8 Business Checking Account Benefits

If you own a small business and want to level up your business professionalism, organization and legal protection, a business checking account may be right for you. Business checking accounts are offered by various financial institutions, including credit unions, online banks and traditional banks.

Takeaways: What Are the Benefits of a Business Checking Account?

• Helps separate your personal and business finances.
• Simplifies business tax, bookkeeping and accounting processes.
• Eases payments you make to vendors, employees and even yourself, along with payments you receive.
• Can potentially add layers of legal protection, depending on your business structure and bookkeeping. 

Be sure to discuss your accounting, legal structure and tax plans with a qualified professional.

8 Ways a Business Checking Account Can Help Small Businesses

Many benefits of a business account work best in tandem with other decisions, such as how you organize your business legally, lay out your business plan, use your business funds and manage your financial recordkeeping. Meet with a CPA or business consultant to discuss how you can establish or improve your business banking. 

1. Streamlines Business Accounting

2. Eases Vendor and Employee Payments 

You can set up your business's utility accounts in your company's name, including electricity, phone and internet service, and make payments from your business checking account. You can also pay independent contractors from your account or set up a payroll system. 

Doing your banking with a separate business account makes it easier to process payments and pay vendors with online, mobile and telephone banking. You can use online banking for free bill payment and mobile deposit for checks. You can also set up regular, automatic payments to vendors to save time or carry out electronic payments. 

Business checking accounts come with paper checks with your business address, debit cards and digital wallets, so you can buy equipment and supplies while on the go or mail checks to vendors.  

Your business credit rating can be damaged if you don't have the funds to pay a bill in your business checking account. Suppliers might insist on cash payments for your business purchases.

Banks and credit unions may offer payroll services or partner with providers. A payroll service can help you pay employees via direct deposit or paper check using online, phone or mail payroll submissions. Payroll services also typically help you and your employees track time and attendance. 

3. Simplifies Paying Yourself

If you're a sole proprietor, you can pay yourself (PDF) by going to an ATM and withdrawing funds from your business checking account. You can also transfer funds to your personal account or write a check from your business checking account. 

However, remember that income taxes haven't yet been withdrawn, so plan accordingly for tax time. 

If you're an S corporation, you must pay yourself a salary. You can also opt for a salary as an LLC or sole proprietor. Speak with a tax professional about how to pay yourself from your business account.

4. Organizes Tax Planning and Filing 

By separating your business and personal accounts, you can avoid miscategorizing your transactions for tax purposes. You'll also avoid the headache of searching for business expenses among your personal checking account transactions during tax season. 

You can use this information to ensure you're not overpaying your taxes and missing out on tax deductions. 

According to the University of Maine, keeping good records in this way could save you money. A missed $20 transaction could cost you around $8 in federal, Social Security and state taxes. 

Instead, software, apps, an accountant or a tax professional use your business banking information to help with tax preparation. You can make more accurate estimated quarterly tax payments and pay tax payments by transferring funds from your business account to the IRS.

5. Potentially Adds Legal Protection 

According to SCORE, a nonprofit volunteer business mentoring organization, setting up an LLC in conjunction with a separate business account can help provide some legal protection if your business runs into legal issues. Commingling your business and personal accounts can expose your personal assets to claims. 

Unlike personal debit cards, federal law doesn't protect business debit cards from liability for unauthorized transactions. However, state laws or account agreements may limit your responsibility for unauthorized transactions. 

If your business is a corporation, partnership, or unincorporated association, you have another $250,000 in FDIC or NCUA insurance separate from your personal accounts. 

However, if you make deposits as a sole proprietor, your personal and business accounts are only insured up to $250,000 total.

6. Helps with Future Credit

To get a business loan, many lenders will likely require you to have a separate business bank account and show business bank statements. These statements prove you have the funds to pay your loan.

Opening a business account can help build business credit in the future, too. You can get a business credit card or qualify for a small business loan and lines of credit. 

Credit can help you make high-cost equipment purchases or manage an emergency. Business term loans help fund large purchases, business vehicles or short-term cash solutions like a line of credit. A line of credit can also help you get through seasonal dips in revenue.

7. Allows for Employee Banking Access

As your business grows, you can delegate banking duties by sharing access to your business checking account. You can control banking access and employee permissions.

Shared users can log in with a unique name and password to view balances or help manage business transactions.

Separating business and personal accounts allows authorized employees to handle business banking tasks without seeing your personal finances. 

8. Offers New Ways To Save and Plan

Beyond a checking account at a bank or credit union, types of business accounts include savings accounts, money market accounts and certificates of deposit. 

Some business owners maintain multiple business checking accounts to receive payments, process credit card charges, pay employees, pay operating expenses and save funds. Having multiple accounts could even reduce the opportunity for fraud from a bad actor.

Some businesses may also set up transfers to a separate, interest-earning money market account to save for quarterly tax payments. 

According to SCORE, businesses should put 10% of their monthly revenue into a business savings account. Then, set aside at least three to six months' worth of operational expenses. Just like a rainy day fund, a business savings account can help prevent debt and, ideally, avoid dipping into personal funds.

The ideal business account for you may:

• Pay interest.
• Provide online banking.
• Include or partner with a payroll service (BECU partners with Paychex).
• Not require a minimum account balance.
• Offer merchant services with purchase protection for customers. 

Business Bank Account Fees

Fees are common with many business accounts, but the types vary. For a variety of business banking services, some banks and credit unions charge fees that range from $12 to $30 per month. BECU business checking¹ does not charge fees for monthly maintenance, foreign transactions² or electronic debits and credits. 

At BECU, for example, fees are charged (PDF) for:

• Nonsufficient funds. 
• Cashier's checks.
• Wire transfers.
• High-speed online deposits (if the average aggregate account balance in the business deposit accounts falls below $25,000 during a rolling 12-month period). 

Or you might receive a certain number of monthly business transactions without a fee, then a $0.20 per-item fee afterward. See BECU's Business Account Disclosure (PDF) for details.

Your combined account balances equal the average deposits balance, outstanding loans, and outstanding lines of credit.

Other fees you may see elsewhere could include minimum account balance fees, which BECU does not charge. 

Opening an Account for Business Banking

Typical documents you might be required to bring to open a business bank account depend on your business type and where your business is located. You'll need different documents depending on whether you're a sole proprietor, in a partnership, a corporation or an LLC. Contact the financial institution to find out what's needed. These documents may include: 

• Business registration documents
• Federal tax identification number
• Business plan 
• Unified business identifier number (in Washington)
• North American Industry Classification System code
• Assumed business name registration
• Your business's formation or organization document
• Ownership agreements
• Business license

A Final Word: Business Checking Accounts for Small Businesses

To sum up, a business checking account is a valuable tool to help your business get more organized and grow. Yet simply getting a business account isn't an overnight solution. 

The account can be used to obtain future business loans and establish good business credit. This account must also be used alongside good financial recordkeeping and professional tax preparer insights to take advantage of liability protection, financial organization and tax recordkeeping advantages.