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What is business banking?
Business banking refers to business-specific products and services offered by financial institutions, which are designed to help business owners better manage their money. It can encompass many different services, including checking and savings accounts, as well as business loans, lines of credit and merchant services.
Every business owner — regardless of the company’s size — needs a business bank account to keep their personal and professional finances separate. A business bank account can be used to pay bills, purchase new assets, set aside money for a rainy day and receive payments from customers. In addition, a business bank account can be used to track cash flow for legal and tax purposes.
3 types of business bank accounts
The most common types of business bank accounts include:
Business checking account. A business checking account allows you to spend money when you need to. These accounts can be used to handle day-to-day expenses, pay invoices and wages and receive payments from clients and customers.
Business savings account. A business savings account allows you to earn interest on your company’s funds while you’re not using them. These accounts are a convenient way to earn passive income and can be linked to your checking account for easy access whenever you need it.
Business certificate of deposits (CDs) allow you to put aside money for a fixed amount of time with a fixed amount of interest. They provide a guaranteed return on your investment and can be useful for long-term savings, but there’s usually a penalty fee if you need to withdraw money early.
5 common features of business bank accounts
Most business bank accounts have these features to help you manage your cash flow:
Software integrations. Most business bank accounts offer integrations for accounting, payroll and taxes. For example, Bluevine syncs with popular business tools like QuickBooks Online, Wave, Freshbooks, Stripe, and PayPal.
Online account management. In today’s digital age, it’s expected to be able to manage your account from your computer or smartphone, instantly freeze and unfreeze your debit card from your account and pay bills online.
Payment processing services. Whether it’s included or offered for an additional charge, most business bank accounts offer merchant services to help you accept and process payments.
Fraud protection. 24/7 fraud protection and account monitoring helps you spot any suspicious account activity so you can report them to your bank before you’re held liable.
Accessible lines of credit. At some point, you may want to take out a line of credit to help grow your business. When that time comes, your bank may be more willing to lend to you as you already have an established business bank account with them.
How to compare business bank accounts
There are hundreds if not thousands of different business accounts out there. When choosing an account, factor in:
Fees. Is the account a free business checking account or does it have monthly fees? If so, can they be waived by meeting achievable requirements? Also, look into ATM, transaction and overdraft fees.
Interest. Choose an account that has a competitive interest rate.
Features. Common features online banking, integrations with accounting software, overnight deposit boxes and lines of credit to maintain cash flow.
Supported transactions. Some accounts don’t support cash deposits, while others put a limit on how much you can deposit each month. Choose an account that aligns with your cash flow.
Accessibility. Check if you can access your account online or through a mobile app and if there are branches near you. If there’s no in-person support, is customer service available at convenient hours? Also consider if you’re able to easily transfer money between your checking and savings accounts.
Introductory offers. If a bank gives an enticing bonus or introductory APY for signing up, check the fine print to see what happens once it expires. The account may not be worth the offer if it has high fees or low APYs.
FDIC insured. Is your money safe with the bank? As a rule of thumb, never deposit your funds in an account that isn’t back by the Federal Deposit Insurance Corporation, which protects balances up to $250,000.
$0 monthly service, overdraft or incoming wire fees
Create up to 5 subaccounts
8+ software integrations
FDIC insured
Pros and cons of a business bank account
Business bank accounts have quite a few benefits, but there are also some drawbacks to be aware of.
Pros
Creates a central place for funds. A business bank account can keep all of your funds in one central place so they’re easy to track and manage.
Separates your personal and business funds. Separating your business and personal expenses helps keep you from getting into trouble for making the wrong deductions come tax time and can help protect you from facing personal liability if your business gets into trouble.
Looks professional. A business bank account can help establish the business’ credibility with customers and creditors.
Helps with accountability. Regular statements from your business accounts help keep you accountable for your finances and are useful at tax time. You can also easily report earnings to your board or shareholders.
Cons
Fees. Banks can charge monthly fees, plus fees for not maintaining a minimum balance and for exceeding a certain number of transactions.
May not be able to open online. Although more and more banks are starting to support online applications, many business accounts still need to be opened in-person at a local branch.
