How to Choose a Business Checking Account

How to Choose a Business Checking Account

When you're a small business owner, one of the important tasks on your agenda is to open a business checking account.

This account not only keeps your business and personal transactions separate, but it can help you manage your taxes, legal financial issues, protects your personal assets in case of a lawsuit, and assists with the credibility of your business by having its own personalized checks. Additionally, your expenses are debited from your business checking account, and any checks made out to your business are deposited there as well.

It'll save you time when it comes to separating business and personal transactions, and even save you money if you pay an accountant to do the work for you.

A business bank account can also give you a greater view of how your business is doing by showing you the exact amount of cash flow. It's also crucial for building credit history for your business, which can help you receive financing and credit in the future.

Personal Versus Business Checking

Personal and business checking accounts have many similarities, such as monthly and overdraft fees and minimum balance requirements. However, there are some key differences:

  • Cash deposit limits: Business checking accounts usually have a limit on the amount of cash that can be deposited. This limit can be as low as $3,000, and anything above that usually requires a cash handling fee of around 30 cents for each $100 deposited.   Businesses that handle larger amounts of cash (like restaurants or performance venues) should find checking accounts with higher limits.
  • Transaction limits: Business checking accounts may limit the number of free transactions you can make and include:   * ATM deposits   * Electronic financial transactions   * Paid checks   * Teller deposits   You'll typically have to pay for additional transactions once you go beyond the monthly limit, which can be around 40 cents per transaction.
  • Analyzed checking: Analyzed checking accounts are specialized accounts for businesses that are in need of a bank account that allows for higher transaction amounts and a high balance.   The bank looks like your business needs and assigns you an ECR (earnings credit rate) based on your account activity and balance. This can affect some of the bank fees and your eligibility.

What You Need

Before you can open a business checking account, you'll need some documentation that includes:

  • An Employer Identification Number (EIN), which can establish your business tax presence and which you can apply for online, or Social Security Number (SSN), which can be used if you're a sole proprietor.
  • Personal identification, such as a driver's license or passport.
  • A business license from your city or state that has the name of your business and owner.
  • A certificate of assumed name or DBA (doing business as), which is the name your business operates under.
  • A partnership agreement, if your business has multiple owners; you will need to show the founding agreement with all the partners listed along with their rights.
  • Your state's requirements for organizing documents, also known as articles of incorporation or articles or organization, which includes information for your business name, address, owners, registered agents, management structure, and type of business.

Once you have this information, you can contact a bank -- whether online or a local bank -- to begin the process of opening a business checking account.

What To Look For

Not all business checking accounts are created equal, and you should definitely shop around to find the right one for your business. There are some important factors to look for when opening a business checking account, including:

  • Customer service that provides communication with a representative through text, email, chat, phone, or in-person, along with dedicated support.
  • Transparency. Look for a reputable bank that offers you transparency regarding their fees, how the account works, and what it can do for you.
  • Scalability, or whether your checking account can meet your needs as your business grows.
  • Account opening process and whether you can open it online or if you need to visit a local branch.
  • What fees are involved (such as an account opening fee, monthly service fee, or NSF fee) and whether these can be waived. Most business checking accounts have fees that range from $12 to $30 a month, with those with more features charging a higher fee.   Even with bad credit, you are still likely to find accounts with no or low fees, although you may not receive a business credit card or overdraft protection. However, improving your credit can open up more possibilities.
  • Interest, or Annual Percentage Yield (APY), accrued on your current balances. The national current average is 0.1%.
  • Minimum deposits and balance necessary to keep the account open, and whether you will be charged a fee if you don't meet the requirements.   In some cases, you may receive an introductory bonus if you deposit and maintain a certain balance when you open an account.    Along with having good customer service, credit unions typically have high cash deposit limits, which is ideal for businesses with a high amount of cash flow. However, these usually have only have a few small physical locations.
  • Transaction limits and whether you will have unlimited free transactions or have deposits, withdrawals, or transfers capped and/or charged after a certain number of transactions.  
  • Account integrations, like connecting your account to other services and apps, wire transfers or transfers to other accounts, or paying bills and vendors.
  • Additional services, such as being able to write checks. You can also look into business savings accounts, credit cards, and other tools that will help your business grow.

When it comes to small businesses, we recommend Azlo, NorthOne, and BlueVine checking. These banks offer comprehensive online banking, low or no fees, and are geared specifically for small business owners.

Want to see some more options? Here are our top picks for free business checking accounts, best credit unions, bank accounts for small businesses, business checking accounts for startups and freelancers, and the best online business bank accounts.

What is a business checking account?

A business checking account is a specific checking account that separates your personal and business transactions and travks your business transactions on a separate statement.

What do I need to open a business checking account?

In order to open a business checking account, you'll need the following:

  • Social Security Number or Employer Identification Number
  • Business License
  • Certificate of Assumed Name or DBA
  • Limited Liability Companies
  • Organizing Documents
  • Partnerships
  • Partnership Agreement
  • Sole Proprietorships

Do I need a business checking account?

If you're a sole proprietor, you aren't required to have a business checking account. However, your personal bank may have conditions that require you to get a separate account for business transactions and it may be easier overall to keep your work life and personal life separate.

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