What Is a Business Checking Account?

A business checking account lets you conduct day-to-day business transactions, such as accepting credit card pay🦄ments from customers, paying invoices and bills, a🐬nd transferring money into a business savings account. 

It serves🐎 the same basic function as your personal che♐cking account but has slightly different rules, fees, and requirements to accommodate business activity.

How a Business Checking Account Works

A business checking account handles your business’s everyday cash management. Like your personal checking account, you can use it to receive money, transfer cash into savings, or pay for busine🎐ss expenses. 

Business owners have unique needs, and different types of businesses need different features and services. No matter what size or type of business you’re operating, there’s a business checking account that ca꧟n match your needs.

For example, if you own a restaurant, you might need to deposit large amounts of cash, which means you should likely choose a bank with local branches and 澳洲幸运5官方开奖结果体彩网:night depository services. But🌸 if you’re a freelance writer, you’re probably paid electronically, which means you might be able to choose from a wider variety of online business checking accounts.

Bꦑusiness Checking Accounts vs. Personal Checking Accounts

Personal checking accounts and business c𝄹hecking accounts function similarly, with some differences. Owners of very small businesses and freelancers may not see much of a difference between their business checking accounts and their personal accounts. Owners of larger and more complex businesses, however, will notice more distinctions between the two. 

澳洲幸运5官方开奖结果体彩网: Here are the main differences:

• Ownership: While some banks may allow sole proprietors to open a business checking account with their Social Security number, you’ll generally need an 澳洲幸运5官方开奖结果ꦫ体彩网:Employer 𒉰Identification Number (EIN) to set up the account in your business’s name. 
• Availability: Business checking accounts are widely available from many banks and credit unions, especially major ones, but they’re not quite as plentiful as personal checking accounts. 
• Interest rates: Checking accounts aren’t known for offering much in the way of interest. That’s especially true for business banking, where interest-bearing checking accounts are harder to find than in the personal banking world, and rates are often low. 
• Maintenance fees: Business checking accounts can be hives of constant activity—and like a beehive, a business account requires more upkeep than a personal one. For that reason, banks typically charge higher monthly fees for business checking accounts. 
• Third-party integrations: Many business bank accounts can be directly linked with other common business tools, such as 澳洲幸运5官方开奖结果体彩网:merchant accounts that allow you to accept credit card payments or accounting software programs to streamline your bookkeeping. 
• Application requirements: You’ll need to submit more paperwork to 澳洲幸运5官方开奖结果体彩网:open a business checking account compared to a personal checking account, such as your business’s formation documents, business license, written business ownership agreements, etc.
• Transaction fees and limits: You’d be hard-pressed to find a personal checking account that caps your transactions. But since businesses can have many more transactions per day than an individual person, it’s common to see transaction fees and limits with business checking accounts. 
• Fee waiver balance requirements: Business checking accounts typically require you to maintain a higher minimum balance to waive a monthly fee than personal checking accounts. 

Benefits of a Business Checking Account

Many business owners may think managing a second checking account for their business is too much of a hassle. In reality, the benefits far outweigh this minor hassle. Some reasons to get a business checking account include:

• Deposit insurance: If you manage your business finances out of your personal checking account, you’ll be subject to the $250,000 cap on 澳洲幸运5官方开奖结果体彩网:FDIC insurance and 澳洲幸运5官方开奖结果体彩网:NCUA coverage. But you can double your protection by opening a second checking account just for your business. 
• Streamlined taxes: Sorting out your business income and expenses on your tax return can be a nightmare if they’re intermingled with your personal funds. By keeping separate checking accounts for personal and business finances, you’ll find it much easier to properly record your business activities and take 澳洲幸运5官方开奖结果体彩网:tax deductions and credits. 
• Employee access: You wouldn’t want to give your employees the keys to your personal bank account, but allowing them to manage parts of your business bank account can help you delegate duties to different team members. 
• Liability protection: Keeping your business and personal finances separate can help protect your individual cash reserves if someone ever sues your business. 
• Business legitimacy: Having a business bank account makes your business seem more official to potential business partners and lenders, and opens the door to professional options like merchant accounts and 澳洲幸运5官方开奖结果体彩网:small business financing. 
• Better business planning: You can get a more accurate idea of your business’s cash flow and profitability at a glance if you keep your business funds in a separate business checking account. It’s not as easy to see in your personal account, and you could inadvertently spend personal funds on business expenses and vice versa. 
• Compliance with legal requirements: Some business structures, notably LLCs and corporations, are required by law to keep separate business and personal finances because these businesses are legally separate entities from their owners.  
• Future business financing options: You may not need financing options like business lines of credit or Small Business Administration (SBA) loans right now, but choosing to open a business checking account at a bank that does offer these benefits can give you a leg up when the time is right.

Frequently Asked Questions (FAQs)

The Bottom Line

Opening a business checking account is one of the first steps you should take when you’re launching a new ventuꦑre. Make sure to spend some time shopping around for the right account, just like you would for any other financial product. Taking a little extra time now to get things set up right for the long haulꦯ can save you a lot of time and money down the road.