Why you need a business bank account and how to open one

New entrepreneurs often fund their ventures using a personal bank account. This can be acceptable in some cases to start, but it’s not sustainable for long-term success. Opening a dedicated business bank account is essential for growing your business while reducing risk to your personal finances.

What is a business checking account?

A business checking account is a cash management and bookkeeping tool for your business finances, separate from your personal checking. Having a business checking account can also simplify operations with features such as business debit and credit cards, accounts payable tools, and accounting software integration. 

No business is too small for a business checking account. Even for sole proprietors, conducting all business transactions through one dedicated account keeps your finances and taxes simple. Here are some of the main advantages of using a business checking account for your business finances:

• Professional credibility: Accepting payments through a business checking account tells vendors and customers that you are a legitimate business entity, not an inexperienced or illegitimate individual.
• Simplified tax preparation: Connecting a business bank account to accounting tools like QuickBooks or Xero simplifies your tax preparation. These tools can be used to run financial statements such as profit-and-loss reports.
• Access to business credit: You need an EIN and a business checking account to qualify for a business credit profile with the credit bureaus: Dun & Bradstreet, Equifax, and Experian. With some business banking platforms, like Bluevine, you could access working capital more easily if you already have a business checking account with an established transaction history.
• Financial operations: Your company may need the merchant services, payroll processing, or bulk payments associated with different business platforms. On the accounting side, automated invoicing, expense tracking, and cross-platform syncing can save you time. If your business banking provider doesn’t offer its own solutions for all these functions, you should find one that easily connects with your existing tools.

Did you know?

Bluevine Business Checking connects seamlessly with your favorite financial and operations tools, including QuickBooks Online, Xero, Stripe, and Gusto.^BVSUP-00056

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What’s required to open a business checking account?

The criteria for opening a business checking account are fairly universal. Here’s what you’ll need to apply for a business checking account, based on your business entity type.

Sole proprietorships need:

• Social Security Number or Employer Identification Number (EIN)
• Government-issued photo ID (driver’s license or passport)
• Business license or DBA certificate if operating under a trade name
• Proof of business address

Partnerships, LLCs, S-corps, and C-corps need:

• Employer Identification Number (EIN)
• Articles of incorporation or organization
• Operating agreement or bylaws
• Government-issued photo ID for all members/partners
• Business license
• Ownership agreement showing the ownership percentage of each member/partner

Nonprofits need:

• EIN
• Articles of incorporation
• IRS determination letter (501(c)(3) status)
• Bylaws
• Government-issued photo ID for authorized signers
• Board resolution authorizing the business checking account

What fees do I pay for a business checking account?

Traditional banks and credit unions generally have different fee structures from online banks and fintechs, which are able to offer higher interest rates and lower fees. Understanding the fees and limits associated with business checking accounts can help you avoid paying unnecessary fees to open and use one.

Common business checking fees and limits

What features should I look for in a business checking account?

Startups or new business owners often underestimate the fees associated with their first business checking account. But aside from fees, you should also consider whether an account has the features and tools you’ll need as you grow your business—and some that might actively help you grow. These can include:

• High-yield interest: Some paid business checking accounts offer high-yield interest on balances. This can create a passive stream of interest income for your business.
• Bill pay and ACH transfers: You can reduce the number of banking providers you rely on by choosing a business checking account with built-in accounts payable features, such as free standard ACH transfers and international payments.
• Mobile deposit and check writing: Some vendors prefer to receive paper checks, which require more manual preparation than digital payment types. Some banking providers will write and mail checks on your behalf. Most also allow you to scan checks for deposits into your own account, right from your phone so you don’t need to visit an ATM or bank branch. 
• Integration with accounting software: Connecting your business checking account to QuickBooks or Xero can simplify tax preparation and help you track company and employee expenses.
• Merchant services and incoming payments: Built-in invoicing and merchant services tools allow you to request and process credit card payments, and payment links can be placed in emails or on web pages to make those payments seamless for your customers.
• Multiple users and cards: Fintechs and digital banks often offer virtual or physical debit cards with built-in spending controls and payment tracking.
• FDIC insurance: Chartered bank deposits are insured by the Federal Deposit Insurance Corporation up to $250,000. If your business checking account is with a chartered bank, or a fintech company that offers banking services through a chartered bank partner, then your funds will be protected. Some fintechs have expanded FDIC coverage by partnering with a network of Member FDIC banks to multiply the $250,000 and offer up to $3 million or more in FDIC insurance.
• Fraud protection and security features: Hacking and social engineering scams can be devastating for your business or employees. Thankfully, almost all business checking accounts offer authorization controls, encrypted transactions, biometrics, and multi-factor authentication.

Bluevine vs. traditional banks

How to open a business checking account

If you prepare the proper documentation ahead of time, you can usually open a business checking account within an hour, or even minutes, depending on the provider and whether you apply online or in-person. Online banks and fintechs make the application process easy by letting you do everything online.

• Step 1: Choose your banking provider based on your business needs.
• Step 2: Gather required documents like your EIN, Articles of Incorporation, etc.
• Step 3: Submit your application with all required documents and information.
• Step 4: Once approved, add funds to your account.
• Step 5: Set up sub-accounts and rules, accounting integrations, payees, employee debit cards, and more.

Opening a Bluevine Business Checking account?

Follow our step-by-step guides for how to apply, how to add funds, and how to set up your account.

Set your business up for financial success with business checking

Understanding why you need a business checking account is the first step toward building a financially healthy company. A dedicated business account protects your personal assets, simplifies taxes, and provides access to tools that grow with your business.

Business bank account FAQs

At what point should I open a business bank account?

If you’re a business owner, open a business checking account as early as possible, as soon as you decide on a business name. Bluevine offers high-yield business checking accounts to business owners with no minimum deposit required.

Can I use a personal account for a sole proprietorship?

It’s not illegal to use a personal checking account for business purposes, but it is impractical. Sole proprietors can deduct business expenses on IRS Schedule C, but having a dedicated business checking account makes it easier to file your taxes or dispute any audits.

How do business accounts help build credit?

By registering your business and checking account with the business credit bureaus (Dun & Bradstreet, Equifax, Experian), you’ll begin to establish business credit when you make timely payments on business credit cards, lines of credit, and loans. Lenders will review your business checking account history when evaluating business loan applications.