What Is a Business Checking Account? And How to Choose a Business Checking Account?

What Is a Business Checking Account?

A Business checking account resembles a personal checking account in many ways. With both types of accounts, you can normally make deposits and withdrawals, process ACH payments, create checks, make purchases using a debit card, and access ATMs.

A commercial checking account maintains funds for your firm, whereas a personal checking account holds funds for personal expenses such as mortgage payments, car payments, and utility bills. Another important distinction is that business bank accounts typically charge more fees than personal checking accounts.

How Do Business Checking Accounts Work?

There are business checking accounts for various types of businesses. LLCs, sole proprietors, corporations, and partnerships are all eligible to open business checking accounts. A business checking account can be opened by a company as small as a one-person consulting firm or as large as a software giant with 10,000 employees.

Do I Need a Business Checking Account?

A business checking account allows business owners to separate their business funds from their personal funds. Among the benefits of a business checking account are its ability to enhance your company's legitimacy, enhance accounting, and ease tax filing. In addition to protecting your personal assets from business-related legal actions or debt collection, business checking accounts may provide access to a business credit card or line of credit.

How to Choose a Business Checking Account?

Your business banking relationship starts with a checking account for your business. One of the most important things it does is keep your personal banking separate from your business banking.

Before you choose an account just based on the APY or fees, think about what you and your business need from this account. Does a lot of your business depend on the way transactions are handled? Will you be dealing with money often? It's important to know what your specific needs are, both at the beginning of your business and as you plan for it to grow.

Here are some things to think about when picking the right business checking account for you:

• Fees. Since you'll use your business checking account for day-to-day business transactions, it's important to keep fees low. Pay special attention to any monthly maintenance fees, out-of-network ATM fees, or volume-based transaction fees.
• Minimums. When you open a business checking account at some banks and credit unions, you have to put down a certain amount of money. Others may require you to keep a minimum balance or do a certain number or type of transactions each statement cycle in order to avoid a monthly maintenance fee or earn the stated APY.
• Limits. Since you'll probably be making more transactions per statement cycle with your business account, it's important to check if there are any limits. Some accounts will limit the number of transactions you can make or the types of transactions you can make. Other accounts may limit how much cash you can put in or take out.
• APY. When it comes to savings deposit accounts, the interest you can earn is more important. Still, for many businesses, their business checking account may be their only relationship with a bank. Not all checking accounts for a business pay interest. But if you can earn APY on your business checking account, that's even better.
• Helping customers. No matter if you bank online or at a branch, it's important to be able to get customer service help when and where you need it. Some banks and credit unions have people who are only there to help businesses with their needs and problems.
• Digital experience. Businesses learned from the Covid-19 pandemic how important it can be to use online and mobile banking. Since so many transactions happen on phones or laptops instead of in bank branches, the quality and functionality of a mobile app can affect how well your business does.
• Safety. Make sure that your account is covered by the Federal Deposit Insurance Corporation (FDIC). In the event that a bank fails, it covers up to $250,000 per depositor, per bank, for each type of account ownership. Look for coverage like this from the National Credit Union Administration at credit unions (NCUA).
• There's room to grow. Your business checking account is the first step in building a relationship with a bank for your business. Look at what other services the bank offers that may become important to you as your business grows, such as ways for your business to save and invest, add merchant or treasury services, and get loans or lines of credit.

There is no one answer that works for everyone. Choosing the best business checking account for your small business is a personal choice that depends on the needs of your business and your own habits and wants.

There are a lot of best business checking accounts, like bluevine, Grasshopper, zil bank (zil money), Chase for business, etc.