If you’re wondering whether you need a business bank account, chances are that you do. Business bank accounts help you separate your personal funds from your business funds and are required for some types of businesses, like Limited Liability Companies (LLCs).
There are other benefits of business bank accounts, such as access to payroll services and bookkeeping tools. If you want to learn more about why you need a business bank account, we’ll break it down.
What is a Business Bank Account?
A business bank account is a lot like a normal bank account. It lets you keep your money safe, but easy to access with a checkbook or debit card.
However, business bank accounts are designed with the needs of companies in mind. Where a personal bank account might come with things like bill payment tools and the ability to automatically move money to savings, business bank accounts might come with bookkeeping applications, payroll tools, and other services that appeal to business owners.
Some banks offer both personal and business bank accounts while others specialize in one or the other.
Benefits and Drawbacks of Business Bank Account
Before you decide if you should open a business account, it’s important to know its pros and cons.
- Separate your personal and business funds. Keeping your personal money and your business funds in separate accounts makes it easier to track your company’s performance and simplifies bookkeeping. Some business structures, like LLCs, make this mandatory if you want to maintain the liability protection.
- Access valuable services. Many business bank accounts offer tools like payroll services or merchant services. Opening an account is a great way to access these services.
- Fees. Many business bank accounts come with fees, including monthly fees and even cash deposit fees if you deposit a lot of cash. Look for ways to keep costs as low as possible. You can look for fee-free banking options.
- You’ll have money in more places. Opening another bank account means having an additional account to keep track of, which might add some headaches to managing your finances.
Do I Need a Business Bank Account?
While most businesses can benefit from a business bank account, you may not technically need to open one.
In general, a sole proprietor does not need to open a business bank account but does have the option if they want to do so. If you’re just doing a few odd jobs a year or making a small amount of money, a business bank account might be overkill.
More formalized businesses, like LLCs and corporations, should definitely open a business bank account. LLCs lose their liability protection without one.
Who Needs a Business Bank Account?
To decide if you should get a business bank account, ask yourself these questions.
- Do I operate like a business, or am I just side hustling? If your business is your main work, or you make a lot of income, a business bank account is worth having. If you’re just making some extra cash as a side hustle, you can probably skip it.
- Do I have more than one business? If you’re running more than one company, each should have its own account.
- Do I have partners? If more than one person owns a business, it should have its own account.
- Do I have employees? If you’re employing people, a business bank account is essential for access to payroll systems.
- Do I want to apply for business financing? Many lenders will want to see bank account records before lending to a company, making a business bank account essential.
Why Do I Need a Business Bank Account?
You should open a business bank for a few reasons.
One is that it lends your business legitimacy. Someone running a company out of their own bank account looks much less serious than one who goes through the effort of making their company a bit more formal.
Business bank accounts also unlock possibilities for your company. You can use them to apply for business financing to expand your company, run payroll when you hire people, or simplify your bookkeeping.
If you ever choose to form an LLC or work with a business partner, having a separate bank account for your company will also be useful. It means you’ve already taken that essential step.
What Do I Need to Open a Business Checking Account?
If you want to open a business checking account, you’ll need to provide the following information.
- Your Social Security number or Employer Identification Number
- Your business licenses, if any
- The date your company was established
- Where your company was formed and operates
- Any names your business uses when operating
- Your company’s financial documents and information
- A photo ID
The bank will use this information to decide whether to let you open an account. Unless you’ve had major issues with banks in the past, such as unpaid overdraft fees on closed accounts, you’ll have no trouble opening an account.
How To Choose a Business Bank Account
When choosing a business bank account, consider the following factors.
- Cost. One of the most important things to think about is the cost of the account. Look for a bank account with no monthly fee. At a minimum, choose one with a fee that you can avoid or that offers incredible features that are worth paying for.
- Features. Every bank is different, and every business is different. Think about the business services and tools that will provide the most benefit to your company. Then, try to find the bank that offers those services and features.
- Customer service. The last thing that you want to deal with is a bank that’s difficult to get help from. Think about the bank’s reputation for service to make sure you can get help when you need it.
For most business owners, opening a business bank account is a no-brainer. They offer a lot of benefits, and you can find many fee-free options, so there’s no risk in giving the account a try. Think about what services your business needs, then find a bank that offers them.
Frequently Asked Questions
1. How much money do you need to open a business bank account
Every bank is different, but you can usually open a business bank account with a minimum deposit of $100 or so.
2. Does a business need to have a business bank account
While some businesses, like sole proprietors, don’t strictly need a business bank account, they can still be helpful. More formal businesses, like LLCs, must have separate business bank accounts.
3. Can I use a personal bank account for my business
If you’re a sole proprietor, you could use a personal bank account for your business, but it isn’t a good idea. Specially designed business accounts will offer more useful services.
4. What kind of bank account do you need for a business
Businesses generally get the most benefit from business checking accounts, but some banks offer savings accounts for businesses as well.
5. How do I open a business bank account with a business partner?
Starting a business with a partner can be a rewarding experience. Not only do you have someone to help you manage the business, but you also have someone to share the burden (and profits) with. If you have a business partner, you can open a joint business bank account.
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