sole Proprietor & Limited Liability Companies

To open a business bank account as a sole proprietor or LLC, you’ll need the following information:

  • Business tax ID
  • Date business was formed
  • Country and state of legal formation
  • Country and state of primary business operation
  • Legal business name and DBA (“doing business as”) name, if applicable
  • Personal information about the business owner and controlling manager.

You’ll need documents that prove each of these.

Usually, you can provide tax forms and the letter you received when getting your tax ID to serve as documentation.

Partnership

Partnerships are slightly more complicated because multiple people have a stake in the business.

To open a business checking account for a partnership, you’ll need the same documents as sole proprietorships & LLCs plus:

  • The partnership agreement, showing the names of the partners.

Corporation

Corporations need to provide the same information to open a business checking account as LLCs plus:

  • Articles of incorporation
  • Proof of filing with the state or county

Conclusion

If you have a business, you can almost certainly benefit by opening a business checking account.

While people with a small amount of income from a side-gig might be able to get away without one, they offer a lot of benefits to anyone with a business.

If you notice any of these signs that you could use a business checking account don’t be afraid to open one.