What Is A Business Checking Account?

A business checking account is an essential financial tool for small businesses. This guide explains how business checking accounts work, what they cost, when you need one, and how to choose the right option for your business.

What Is A Business Checking Account?

A business checking account is a bank account where businesses can deposit, withdraw, and transfer funds for day-to-day operations. Checking accounts are ideal for funds that are used for everyday business operations, like payroll and supply purchases.

Long-term funds are a better fit for business savings accounts.

How Does A Business Checking Account Work?

Business checking accounts are designed to hold business funds that need to remain easily accessible for everyday expenses and transactions. With a business checking account, you can:

• Transfer money to and from your account (typically via wire transfers or ACH)
• Deposit cash
• Make withdrawals
• Deposit checks
• Write checks
• Earn checking-specific rewards like APY and/or cashback
• Track expenses

Many business checking accounts also include features like cash flow management, business credit score building, invoicing, or even more unique services like built-in bookkeeping or tax support.

Business Checking Accounts VS Personal Checking Accounts

A business checking account operates in the same way as a personal checking account. The main difference is that business checking accounts are designed for managing business finances, while personal accounts are designed for individual use.

Keeping business and personal finances separate may also help preserve the liability protections associated with LLCs and corporations.

Each type of account also offers slightly different features that are designed for different types of users. Personal checking accounts often focus on personal budgeting and credit monitoring, while business checking accounts may include invoicing, cash flow tools, or accounting integrations.

Learn more about the differences between personal and business checking accounts.

The Benefits Of A Business Checking Account

Business checking accounts can simplify bookkeeping, improve cash flow management, and help separate business and personal finances.

Having a business checking account can also help present a more professional image to customers and vendors. Plus, you get access to great features like expense tracking and cash flow management that make managing your business finances easier.

Here are some of the many benefits of having a business checking account:

• Tracking expenses and managing cash flow
• Integrating with accounting software
• Separating business and personal finances
• Building business credit eligibility
• Paying vendors and business expenses

How Much Does A Business Checking Account Cost?

Business checking accounts generally cost between $0-$10/month. Some business checking accounts have much higher monthly fees, but usually, it’s because they include additional services or premium features, like Lili, which includes bookkeeping services built into its checking account.

Business checking accounts come with more fees than just a monthly maintenance fee. Some fees are quite common, while others are less common and fairly avoidable, like stop payment fees and card replacement fees.

When Do You Need A Business Checking Account?

Most businesses should have a business checking account.

In addition to simplifying bookkeeping and expense tracking, a business checking account may help preserve the legal separation between personal and business finances.

For LLCs and corporations, keeping business and personal finances separate is important for maintaining clear financial separation between the business and its owners.

If you plan to open business credit cards or apply for business loans, a business bank account is almost always required.

How To Open A Business Checking Account

To open a business checking account, you’ll first need to decide on the best bank account for your business. Look for rewards, features, transaction types, and transaction limits that match your business’s needs and budget.

Once you’ve found the right account, you can apply online or in-person. Be prepared to provide certain documentation to prove you’re eligible for opening an account.

What Do I Need To Open A Business Checking Account?

In order to open a business checking account, you will need several documents. Common requirements include:

• An Employer Identification Number (EIN) and/or SSN
• Business formation documents depending on your ownership structure
• A business license

Check with your bank to see about any additional requirements, and then gather all of these things together and visit the bank or credit union of your choice in person or online. Our step-by-step guide on how to open a business bank account can provide even more guidance.