What is a Business Checking Account? 

Written by:

Baylor Cox

Reviewed by:

• Liz Kritikos

A business checking account works similarly to a personal checking account and is a safe place to keep your business funds. Like a personal checking account, a business checking account can be used to deposit or withdraw cash, make transactions with a debit card, and cash checks. The difference is that this account is opened in your business’s name and is intended exclusively for business transactions as opposed to personal transactions. 

Many financial institutions offer different types of business checking accounts to suit your needs, including options specifically for startups, sole proprietors, and more established companies with higher transaction volumes. For example, a small business checking account may charge lower fees and offer features like free transactions up to a monthly limit, access to online banking tools, or integrations with accounting software. 

Do I Need a Business Checking Account? 

If you are thinking of starting your own business, it is important to set up a checking account specifically for your business. Creating a separate checking account for your business is beneficial when compared to conducting business transactions from your personal checking account for multiple reasons. 

Separating business and personal finances makes recordkeeping much simpler. When preparing quarterly or annual taxes, having a business checking account that is separate from your personal checking account makes tracking income and expenses easier. It also helps you to not accidentally overlook deductible business expenses because they were combined with personal transactions, which can save you money during tax season. 

Some business structures, such as LLCs and corporations, require that you keep your business finances separate from your own finances to maintain legal protection. Mixing funds between personal and business accounts can potentially expose your personal assets to liability. Even if your business is a sole proprietorship, having a separate account provides better financial organization, makes your business look more professional to customers, and can help build a financial history for your company which can help if you decide to apply for a business loan. 

Can I Use a Personal Checking Account for Business? 

Sole proprietors may be able to use a personal checking account for their business, though it is generally not recommended. While using a personal checking account for business transactions may seem like the simpler approach, it can create financial chaos, especially as your business grows. Combining business and personal transactions makes it harder to keep accurate records, it can complicate your personal and business taxes, and it may cause complications during any personal or business audits. 

How Do I Open a Business Checking Account? 

Opening a business checking account is typically a straightforward process but may vary depending on the specific financial institution and your business structure. In general, you can expect to follow these basic steps: 

1. Choose a financial institution and account type – Compare different banks and credit unions to find the small business checking account that best fits your needs. Look for features such as low monthly fees, transaction limits that fit your expected business activity, online and mobile banking access, and any extra features like integrations with payment processors or accounting software that are important to you. 

Gather the required documents 
You’ll need specific documents to prove your business’s identity. This usually includes: 

• Employer Identification Number (EIN) or Social Security number (for sole proprietors) 

• Business formation documents (e.g., Articles of Organization for an LLC) 

• Ownership or partnership agreements, if you have one 

• Any business licenses or permits 

• Personal identification documents like a driver’s license or passport 

Having the above available at the beginning will speed up the application process. 

3. Complete your application 
   For many financial institutions you can apply online, but some may require you to visit a branch in person. During the application, you’ll provide business and personal information, upload or present your documents, and select your account preferences. 

4. Deposit funds into your account 
   Most financial institutions require a small initial deposit to open a business checking account. Once the account is open, you can start depositing business income, paying vendors, and managing day-to-day expenses from it. 

What Do I Need to Open a Business Checking Account? 

The specific requirements can vary, but at minimum, you’ll need: 

• Your legal business name and address 
• Tax identification number (EIN or SSN) 
• Business formation documents 
• Personal identification 
• Any necessary business licenses or permits 

Some financial institutions may need additional information, such as projected monthly transactions or specific industry details. You’ll want to check out the financial institution’s website or call a branch, so you know exactly what you need to bring. 

Recap 

A business checking account is a key part of running your business responsibly. It helps you keep personal and business finances separate for clarity, simplifies bookkeeping, strengthens your business’s credibility, and can protect your personal assets depending on your legal structure. 

If you’re wondering if you need a business checking account, the answer is almost always yes. Even for sole proprietors, opening a dedicated business checking account can make a difference in how smoothly your business’s finances run. By understanding the purpose of a business checking account, you’ll set your business up for better financial organization and long-term success. 

This article is for educational purposes only. WeStreet makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.