What is a business checking account?
A business checking account helps business owners accept different types of payments and manage cash flow. Learn more about them and how to choose an account.
Updated 
7 min. read
A business checking account can provide a financial engine to help power your business. You can use it to pay rent, utilities, inventory, employees, and sub-contractors, and it can help you maintain accurate records for tax and bookkeeping purposes and analyze key metrics for your enterprise.
Whether you're launching an e-commerce site as a sole proprietor or running a business with a partner and staff, understanding how to use a business checking account, along with other types of accounts, can help guide your growth and long-term success. Here's an overview of business checking accounts, their benefits, features, and what you may need to open a business checking account.
What is a business checking account?
A business checking account is a dedicated bank account for managing a business's day-to-day funds. It serves a different purpose than a business savings account, which might provide overdraft protection or act as a rainy-day fund. It's also different from a personal checking account, which is where you might send your paychecks or profits from the business for personal use.
What are the benefits of a business checking account?
The primary benefit of opening a business checking account is to have a dedicated account for collecting customer payments or fees and paying creditors and vendors. Other potential benefits of business checking accounts include:
1. Banking services access
A business checking account can connect you to an array of financial services, including credit card processing, online banking, mobile apps, and digital payment services. An established business checking account can sometimes make it easier to apply for a business credit card or loan from the same bank.
2. Legal protections
Opening a dedicated business account could shield your personal finances from liability should your business face a lawsuit or close.footnote 1
3. Professionalism
If you're launching a startup or side hustle, using a business checking account could help you appear more professional to customers or vendors you want to work with and to investors or government agencies that provide business funding.
4. Simplified recordkeeping
Business checking accounts can make it easier to organize your transaction records.
5. Streamlined tax preparation
Business checking accounts can make it easier to file quarterly and annual taxes.
How do business checking accounts work?
Business checking accounts help business owners accept different types of payments and manage cash flow. Here are some common transactions:
- Check writing. You may use your business account to write checks to pay vendors, rent, utilities, insurance, and other expenses.
- Debit card payments. You may choose to use a business debit card for purchases. Some banks may also issue debit cards with certain limits to employees.
- ACH transfers. A business checking account may use ACH transfers to send and receive paperless payments. However, charges may apply.
- Wire transfers. You may use a business checking account to make deposits or withdrawals between domestic or foreign banks via wire transfers. Banks charge a fee for outgoing wire transfers, but some could offer free transactions for incoming transfers.
What do I need to open a business checking account?
Unlike personal checking accounts, which may only require a driver's license or other government-issued identification, Social Security Number, and initial deposit to open an account, the requirements to open a business checking account might be more extensive, including:
1. Business Information
- Business name, address, and contact details
- Legal structure (e.g., sole proprietorship, LLC, corporation)
- Employer Identification Number (EIN), Social Security Number, or Taxpayer Identification Number (TIN)
2. Ownership and Authorization
- Identification for all owners, partners, or key individuals (such as driver's licenses or passports)
- Articles of Incorporation or Organization (for corporations or LLCs)
- Partnership Agreement (if applicable)
- Business licenses or permits
3. Business Documentation and Business Tax Information
- Documents showing the legal structure of the business along with tax documents or information related to your business' tax status
4. Personal Identification
- Personal identification for authorized signers or individuals associated with the business
Check out this checklist for more information on business banking requirements.
What to look for when choosing a business bank account?
When opening a business checking account, you should look for the features that are most important to you, which might include:
1. Account services
Consider core features and benefits that might assist with running your business, including bill payment services, online and mobile banking, and cash flow management.
2. Ability to support business growth
Many banks offer better benefits and terms for businesses that grow their revenues over time. With BMO Business Checking, for example, you may choose among options that allow a certain number of free transactions per statement period and the ability to waive the monthly maintenance fee, provided you maintain a specific average collected balance.
3. Costs of operating the account
Review the various types of fees, which might include charges for monthly maintenance, minimum balance, wire transfers, ATM usage, and overdrafts, to help decide which business checking account is right for you.
4. Transaction limits and fees
Transaction limits and related fees will vary among banks and types of business checking accounts. Fees may apply if you exceed a certain number of transactions each month.
5. Branch banking and ATM access
The need to access a branch office or ATM will vary, depending on the business. For example, a restaurant owner who handles cash may need to go to a bank regularly, while the owner of an online firm may rarely need to access a physical bank location.
6. Interest rates
Many business checking accounts don't earn interest, but depending on the nature of your business, you may want to weigh the benefits of an interest-bearing account with any fees.
7. Mobile and website banking
Does the bank offer full access to its business checking accounts online or through a mobile app? How easy are these services to use? And do they seem reliable?
8. Merchant services
Where relevant to your business, consider merchant processing services, terms, and fees for accepting debit and credit card payments.
9. Account protection and insurance
When a bank is FDIC insured, the FDIC protects all deposits in a corporation’s, partnership’s, or unincorporated entity’s business accounts at the same bank for up to $250,000; this insurance is separate from any personal accounts held at the bank by a business owner or partner.
10. Perks and special offers
You may be able to access special benefits for opening a business checking account, including receiving cashback at the outset, on debit card purchases, or by spending with certain merchants.
Business Checking FAQs
Need more info? Here are answers to some frequently asked questions about business checking accounts.
Yes, it is possible to use a personal checking account for business purposes provided you are doing business in your personal name. However, it may be better to open a dedicated business account to protect yourself from personal liability and fraud as well as have a separate business name for your business.
You don't need to have a business bank account to start a business. However, a business bank account can offer multiple benefits, including access to banking services, credit cards, and other types of financing, as well as protection from personal liability and fraud.
A checking account is one type of business account. A business bank account is meant for use by a company or enterprise and could include checking or savings accounts. A personal checking account is a different type of bank account meant for non-business use.
It depends on your business. You might opt to open several business checking accounts to organize expenses or separate revenue from different locations.
You're not required to have a business checking account and a business savings account. However, a business savings account can serve as an emergency fund, provide overdraft protection, and help pay for investments in technology or inventory while generating interest on your deposits.
You don't need a business checking account to apply for a business loan, but it may help to show that your business is a professional enterprise and that you are keeping your personal and business funds separate.
If you have a business checking account, you're not required to have a business credit card. However, you may find it convenient to use a business credit card to purchase inventory and supplies and even for utilities and recurring bills.
Yes, a non-profit can open a business checking account, which can help an organization maintain accurate records for tax and reporting purposes.
Compare our checking account options to decide which one is the best fit for your business.
Ready to open an account?
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How to get a business loan in 5 easy steps
Have questions?
Footnotes
1You may consider consulting an accountant or lawyer for direction in your specific case.
Banking products are subject to approval and are provided in the United States by BMO Bank N.A. Member FDIC