How to Open a Business Checking Account

Businesses new and old benefit from a checking account offered by a reliable and supportive bank.

Is it time for your company to:

  • Begin accepting payments from customers for the first time?
  • Clearly differentiate between the owner’s and the organization’s finances?
  • Make a change in its existing business banking relationships?

If you answered “yes” to any of these questions, your company is ready to open a business checking account.

Benefits of a business checking account

A business checking account is essential for operating and managing a successful business. This type of business bank account makes it easier to process transactions and accept payments.

A business checking account offers more advantages when paired with complementary products and services. A checking account, along with a debit card tied to the account, streamlines everyday and major purchases for your company. When you combine business checking with a savings account, you have a complete solution for making, receiving and securely storing payments.

You will also need a business checking account for your company to operate under its business name, as a separate legal entity. Corporations and limited liability companies (LLCs) are legally required to use a business bank account separate from the personal accounts of owners and other stakeholders.

Key benefits of business checking accounts include:

  • Personal liability protection: Even if you’re a sole proprietor, organizing your business as an LLC or corporation can protect your personal assets if your business gets into legal or financial trouble.
  • Ability to transact business in your business name: Organizing your business requires legal documentation, obtaining an employer identification number (EIN) and New York State filing receipt. As a sole proprietor, you should file a certificate to conduct business (DBA) under another name. You may also use your own social security number for the business.
  • Credit preparedness: Opening a business checking account establishes a valuable relationship that can make it easier to access a loan, business credit card or business line of credit from your bank of choice.
  • Credibility: A separate checking account provides a layer of professionalism. Your vendors are more likely to have confidence in you if your payments come from a checking account in your business’s name.
  • Tax simplicity: When the time comes to do your taxes, a separate business account can make the process much faster by keeping personal and professional finances distinct.
  • Cash flow management: Separating business and personal transactions also makes it easier to review your finances and understand how money flows in and out of your company.

What is the difference between business and personal checking accounts?

On the surface, personal and business checking accounts operate in much the same way. Both types of accounts allow you to make cash withdrawals, cash deposits and process transactions via automated clearing house (ACH). Many accounts offer some form of overdraft protection as well. In addition, you can make purchases and withdrawals through a debit card.

However, there are some key differences to keep in mind between a personal and business checking account. A business account can have a higher monthly fee as compared to a personal account. While it is possible to find business accounts without a monthly maintenance fee, accounts with additional features often carry small service fees. The transaction fee is another important factor to consider. Some accounts allow for unlimited transactions without fees, while others set transaction limits for each statement period.

It’s possible to use a personal checking account for certain types of companies, such as sole proprietorships. However, there are pitfalls associated with tying your personal account to your business.

For instance, it may be difficult to keep every personal and business transaction separate. And if you operate your business as a corporation or LLC, you are required to keep your company’s finances distinct from your personal finances.

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Choosing the right bank partner and business bank account

Finding a bank partner that understands the needs of your business can be a challenge, but it’s worth doing the research. With the right bank, you’ll have a partner for the life of your business. Choosing a local bank is often the best route for small businesses. Community banks understand and want to support companies in their local market. Their knowledge of the area’s economy and desire to support it mean community banks are more likely to offer products and services in line with the needs of local small businesses.

In addition, local banks will usually offer several types of business checking accounts, allowing you to choose the right solution for your unique needs. When evaluating accounts, pay close attention to these features:

  • Monthly fees.
  • Minimum daily balance.
  • Check writing privileges.
  • Debit card access.
  • Merchant services offered.
  • Online and mobile banking options.

You may also be interested in specific types of business checking accounts, such as those that earn interest. While a savings account can also offer this benefit, interest-bearing checking can lead to additional passive income through just one account.

As a business owner, you should think of the digital tools your bank offers as value-added services. The ability to monitor your business accounts from your smartphone can greatly improve your banking experience. It’s always important to make sure the account you choose is insured by the Federal Deposit Insurance Corporation (FDIC).

Opening a business checking account is often the first step to developing a long-term banking relationship that will be key to the success of your company. It’s always easier to apply for a business line of credit, business loan or business credit card once you have an established relationship with your bank.

Business checking: Next steps and best practices

A business account will have a few more requirements than a personal account, so be prepared to provide additional documentation, such as the following:

  • Business license.
  • EIN or social security number (SSN).
  • Business formation papers (articles of organization or articles of incorporation).
  • State filing receipt.
  • Government-issued identification.

When possible, it’s a good idea to visit your bank in-person and speak with a representative face-to-face. An initial meeting will help you determine if the bank aligns with your business’s values and mission. Plus, it makes sense to get to know the people who will be handling your business’s finances. The experts who work at local banks have their fingers on the pulse of the local marketplace. This consistent focus makes them great partners who can help to steer you in the right direction when you need advice or encounter a financial challenge.

The Adirondack Trust Company believes that the success of small businesses is the focus of our community bank. We’re proud to offer locally based solutions — from checking and savings account options to a business credit card, loans and lines of credit — that deliver in quality, affordability and efficiency. We work hard to earn and keep your trust.

Learn more about our specialized checking solutions for local businesses.