Running a small business is already a juggling act—do you really want to complicate things further by having the wrong bank accounts? Whether you’re starting out, expanding, or streamlining your finances, having the right mix of business bank accounts is like having the perfect tool for the job—it just makes everything run smoother.

To help make sure you’re on the right track, here’s a guide to help you choose the best accounts for your business needs.

Why You Need a Business Bank Account

Let’s start with the big question: Why not just use your personal accounts? Sure, it might seem simpler initially, but mixing personal and business finances can quickly become a bookkeeping mess. Plus, having a dedicated business account helps you:

• Keep your finances organized (no more hunting through grocery receipts for that business expense)
• Build credibility with vendors and clients who prefer to write checks to your business—not you personally
• Simplify tax season (trust me, your accountant will thank you)
• Keep you out of legal trouble by not “piercing the corporate veil” (talk to your attorney about this one)

So, if you haven’t already opened one, now’s the time.

Types of Business Bank Accounts

Here’s a breakdown of the most common types of accounts and how they match up to different business needs:

1. Business Checking Account

A small business checking account is the foundation of business banking. This account handles day-to-day transactions like deposits, bill payments, and payroll. Look for:

• No monthly service fee
• Online and mobile banking tools to save you trips to the branch
• A healthy monthly transaction limit if your business has frequent deposits or withdrawals

You may even earn interest on the balance in business checking accounts. For example, Bluevine business checking accounts check all of the above boxes PLUS you earn 1.5% APY on balances under $250K (as of November 2024).

2. Business Savings & Money Market Accounts

Want to grow your cash reserves? A savings account helps you set money aside for taxes, future investments, or the “just in case” fund every business needs. Look for:

• Competitive interest rates (or at least better than your business checking account offers)
• Low minimum balance requirements so you’re not penalized during lean months

Pro tip: Set up automatic transfers from your business checking account to your business savings accounts to start building your business emergency fund.

3. Merchant Services Account

Do you accept credit card payments? Then you’ll need a merchant services account. It processes customer payments and transfers them into your business checking account.

Look for providers that offer:

• Affordable processing fees (every penny counts)
• Integration with your point-of-sale system or e-commerce site

This account is like your trusty cash register—except it’s digital and works 24/7.

4. Business Certificate of Deposit (CD)

Business CDs are alternatives to business savings accounts, but they usually pay a higher rate of interest. The catch is you can’t touch the money for a set period. If you do, you’ll pay an early withdrawal penalty.

Fortunately, you can choose your CD term—anywhere from a few months to several years.

• Competitive rates—some financial institutions offer promotions with special CD rates for various term lengths
• Maturity date (they can range from one month to 10 years)

Pro tip: If you want the higher interest rates of a business CD but want to manage cash flow, consider a CD ladder. This involves buying multiple CDs with staggered maturity rates to access portions of your money at frequent intervals.

5. Specialized Accounts

Some industries have unique banking needs. For example:

• Trust accounts hold money on behalf of clients. Law firms, property managers, insurance agents, and other businesses that hold client funds may need a trust or escrow bank account
• Nonprofit accounts have unique features like waived fees and donation management tools
• Sweep accounts automatically move excess funds from a business checking account to a higher-earning business savings or investment account to maximize earning potential
• Brokerage accounts can be used for businesses who have funds they want to invest in stocks, mutual funds, ETFs, and other traditional investment strategies

If your business falls into a niche, don’t hesitate to ask your banker about tailored options.

Questions to Ask When Choosing a Bank

When picking a bank or credit union, think beyond the freebies. Ask yourself:

• Is it FDIC-insured? The Federal Deposit Insurance Corporation is a federal government agency that protects the money in member FDIC banks in the unlikely event the bank fails. The standard deposit insurance coverage limit is $250,000 per depositor, bank, and ownership category. Credit unions have their own insurance fund run by the National Credit Union Administration (NCUA).
• What are the fees? Look for monthly maintenance charges, transaction fees, overdraft charges, and ATM costs.
• Is it business-friendly? Does the bank offer loans, lines of credit, or resources for small businesses?
• How convenient is it? Is there a branch nearby? Does it have an extensive network of ATMs? Does it offer online bill pay, ACH payments, and other convenient online banking features? Can you make mobile deposits and manage accounts online or via a mobile app?
• Are there perks? Free checks, cash back on debit cards, fraud monitoring services, or higher rates on savings accounts can sweeten the deal.
• What’s the vibe? Do you feel comfortable asking questions, or is it all corporate jargon? (Trust me, a supportive banking relationship can go a long way.)

Tips for Opening Business Accounts

So, you’ve decided to open a business deposit account—great move! Now, let’s talk about how to make the process smooth and stress-free. Spoiler alert: It’s not as intimidating as it might seem. With a bit of preparation, you’ll be in and out of the bank (or website) in no time.

Choose the Right Bank and Account

If you haven’t already, take a moment to research banks that offer the features you need, whether it’s low fees, great customer service, or business-friendly perks. Once you’ve picked your winner, head to their website or branch to start the application process.

Gather Your Documents

Banks want to know you’re a legit business owner before opening an account. You’ll likely need to provide:

• Personal identification. Have yourgovernment-issued ID (driver’s license, passport, or state ID) and Social Security number (or Individual Taxpayer Identification Number for non-citizens).
• Business formation documents. Depending on your business structure, you may need to provide a copy of your articles of organization, operating agreement, partnership agreement, articles of incorporation, or corporate bylaws.
• Employer Identification Number (EIN). This is like a Social Security number for your business. If you don’t already have one, you can apply for an EIN through the IRS—it’s free and usually takes just a few minutes online.
• Proof of address. Many banks require a recent utility bill, lease agreement, or other proof that your business has a physical location (even if it’s your home).
• Initial deposit. Some banks require a minimum deposit to open your account, so make sure you have funds ready.

Most banks offer the convenience of opening accounts online, but if you’re someone who likes to talk through details face-to-face, visiting a branch is a great option. Once you open your account, save yourself time and headaches by setting up online banking right away. This allows you to monitor your account in real-time and take advantage of other time-saving features like mobile deposits, online bill pay, and downloading transaction records for bookkeeping.

A Final Word of Encouragement

Choosing the right bank account might feel like one more thing on your already long to-do list, but it’s a small step with big rewards. When your business finances are in order, you’ll feel more confident, prepared, and ready to tackle whatever comes next.

Remember, you don’t have to figure it all out alone. If you’re feeling stuck, contact NewWay Accounting. We can guide you through the process and help you make the best choice for your unique needs. You’ve got this!