What Is A Business Checking Account?
It's important to open a business checking account to keep personal and business finances separate and stay legally compliant.
If you’re a small business owner still paying for business expenses from your personal account, it’s time to make the change and get your own business checking account.
What is a business checking account?
Read on to learn more about business checking accounts, why you need one, and what you need to open one to keep your personal and business finances separate.
Table of Contents
- What Is A Business Checking Account?
- Why Would I Need A Business Checking Account?
- What Should I Consider When Choosing A Bank?
- What’s Required To Open A Business Checking Account?
- What Is A Business Checking Account FAQs
What Is A Business Checking Account?
A business checking account is exactly like a personal checking account, with the main difference being that the only expenses paid from the business account are business-related.
Business checking accounts keep you protected and prepared for your small business future. If you are interested in financing or expanding your brand, having a business checking account will also increase your purchasing strength. Having a business checking account is a professional addition that shows you are serious about your business and the funds it receives.
Business checking accounts allow you to make deposits via:
Monthly or annual fees for these accounts are often waived as long as a daily minimum balance is met.
Learn more about the differences between personal and business checking accounts.
Why Would I Need A Business Checking Account?
Besides it being easier to keep your personal and business funds separate from each other, a business checking account decreases your personal liability.
When you set up your business structure in a way that limits your liability as well (as is the case with a Limited Liability Corporation, LLC) it’s crucial to keep your business and personal money separate. This way, your personal money can’t be touched if you were to be sued — or otherwise owe more money than your business is able to afford.
If you receive financing from a bank, credit union, or online lender, there’s a good chance you might have signed a personal guarantee. While it is possible to get credit without a personal guarantee, this is the norm for most traditional funding services. And as a guarantor, you will have to pay the remainder of that loan if your business is unable to do so. This is the only circumstance where your personal funds could be accessed in order to make payments for your business’s shortcomings.
You may want to consider a business checking account purely for ease of tracking transactions. When tax time comes around, you want to make sure that you have clear records of what is personal vs. business expenses. Having a debit card specifically dedicated to your business expenses can make this much easier.
Check out our article about knowing when to open a business banking account. We also have an article about when you can and can’t use your personal account for business purposes.
What Should I Consider When Choosing A Bank?
When you are shopping around for a business checking account, we recommend considering the following:
- Minimum balance requirements
- Interest rates
- Deposit and transaction limits
- If a bank is physical or virtual/mobile only
- Extra features like employee debit cards
Need some ideas about where to start? Check out the best business bank accounts.
What’s Required To Open A Business Checking Account?
In order to open a business checking account, you will need several documents.
These documents will vary from business to business as your structure could be different, or your bank could have more in-depth requirements.
The basic requirements to open a business checking account are:
- An Employer Identification Number (EIN)
- Business formation documents depending on your ownership structure
- A business license
Gather all of these things together and visit the bank or credit union of your choice. Check with your bank to see about any additional requirements.