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Small Business Owners, Choose an Account That Fits Your Lifestyle

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Small Business Owners, Choose an Account That Fits Your Lifestyle
Katy Ward
Katy Ward
Jul. 10, 20245 min read
So, you’re setting up a new business, and there are plenty of exciting decisions to make. What should you name your company? How many employees should you hire? Do you need a website? Although questions relating to your business checking account may not be as exciting, choosing the right banking product could play a vital role in ensuring your day-to-day operations run as smoothly as possible.

Here, you’ll find answers to some of the most common questions entrepreneurs face when opening a new business checking account. For instance, whether you should open a separate business checking account or continue using your personal account. You will also understand  the pros and cons and unique features of some of the most attractive accounts on the market.

Can I use a personal checking account for my business? 

The answer to this question depends on the type of business you're running and its legal status. If your business is a legal entity separate from yourself such as a registered LLC or corporation, you're legally required to open a designated account to manage your company's affairs.

However, if you’re a sole proprietor and your business is not a separate legal entity, it’s possible to use the same bank account for both your personal and professional finances. 

On a practical level, you should consider whether a personal checking account will have all the features you need to run your business effectively, especially when it comes to accepting payments.

As a business owner, you’re likely to need a bank account that enables you to accept credit card payments from customers and, crucially, this feature isn’t available on personal bank accounts. Likewise, retail businesses will need a bank account that accommodates point-of-sale transactions.

Should you mix accounts? 

Using the same account for your personal and business affairs is known as “commingling”. Although this is not necessarily illegal, it may prove unwise in the longer term.

As well as the inherent potential for confusion, you may find it difficult to tell how much your business is spending if you lose track of which expenses are personal and which are professional. In a worst case scenario, you could face costly tax penalties if you make an error when filing your return, as the IRS requires a clear audit trail.

Can I deposit a business check in a personal account? 

If you’re a sole proprietor, you shouldn’t encounter any difficulties depositing a check into your personal checking or savings account if it is payable in your name. However, the situation will be more complicated if the check is payable to your corporation or LLC. 

Although you may believe you can simply endorse the check over to your personal account, many banks will not allow you to do so as they have no way of knowing whether the transaction is legitimate. Say you deposit a check made out in your corporation's name into your personal account, this could constitute fraud if, for example, the corporation has several owners and the other members were unaware of the transfer.

If you’re operating your business under a name different than your own, you may wish to open a Doing Business As account (DBA), which will enable you to deposit checks made out in the name of your company.

What personal checking accounts are on the market?

If you’d prefer to operate your business using a personal checking account, there are numerous options available. 

BankFees
 NovoNo monthly fees
 Radius Bank$0-$10

Novo

Being specifically tailored towards small business owners, Novo’s products could be especially attractive for entrepreneurs or freelancers seeking an account that doesn’t carry monthly fees or impose minimum balance requirements. 

As well as offering free ACH transfers, mailed checks, and incoming wires, the bank also enables you to manage your account entirely online. You can also attach receipts to your transactions, which should take the stress out of managing your company’s finances. If your business has a global presence, Novo allows you to make international transfers through Wise. Bear in mind, it’s sensible to avoid going into the red on your account as doing so could incur a fee of $27.

In another major plus point, Novo’s products also have integrations with a number of apps popular with businesses, such as Transferwise, Slack, Stripe, Quickbooks, Xero, and Shopify.

Read the full Novo Review

Novo Novo View Rates

Radius/Lending Club

If you’re looking to earn cashback and benefit from competitive rates, you could consider opening an account with Radius, which is now part of Lending Club. Unlike many of its competitors, the bank doesn’t charge a monthly management fee on its checking accounts. 

For many customers, the ability to earn unlimited cashback at a rate of 1.5% on any transactions you make with your card will be one of the biggest incentives to open an account. Another major attraction is the relatively high APY available on checking accounts, with the bank paying 0.1% on deposits of between $2,500 and $99,999.99 and 0.15% on deposits above this amount. If you set up a direct debit, you may be able to receive your money up to two days early, meaning you could get your paycheck in advance.

The most significant downside we encountered is that the bank’s customer service teams are not available on a 24/7 basis, operating between 8.30am and 12am ET on Mondays to Fridays, and 8.30am to 8pm ET at the weekends. For those who prefer a more tech-savvy approach to banking, Radius enables its customers to open and manage every aspect of their account online or via the mobile app. 

View the full Radius Review

View Rates

How do I open a business checking account? 

In order to open a new business checking account, you need to be a US citizen with a verifiable address and be at least 18 years old. Although you may be able to open your account online, you’ll normally need to open an account in person if your company operates in the telemarketing, precious metals, or gambling industries. A number of banks also include exclusions for businesses in the adult entertainment or weapons industries.

What do I need to open a business checking accounts? 

Although the exact requirements for opening a business checking account vary depending on the bank you choose, you’ll normally need to provide the following information:

  • Your business name/DBA name
  • Your business address/phone number
  • Your tax ID/EIN or SSN
  • Your business license
  • Your annual revenue
  • Industry type

Although you won’t necessarily need to demonstrate a profit to open a business banking account, some banks require a minimum deposit or balance.

What business checking accounts are on the market?

If you'd like to open a business checking account, there are numerous options available:

BankFees
NBKC$5 or $45
BlueVine$15

nbkc

Missouri-based community bank nbkc offers a range of services for businesses through its online checking accounts. The bank doesn’t require a minimum deposit in order to open an account and enables you to write an unlimited number of checks, pay an unlimited number of bills, and make as many deposits as you need. In addition to  nbkc’s standard online banking features, the business checking service is also available via a mobile app.

Although you won’t pay small business bank account-sized fees, the company does charge $5 to send domestic wires and $45 to send or receive international wires.

If you’re concerned about security, the bank's services employ standard 256-bit encryption and multi-factor authentication.

Read the full NBKC review

nbkc bank nbkc bank View Rates

BlueVine

With an A+ rating from the Better Business Bureau, BlueVine offers services specifically designed for small businesses. If you choose a free business checking account, the bank enables you to make an unlimited number of transactions and also offers a competitive interest rate of 1% on checking account deposits. 

The bank doesn’t charge monthly maintenance fees or require a minimum deposit. You'll also benefit from free ATM usage at more than 35,000 locations, though you’ll pay a $15 fee for outgoing wire transfers. 

As well as its standard online banking features, the service is also available via a mobile app.

Read the full BlueVine review

Bluevine Bluevine View Rates

So, now what?

Although it may be tempting to use your personal checking account for your business banking needs, doing so is likely to waste significant amounts of time and energy and you risk confusing your finances, which could have legal ramifications. 

In contrast, having the right designated business checking and savings accounts could be essential for some of the activities on which your business depends, while also ensuring you remain on the right side of the law.

Katy Ward
Written byKaty Ward

Oxford graduate Katy Ward is a seasoned journalist and editor covering personal finance for Eleven Writing and Top10. Over a 15-year career, Katy has worked with several finance titans, including Barclays, Tandem Bank, and Yahoo! Finance. She enjoys identifying complex financial trends that make for interesting article topics.

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