Is it safe to open a business bank account?
Yes, most business bank accounts are perfectly safe. But before you move your company’s money to a new financial institution, check that they have these three factors:
FDIC insured. If the bank or credit union is backed by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), your funds are safe if the bank fails.
Clear terms and conditions. Are the bank’s terms and conditions up-to-date and easy to understand? Read all the fine print and ask questions about anything that seems suspicious or unclear.
Secure website. Check that the bank’s website is encrypted and if it requires two-factor authentication to log in to your account. If you don’t see an “https” at the beginning of its website address and you can log in with a simple username and password, you might want to think twice before making a significant deposit.
Can I use a personal bank account for business banking purposes?
Depending on your business structure, you may be required to open a business bank account. But even if it’s not a requirement, it’s considered best practice to do it anyway. Here are three reasons why:
Saves you time during tax season. Keeping your work and personal finances separate ensures you don’t spend countless hours sorting through transactions come tax time and makes it easier to spot what tax deductions and credits you qualify for.
Protects your liability. If you keep your money in a personal account, the courts could come after your personal assets during a lawsuit — even if you’re established as an LLC or corporation. That’s why it’s recommended to open a business account as soon as possible, even if you’re not legally required to have one.
Gives you a clearer picture of your performance. If you use a personal account, it’s difficult to separate your income from your spouse’s income, your personal bills from your business bills and so on. But with a business account, you automatically know if your company is on the right track financially.
How to apply for a business bank account
Applying for a business account is a lot like applying for a personal account, but there are a few extra steps you need to take:
Choose a bank. Research financial institutions and choose one that supports your business entity and transaction types and has the features you’re looking for.
Apply for your account. Once you gather all the required information, apply for your business bank account online, by phone or in-person at a local branch. If you’re opening up an account with a business partner, make sure they’re present when you open the business bank account. The bank will need their information too.
Start using it. Once your account is approved, activate any debit or ATM cards and get ready to start accepting payments from clients and customers.
Four things to do before opening a business bank account
If you’re planning on opening a new business account:
Determine if your business needs a savings account and its savings goals.
Determine if the business needs another income stream or more financial stability.
Decide how the business account will be accessed and by whom. If there’s more than one account owner, it’s recommended that legal advice is given to make the rules and purposes of the account is clear.
Consider whether or not you want to link your business’ savings and checking accounts.
Can you get denied a business bank account?
Yes. A bank can refuse to open a business bank account for numerous reasons. Financial institutions evaluate your business, your credit profile and your previous banking history depending on the financial product you’re applying for. Banks and credit unions generally look to make sure that your business is in good standing and you have all your paperwork in order. You might also be denied a business bank account if your company is considered high-risk, such as operating in the gambling or cannabis industry.
When opening an account, banks will also consider your ChexSystems Report, which is a record of previous banking history. Your report includes any previous problems you may have had with checking and savings accounts, including unpaid negative balances, bounced checks and overdrafts and involuntary account closures.
They may also take a peek at your personal credit score, especially if your business is a single-member LLC and you’re opening up a business credit card, loan, etc. Having poor credit or red flags like outstanding collections may cause banks to categorize you as a risky customer and refuse to do business with you.
Compare business bank accounts
Use the comparison table to compare business bank accounts by monthly fee, minimum deposit and ATM network.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Commercial banking is similar to business banking, but it’s primarily reserved for large corporations, institutions and government agencies. Commercial banking services are offered on a much larger scale and include things like merchant services, lending, stock ownership plans, treasury management, insurance products, global trade management and more.
Typically, no. Many have associated monthly fees that can only be waived when you meet certain deposit or transaction requirements. But there are a handful of free business checking accounts on the market.
Cassidy Horton is a freelance personal finance copywriter and past contributing writer for Finder. Her writing and banking expertise have been featured in Forbes Advisor, Money, The Balance, Money Under 30, Insure.com, and other top digital publishers. She holds a BS in public relations and an MBA from Georgia Southern University.
This small business checking account comes with features like early access to payments, automatic savings for taxes and emergencies and pre-filled tax forms.
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