What is a business bank account?

A business bank account is a checking or savings account that business owners use to keep business expenses separate from their personal finances. They can include standard services like debit cards, credit cards, overdraft protection and check and cash handling. Some business bank accounts allow business owners to issue company debit or credit cards to employees.

Business bank accounts vs. personal bank accounts

Personal checking accounts are usually free or have a low fee that the bank waives if the account meets certain conditions, while business checking accounts may have transaction fees or monthly maintenance fees. Business checking accounts usually have lower interest rates, and credit cards associated with business accounts tend to have higher credit limits than personal accounts.

Some banks allow sole proprietors to use their personal checking accounts as a business account, but others have limitations. If you run your business as a separate legal entity like a corporation or LLC, you’re usuallylegally requiredto keep your company’s finances separate from your personal spending.

Related:Budget Management: Three Skills Essential for New Manager

Why small businesses should have a business bank account

A business bank account can help small businesses organize finances andsimplify recordkeeping. Having a business account can also make it easier to file taxes for your small business because all of your relevant transactions are in one place. Many banks offer business accounts an itemized spending report each year, giving you in-depth detail that you typically wouldn’t get with a personal bank account. Business bank accounts are also essential for applying for a loan to grow your company.

Even if you’re the sole proprietor of your business and aren’t required to have a business bank account, it can help limit your liability for business expenses, legitimize your business to the IRS and show customers and clients that they’re working with an established business.

Related:10 Steps to Starting a Business

Best banks for small businesses

Here are three of the top banks for small businesses where you can manage your business expenses and access other financial benefits:

Chase

Chase offersfree business checking for accounts that can maintain a minimum balance of $1,500. Even if you go below this balance, the standard monthly maintenance fee is only $15 per month or $12 per month if you choose paperless statements.

Wells Fargo

Wells Fargo has an extensive banking system and 24/7 customer service. Their Simple Business Checking Account costs $25 to open, and they waive the $10 monthly service fee if you can keep a minimum balance of $500. Wells Fargo business credit cards also offer 1.5% cashback on any purchase.

Axos Bank

Axos Bankdoesn’t offer credit cards, but they’re a good choice for people who want to earn a high annual percentage yield (APY)on the money in their business account. With the Axos Bank Business Interest Checking Account, you can earn 0.8% APY. The account is free if your average balance stays above $5,000.

Here are a few frequently asked questions about banking for small businesses: