Do You Need A Business Checking Account?

When it comes to running your small business, you may feel tempted to dump all your business expenses and earnings into your personal checking account for the sake of convenience. You’re a busy entrepreneur with a ton of information to track — why bother adding to the load by keeping separate checking accounts?

It turns out there are plenty of reasons to draw a bright line between your personal and business finances, including your checking accounts. Below, CNBC Select breaks down these benefits and explains how to set up your business checking account.

If you think commingling your business and personal funds in the same checking account will save you some time, you’re in for a rude awakening when you file your business taxes. You would need to go through potentially thousands of transactions and be able to identify which ones were meant solely for business needs vs. your personal life to avoid all sorts of tax (and potentially legal) headaches.

However, if you keep those transactions within a business checking account, you’ll have to do much less leg work come tax time. This also makes it easier for you to import your transactions onto platforms like QuickBooks, which will then sort your transactions into different tax categories and organize your transactions so you see where your business’s money goes. In this sense, you’re working smarter, not harder.

A business debit card can help you maintain the line between your personal spending and your business spending, which, again, keeps things organized when you file your taxes. Many business checking accounts will issue multiple debit cards, so you can give employees access to your funds (a feature most personal accounts lack).

For instance, Chase Business Complete Banking® allows the checking account owner to get individual debit cards and PINs for employees and the owner can set daily limits on the spending. This helps empower your team to order business supplies (for example) while still giving you insight into what’s being purchased through the company so you can report those transactions during tax time.

The Bluevine Business Checking account even rewards you for spending with its debit card. If you spend $500 per month with Bluevine Business Debit Mastercard® you’ll be eligible to earn 2.0% APY on checking account balances up to and including $250,000. The other requirement to be able to earn the APY is to receive $2,500 per month in customer payments into the account through ACH, wire transfer, mobile check deposit, or directly from a merchant payment processing provider.

Plus, a business debit card is a low-stakes way to get comfortable with business spending before you take the leap to apply for a business credit card.

If you ever need additional funding for your business, you might turn to business loans or business grants. Of course, you’ll need a checking account for your funds to be deposited into. Many business loan lenders and grant programs require you to have a business checking account in order to apply. So if you think your personal checking account should be good enough for now, you might be disqualifying yourself from major funding opportunities.

Personal checking accounts don’t usually come with perks or welcome bonuses but some business checking accounts help you earn benefits that can help you run your business more smoothly.

For instance, after signing up for the Novo Business Checking account, you can get a host of perks including $3,000 in Google Cloud credits, $150 toward Google Ads, 40% off your first six months of QuickBooks Online and up to $20,000 in fee-free credit card transactions when you link your checking account with Stripe.

Offers like this can help give you a leg up when it comes to affordably launching and managing your business in the early days. So if you manage to find a business checking account with some extra perks, it could be worth exploring.

Opening a business checking account is a lot like opening a personal one. Once you decide which bank you want to go with, you sign up for the account by inputting your personal details such as your name, address, date of birth and Social Security number.

But for business checking accounts, you’ll also need to provide information on your business, like the business name, business address and phone number, employer identification number if you have it and what type of business entity you have (LLC, sole proprietorship, etc.).

You may also need additional documentation like a business license and name registration certificate. It can be helpful to ask the bank for a checklist of everything you’ll need and prepare all your documents before you sit down to officially open the account.

If you have a business — no matter what its size — it’s a good idea to avoid relying on your personal checking account and instead open a business account. Not only does that help you avoid some big tax pitfalls, but it also gives you access to different features that should mesh better with what you need from your checking account.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of business checking account products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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