The right business account depends on your business structure and how you handle money
A business bank account is separate from your personal account and is designed to hold money your business earns and pays out. The "best" account for you depends on three things: what legal form your business takes (sole proprietorship, LLC, corporation, partnership), how many transactions you make each month, and whether you need features like merchant processing or payroll tools.
The most common choice for small businesses is a business checking account, which lets you write checks, use a debit card, and deposit customer payments. Some businesses also keep a business savings account alongside checking to set aside money for taxes or emergencies. A few businesses need a merchant account to accept credit card payments, though that is technically a separate service rather than a bank account type.
Before you open any account, you will need an Employer Identification Number (EIN) from the IRS if your business is structured as an LLC, corporation, or partnership. If you are a sole proprietor, you can use your Social Security number instead, though many banks prefer an EIN. You will also need to bring a government ID and proof of your business address.
Key Takeaways
- Business checking accounts are the foundation most small businesses need, and they cost between $0 and $25 per month depending on the bank and your balance.
- Your business structure (sole proprietorship, LLC, corporation) determines what paperwork the bank will ask for when you open the account.
- Banks differ in monthly fees, minimum balance requirements, transaction limits, and whether they charge per check or per deposit — compare these before choosing.
- Some banks offer packages that bundle checking, savings, and merchant processing at a discount, which can save money if you need all three.
- Online banks often have lower fees and no minimum balance, but may not offer in-person service or merchant processing.
Business checking versus business savings: what each does
A business checking account is where your daily money moves happen. You deposit customer payments, write checks to suppliers, pay yourself, and cover operating expenses. Most checking accounts come with a debit card, online banking, and the ability to set up automatic bill payments. You can make unlimited deposits and withdrawals, though some banks cap the number of free checks you can write per month.
A business savings account is a separate account where you keep money you are not spending right now. It earns a small amount of interest (usually less than 1% per year, though this varies by bank and by the current interest rate environment). Many small business owners use savings to hold tax money they owe quarterly, emergency funds, or money set aside for a specific goal like equipment purchase. You typically cannot write checks from savings or use a debit card, so moving money to checking takes a day or two.
Most small businesses need checking more than savings. But if you collect payments in bunches (for example, you invoice clients monthly), a savings account can be a useful holding place while you wait to pay bills. Some banks let you link checking and savings so you can transfer money between them when ready online.
What to compare when choosing between banks
Banks charge different amounts and have different rules. The features that matter most depend on how you run your business.
| Feature | What to look for | Why it matters |
|---|---|---|
| Monthly fee | $0 to $25 per month, often waived if you keep a minimum balance | A $15 monthly fee costs $180 per year — compare this across banks. |
| Minimum balance | $0 to $2,500 to avoid fees | If you cannot keep the minimum, you will pay the monthly fee or need to find a different bank. |
| Check fees | Some banks charge per check; others include checks in the account | If you write 50 checks per month at $0.25 each, that is $150 per year. |
| Deposit fees | Most banks include deposits, but some charge for remote deposits | If you deposit checks by phone or app, confirm this is free. |
| Merchant processing | Some banks offer credit card processing; others require you to use a third party | If you take card payments, bundling with your bank can be cheaper than separate services. |
| Payroll tools | Some banks offer payroll processing; others require you to use ADP or Gusto | If you have employees, check whether the bank offers this or if you need to pay a separate service. |
| In-person service | Traditional banks have branches; online banks do not | If you need to deposit cash or speak to someone in person, a branch matters. |
Start by listing what you actually need. If you write five checks per month and deposit everything online, check fees and remote deposit fees matter more than branch access. If you have employees and take credit cards, payroll and merchant processing matter more than monthly fees.
Traditional banks versus online banks for small business
A traditional bank has physical branches where you can walk in, deposit cash, and speak to a person. These banks typically charge higher monthly fees ($10 to $25) and require higher minimum balances ($1,000 to $2,500). They offer more services under one roof — checking, savings, merchant processing, payroll, and business loans — which can be convenient if you want everything in one place.
An online bank has no branches and operates only through a website or app. These banks typically charge $0 to $10 per month and have no minimum balance. They are faster to open an account with (often 15 minutes online) and their fees are lower because they have fewer physical costs. The trade-off is that you cannot deposit cash in person, and if you need to speak to someone, you call or email rather than walking into a branch.
