No traditional small business owner would dream of operating without a business checking account. Not only does having a dedicated account for business transactions make small business accounting much easier, but also a business checking account is required for any business operated as a separate legal entity from the owner.
But in the modern world where side hustles, gigs and multiple income streams are the norm, and where the internet has made it possible to launch a small business from the comfort of your living room, the question of who needs a business checking account is a lot less clear. If you’re not launching a traditional small business, do you need a business checking account?
Here’s what you need to know about business checking accounts so you can decide if you need one for your entrepreneurial venture.
Business Checking Accounts vs. Personal Checking Accounts
At first glance, a business checking account doesn’t seem that different from a personal checking account. Both allow you to make deposits and withdrawals, draft checks or make ACH payments, and make purchases and cash withdrawals with a debit card. And both can potentially save your bacon via overdraft protection.
In terms of how checking accounts work, the main difference between a personal and a business checking account is the cost. The majority of personal checking accounts are either free or have easily waivable fees. Business checking accounts, on the other hand, will almost always have associated fees, and it is nearly impossible to find a truly fee-free business checking account.
While many banks waive their business checking account fees if you maintain a minimum daily balance, have a minimum number of direct deposits per month or spend a minimum amount with your associated debit card each month, these minimum requirements tend to be higher than similar waivers offered for personal checking accounts.
What You Need to Open a Business Checking Account
While nearly anyone can open a personal checking account with nothing more than an ID and Social Security number, the requirements for a business checking account can be a little more onerous. To open a business checking account, you may have to provide the following documentation:
- Social Security number if you are a sole proprietor or Employee Identification Number (EIN) if your business is a corporation, partnership or limited liability company (LLC)
- Government-issued ID, such as a driver’s license or passport
- Business license and Articles of Organization (for LLCs) or Articles of Incorporation (for corporations)
- Organizing documents filed with the state
- Partnership agreement with the name of the business and its partners (for a business with multiple owners)
- Certificate of assumed name/Doing Business As (DBA) name (if you are operating your business under a name different from your…