Benefits of having a business checking account
Sure, it seems convenient to slip your business funds into your personal account, but bear in mind, you will face multiple problems when it comes to separating your business funds. Here are a few reasons why your business needs its own repository.
- More accurate tax filings: Some of the most common tax issues small businesses have include misreporting income and mixing personal and business finances. Having a business account helps you properly deduct your business expenses and avoid the overall wrath of your accountant and the IRS penalties that come from inaccuracies.
- Eligible for third-party credit card account: Running a cash-only business limits your potential customer pool. While there are plenty of common payment platforms online, at some point, many businesses have to use third-party credit card processors. Having a business checking account makes it easier to set up a merchant account. You will incur fees by using these processors, but expanding the benefits your business gets will make up for that.
- Tracking business profitability: If your business expenses are mixed with your personal money, there’s no way for you to manage your company’s finances and determine your profit margins. Keep your records organized and tracked by having a separate checking account.
- Looks more professional: There may be a time when you need to ask for a loan. Whether you’re starting up and need a new round of funding or you want to expand your current business into a new area, having a business checking account makes you look more professional and qualified for that small business loan.
How to choose the best small business checking account provider for you
Because your business is unique, what some consider to be the best business bank account may not be the one for your needs. To find the account that works for you, look at the features and services each provides. Check if they offer wire transfer, safe deposit or bill payment services and how much those cost.
Then there are the fees. You could be slapped with a minimum balance fee if you go below a certain amount in your account or face those dreaded overdraft fees. Take a look at the list of fees, and make sure you understand every penny and how it affects your business’ finances. One of the most attractive features of the following small business checking account providers is their interest rates. An interest-bearing business account makes your business’ money work and grow.
Featured business checking accounts
Axos Basic Business checking provides unlimited domestic ATM fee reimbursements and a Visa debit card. You need $1,000 minimum to open an account, but there are no monthly minimum balance requirements or maintenance fees.
Pros: Businesses can bank strictly online, and if they need to use checks, the first 50 are free. There’s also a welcome bonus of $100 for new businesses. ATM reimbursements and no monthly minimum fees are also great attractions.
Cons: For higher volume businesses, the 200 debits, credits or deposits may be limiting. For any transactions over the limit, the cost is $0.30 per item, which can add up. Also, that minimum deposit can be steep, and Axos Basic Business checking doesn’t integrate with third-party apps.
Tailored Checking account holders get over 1% cash back for online and signature-based transactions when they use their debit MasterCard. Businesses have unlimited transactions, and accounts earn 0.10% APY for balances of $5,000 or more.
Pros: Cash back can be as high as 1.5% for certain categories, and ATM rebates provide additional savings. It’s just $100 to open an account, and that account doesn’t require a monthly minimum balance.
Cons: To avoid the $10 monthly fee, businesses must keep a balance of $5,000. There are also some other fees, such as a $5 daily overdraft fee and $25 each for stop payments, returned items and insufficient funds.
How to get started: Gather your business name, work email and other documents to sign up online.
Small or new businesses can make up to 25 cash deposits and 125 transactions per month without charge. This account doesn’t have a monthly fee, but if you want a paper statement, it’s $5. There’s a $100 minimum deposit and daily ATM limits, such as $500 maximum cash withdrawals and $2,500 card purchases.
Pros: There’s no monthly maintenance or service fees, and businesses that qualify can get a $5,000 credit line to help them during the leaner times.
Cons: Accounts aren’t interest-bearing, and if you go over any daily limits, it’s $0.50 per transaction.
How to get started: To get started, you need your EIN or SSN, a charter or other proof of your business entity and a government-issued ID. Apply online.
Novo offers business checking accounts with free ACH transfers, mailed checks and incoming wires. The app makes handling business finances convenient, and it integrates with several tools to facilitate services to customers and vendors, including Slack, TransferWise and QuickBooks. Novo boasts that businesses can apply for an account in just 10 minutes with a minimum opening deposit of $50.
Pros: Companies that need to write checks on behalf of their business can do that through the Novo app free of charge. Another useful feature is the refund of all ATM fees.
Cons: The overdraft fee is $27, and businesses can’t deposit cash or have recurring payments. Unless they use the TransferWise integration, they can’t send domestic or international wires.
How to get started: Apart from a personal ID, US mobile phone, social security number and a US address, business requirements depend on the type of business and the state. You also need specific proof of your LLC, partnership or corporation. Sole proprietors with a DBA certificate must submit this too.