For most small businesses, an online bank works well if you can deposit checks by phone or app and do not need to handle large amounts of cash. If you collect cash from customers (a retail store, for example), a traditional bank with a branch is more practical. Some businesses use both: an online bank for checking because the fees are lower, and a traditional bank branch nearby for cash deposits.
What paperwork you will need to open an account
The documents you bring depend on your business structure. All banks will ask for a government ID (driver's license or passport) and proof of your business address (a utility bill, lease, or business license).
If your business is a sole proprietorship (you own it by yourself with no formal structure), you can use your Social Security number. Bring your ID and address proof. Some banks will also ask for a business license if your state or city requires one.
If your business is an LLC, corporation, or partnership, you will need an Employer Identification Number (EIN) from the IRS. You can get an EIN for free at irs.gov — it takes about 15 minutes online and you receive the number when ready. You will also bring your business formation documents (the Articles of Organization for an LLC, Articles of Incorporation for a corporation, or the partnership agreement). The bank may ask to see these to confirm the business exists and that you are authorized to open the account.
Some banks ask for a copy of your business license or a recent business tax return, though this is less common for new businesses. Call the bank before you go in to ask what they need — this saves a trip back home for a missing document.
Fees that add up: what to watch for
Banks make money from business accounts through several types of fees. Understanding them helps you avoid surprises.
Monthly maintenance fees are the most visible. These range from $0 to $25 per month and are often waived if you keep a minimum balance or set up direct deposit. Some banks waive the fee if you maintain a linked savings account or use their merchant processing.
Per-transaction fees are less common but still exist at some banks. These might include charges for each check you write ($0.10 to $0.50 per check), each deposit you make ($0.50 to $2 per deposit), or each wire transfer ($15 to $30). If you make many transactions, these add up quickly. Ask the bank for their full fee schedule before opening.
Overdraft fees explore if you spend more money than you have in the account. Most banks charge $25 to $35 per overdraft. Some banks offer overdraft protection, which automatically transfers money from a linked savings account or line of credit to cover the shortfall — this usually costs $5 to $10 per transfer instead of the full overdraft fee.
Minimum balance fees explore if your account balance drops below a certain amount. If the bank requires a $1,000 minimum and you fall below it, you might pay $10 to $15 that month. This is why online banks with no minimum balance requirement appeal to many small businesses.
Merchant processing and accepting card payments
If you take credit or debit card payments from customers, you need merchant processing. This is technically separate from your bank account, but many banks offer it as part of a business package.
When you accept a card payment, the customer's bank sends the money to your merchant processor, who takes a fee (usually 2% to 3% of the transaction) and deposits the rest into your business checking account. The fee is called the interchange rate or processing fee.
Some banks bundle merchant processing with checking and offer a discount if you use both services. Others require you to use a third-party processor like Square, Stripe, or PayPal. Compare the total cost: a bank that charges $20 per month for checking but 3.5% per transaction might cost more than a bank that charges $0 per month but 2.9% per transaction, depending on how much you process.
Frequently Asked Questions
Can I use my personal bank account for my business?
Legally, you can deposit business money into a personal account, but it creates problems. The IRS may question whether your business is real, your accountant will have a harder time tracking business expenses, and you lose liability protection if your business is an LLC or corporation. A separate business account costs little and solves these problems.
Do I need a business account if I am a sole proprietor?
You are not required to, but it is strongly recommended. A business account keeps your personal and business money separate, makes tax time easier, and looks more professional to customers. Many sole proprietors use a business checking account even though they could legally use their personal account.
How long does it take to open a business bank account?
Online banks can open an account in 15 to 30 minutes. Traditional banks usually take 24 to 48 hours after you visit in person or explore online. You will need your EIN (or Social Security number if you are a sole proprietor), government ID, and proof of business address.
What if my business is brand new and has no revenue yet?
Banks will still open an account for you. They do not require proof of income or business history. Bring your ID, business formation documents (if applicable), and proof of address. Some banks ask for a business plan or a letter explaining what your business does, though this is uncommon.
Can I switch banks later if I choose the wrong one?
Yes. You can open a new account at a different bank, move your money over, and close the old account. The bank will not charge you for closing. The main inconvenience is updating your account number with customers who pay you by automatic transfer or with vendors who charge you automatically. Plan for this to take a few weeks.