How to Open a Small Business Bank Account

By Cameron McCool on January 18, 2017

*Heads up: this article has some information that's only relevant to U.S. businesses. *

Using a small business bank account helps keep your personal and business finances separate, and will make your life much easier come tax time.

LLCs, partnerships, and corporations are legally required to have a separate bank account for business purposes. Sole proprietors don’t legally need a separate business bank account, but it is something we strongly recommend.

In this guide, we’ll show you how to set up a small business bank account.

If you’re currently using your personal bank account for business purposes, don’t stress -- we’ve also included some advice on how to resolve commingled expenses at the end of the article.

Choosing the right account

Before you begin searching for the right bank, get clear on the type of accounts your business requires. Let’s take a look at the most common account types you’ll have to choose from, and how your business might use them.

Business checking account

This is the general account for your business, often used to receive income and pay expenses. As businesses tend to make a higher number of transactions and deposits than the average individual, business checking accounts differ greatly from personalized checking accounts. They have different fee structures, limits on the number of free monthly transactions, cash deposit limits, and traditionally lower interest rates when compared to personalized checking accounts.

Business savings account

It’s a great idea to save a percentage of each payment your business receives. Stockpile this money in a business savings account and use it to cover any emergency expenses and self-employed tax withholding.

Business credit card

Paying off a business credit card in full each month can help you build good business credit. Credit cards can also be used as an additional line of credit, and some also allow you to accrue points for perks such as frequent flyer miles and cash rewards. It’s a good idea to get a business credit card with the same bank as your business checking account, because payments made within the same bank process faster than those made from one banking institution to another.

Choosing the right bank

Once you understand the type of business bank accounts you’ll need, it’s time to choose a bank. NerdWallet’s Business Checking Account Search Tool lists and compares over 200 low-fee business checking accounts in the US. It’s a great place to start your search.

Here are some additional criteria to consider in your search for the perfect bank.


An easy way to quickly narrow down your search is to consider the bank’s physical location. Local banks often have cheaper fee structures and are known for placing a greater emphasis on customer service, which could be a good option if your business operates locally.

If you operate an online-only business and you don’t require in-person support from bank tellers, a branchless internet bank that offers 24-hour phone and online service could be a better option.

Alternatively, if your business operates across multiple regions or internationally, you’ll likely need to find a bigger, full-service banking institution that can meet your business’s needs.

Fees and fine print

Account fee structures will differ depending on which bank and which account you choose. Total monthly fees your business will incur will also vary depending on how much your business uses the account.

For example, while a business checking account might claim to be ‘free’ because it doesn’t charge an account service fee, your transactions during the month may incur charges for overdrafts, excess cash deposits, excess transactions, and other activity. In this example, the more your business exceeds its transaction and cash deposit limits during the month, the more it will pay in account fees.

Before finalizing which bank and business accounts are right for your business, pay close attention to the fee structure of each account and make sure you can comfortably afford the monthly fees you estimate your business will accrue.

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How to separate commingled personal and business finances

We’ve already mentioned that as a sole proprietor you can legally accept business payments into your personal bank account.

But do we recommend it? Never.

As well as having to painstakingly separate your business expenses from your personal bank account come tax time, if a personal bank account is used for business purposes then, legally speaking, you can be held personally liable if your business is ever on the hook for a sum of money.

Having commingled expenses can result in you “piercing the corporate veil”—which means that creditors, including the IRS, can pursue your personal assets to collect any outstanding debts.

If your business and personal bank accounts are currently commingled, read our guide to keeping your personal and business finances separate and take action to separate your finances as soon as you can.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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