Lili is a business checking account that rolls with inconsistent freelancer finances. Freelancers get a Visa business debit card they can use at 32,000 in-network ATMs for free. Business owners can set up direct deposits from prominent platforms, such as Fiverr and Upwork. They can even connect with payment apps such as Venmo and PayPal. The out-of-network ATM fee is $2.50 per use, and for those who use an ATM outside of the United States, it’s $5.
Pros: There are no monthly fees for overdrafts, returned items, stop payments or inactive returns. Also, the account comes with no minimum deposit and a $50 referral rewards program. Visa cards can be frozen and unfrozen at any time.
Cons: Checking account funds don’t earn interest with Lili. For access to mobile check deposits, you need to have at least $200 in monthly earnings.
How to get started: You can apply by submitting your email and filling out the application.
The banking arm of J.P. Morgan Chase has a strong reputation for supporting businesses. Chase Business Banking has fraud protection, and you get same-day deposits so you can keep the business moving. Customers who need it have built-in card acceptance through QuickAccept contactless mobile card readers. Fees are 2.6% plus $0.10, or if you need to do it manually, 3.5% plus $0.10. For businesses that maintain a $2,000 daily balance, process that amount in QuickAccept transactions or fit other criteria, there’s no monthly fee. Otherwise, it’s $15.
Pros: There’s no minimum deposit to open an account, and it’s adept with mobile and online banking platforms.
Cons: That $2,000 minimum can be tough for some businesses. Even though branches are available in 28 states, you can’t open an account in person, even if there’s one near you.
How to get started: You can sign up online. You need your ID, Tax ID and business documentation for your specific business type.
BBVA has three different checking account options for small business owners. The Business Connect has no monthly charges and allows businesses up to $5,000 in monthly cash processing. There’s also no fee to use another bank ATM. For more complex small businesses, Business Choice checking provides the choice of two premium features that help reduce fees. Business Premium gives businesses half-off paper checks, no ATM fees on any network, one overdraft forgiveness a year and up to $25,000 in monthly cash processing.
Pros: The break on ATM fees gets better with the premium accounts.
Cons: The premium accounts have monthly fees, and none of the accounts earn interest. The overdraft fee is $38, which is the same as the returned item fee and $6 higher than a stop payment. Sole proprietors are the only ones who can apply online.
How to get started: Gather all business and personal documents, then apply online if you’re a sole proprietor. For other business types, visit a branch.
Business Checking is for newer businesses. It has no monthly fees and allows up to 30 monthly nonelectronic transactions per month with a maximum of two signers. Business Plus is for more established, growing businesses with multiple owners. They get 20 more transactions, unlimited signers and incur a monthly fee of $8. More mature businesses with more business volume get 100 transactions and tiered APY that starts at 0.35% for balances up to $9,999. For sole proprietors, an opening deposit is $100, and for other businesses, it’s $105.
Pros: All accounts earn interest, and there are no fees for ATM transactions within its network. Unlimited cash deposits are also offered, and there are no fees for incoming wires.
Cons: The APY is really low for Business and Business Plus.
How to get started: Department of Defense military and civilian personnel, their families and household members are the only people eligible for membership before joining Business Solutions.
BlueVine has no minimum deposit or balance, no monthly service fees or fees for insufficient funds. You can make one-time payments or schedule recurring payments. If your debit MasterCard is lost or stolen, you can lock it immediately.
Pros: Earn 1% interest on balances up to $100,000, which is one of the highest around. If needed, you can get up to 200 paper checks free of charge.
Cons: This is strictly online, and support is only available 8am-8pm, Monday through Friday. Cash deposits can be made at Green Dot locations, and that incurs a $4.95 fee.
How to get started: Sign up for BlueVine business checking online.
Small business checking accounts FAQs
What is the difference between a personal checking account and a business checking account?
Personal bank accounts are for monitoring your personal transactions, such as food and utilities, and are not for business use. Business accounts help business owners manage and monitor the finances and financial health of their businesses. If you have an LLC, partnership or corporation, you’re required to have a separate business account.
What do I need to open a small business checking account?
To open a small business checking account, you need your SSN or an Employer Identification Number (EIN), depending on the type of business you have. You also need your business documents, such as a partnership certificate or ownership agreements.
What should I use my business account for?
Your business account is for accurate bookkeeping and to prove that you’re running a legitimate business and not a hobby. It also provides a clear audit trail for the IRS, should that be necessary.