Do You Need a Business Bank Account?

Cafe owner talking on phone with banker and reviewing her account on a laptop
Do you need a business bank account?. Photo: Hero Images / Getty Images

A business bank account is crucial for keeping your business and personal expenses and income separate and getting your new business's record-keeping off to a good start. Opening a business bank account is one of the first things you should do when starting a business.

Key Takeaways

  • Business bank accounts lend credibility to your business
  • Bank accounts geared for small business may come with a line of credit and multiple signing authority that is helpful
  • Decoupling business and personal bank accounts and maintaining separate financial records is a good practice, especially come tax time
  • Separating business accounts may limit personal liability to some degree

Business Credibility

Having a business bank account provides your new business with credibility (with both customers and potential creditors) which is especially important when you're starting a business. If some of your customers use checks to pay your invoices it is much more professional in appearance to have them writing checks to "Acme Corp" rather than to "John Smith". It also looks better as you pay your business invoices with separate business checks or a separate business credit card.


If you want customers to be able to write checks to your business name you need a business bank account.


Having a separate business account is also important for tax purposes. One of the easiest ways to attract attention from the Internal Revenue Service (IRS) is to commingle business and personal expenses and bank accounts. Keeping a separate business bank account with all of your business-related financial transactions provides a clear trail of business revenue and expenses in case you are audited by the IRS.


While it is recommended to have a separate account for both sole proprietorships and incorporated businesses, it is particularly important for corporations. 

A corporation is treated as a separate entity and as such the personal assets of the owner(s) are sheltered from potential liability.

However, in certain cases (such as gross negligence by directors or owners of the company) the courts may disregard the "separate entity" concept of a corporation and hold the directors or shareholders of a company personally liable. This is known as "piercing the corporate veil", and one of the criteria which may be used to determine this is the degree of separation between the financial activities of the owner(s) and of the business. As such, a separate business bank account for an incorporated company is a must.

Line of Credit

One of the biggest benefits of establishing a business bank account is a line of credit, that can help a small business get access to funds it requires, sometimes without a collateral. Businesses may use a line of credit in circumstances such as meeting unexpected expenses, getting funds during a liquidity crunch as well as finding money to grow the business.


Making large purchases using a business bank account can also help establish a credit history for your business, that may be helpful in getting favorable interest rates for loans in the future.

Multiple Signatories and Users

Business accounts can allow for multiple signing authority. It is a common practice for businesses to have more than one person with signing authority on the account (for example other directors, shareholders, managers, treasurers, etc.) It is also typical for businesses to require dual signatures on some types of transactions.

With a business account, you can also have different groups of signatories. For example, one group could be sole signatories (for trusted individuals) and another group could require dual signatures. Note that online business accounts also support "dual signature" authority.

Other Benefits of a Business Account

There are some other small benefits of opening up a business bank account that can indirectly help your business grow:

  • The ability to interface accounts with business accounting software. Most accounting software packages have the ability to link directly to business bank accounts at some banking institutions.
  • Proximity - If you are doing business locally you will likely want walk-in access to a branch within your community. Developing a strong relationship with your local banker can be of great benefit to your business - you are much more likely to be successful in obtaining small business financing, for example.

Cost of Business vs. Personal Accounts

The first thing you'll discover about business bank accounts is that they always cost more than personal bank accounts and typically pay less in interest on balances. However, there are some valid reasons for this (other than pure profiteering by the banks).

A business bank account is an asset owned by the business and as such if the business is sold, the bank account is included in the sale (another reason why a separate bank account is an absolute must for corporations).

Fortunately, bank fees are a deductible business expense.


When looking for a business bank account take the time to shop around, because there is quite a variance in the fees attached to business accounts, depending on the number of monthly transactions, the account balance, etc.

Estimate the number of transactions you are likely to make in a typical month and the lowest balance you are likely to have and compare this with the bank's fee schedule. Note that if your business does not need branch banking, an online business account can be less expensive.​

Frequently asked Questions (FAQs)

How do you open a business bank account?

The first step to opening a business bank account is to evaluate multiple account offerings at different banks and decide on which bank you want to open the account at. Consider rates, transaction fees and account minimums among some of the selection criteria. Once you've decided on the bank, go online or visit your local branch to open an account. The documents you require require may include your Employer Identification Number (EIN) (or a Social Security number, if you're a sole proprietorship), your business license, the ownership agreement and business formation documents for your business.

What is the best business bank account?

The best bank account for your business depends on your needs, there's not really a one size fits all. Some of the factors you should consider while deciding on a bank account include account balance minimums, transaction limits and fees, provision for multiple signatories, lice of credit offerings etc. If you're someone who like to cultivate relationships, having a bank with a local branch may be something that works for you as well.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Small Business Administration. "Open a business bank account."

  2. Cornell Law School Legal Information Institute. "Corporations."

  3. Cornell Law School Legal Information Institute. "Piercing the Corporate Veil."

  4. Wells Fargo. "Wells Fargo Business Lines of Credit."

  5. TD Bank. "Small Business - What you need for account opening and loan application."

  6. Internal Revenue Service. "Publication 334 (2021), Tax Guide for Small Business - Other Expenses You Can Deduct."

  7. Bank of America. "10 ways to help avoid business banking and credit card fees."

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