Business bank accounts can help owners keep professional transactions separate from personal banking and aid in their business cash management. These accounts often come with special conditions and requirements, and they may have various fees.
Here, we’ll take a closer look at these accounts, their pros and cons, and what it takes to open one. Let’s dive into the details about business bank accounts.
What Is a Business Bank Account?
There are three main types of business banking accounts: checking accounts for everyday use, savings accounts for intermediate and long-term savings, and merchant accounts for accepting debit and credit card payments. In this article, we’ll focus on business checking and savings accounts, available from both online and brick-and-mortar banks.
What Is a Business Checking Account?
A business checking account works much the same way a personal checking account does. You use it to deposit payments and make withdrawals, usually an unlimited amount. Like personal checking accounts, business checking accounts typically pay low to no interest on your balance.
What Is a Business Savings Account?
A business savings account will pay more interest than a checking account, so it can be a good place to park cash on an interim basis. You will likely be limited on how many transactions you can make per month without a penalty (typically six), and there may be a monthly minimum balance to maintain. Many business owners find using both a business checking and savings account can meet their banking needs.
How Long Does Opening a Business Bank Account Take?
If you open up a business bank account — whether it’s checking, savings, or both — the time commitment needed is usually similar to that of a personal checking and savings account. It will likely take just a matter of minutes if you have the necessary information on hand. You will need to provide some details about yourself, your business, and any additional business owners involved in your enterprise. Then, you’ll deposit funds. Keep in mind it can take up to seven business days for final approval before you can actually access funds.
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What Is Needed to Open a Business Bank Account?
Whether you open your bank account online or in person, you’ll need documentation of several personal and business details. Different banks may have their own verification requirements, depending on the type of business you own and the type of account you’re looking to open.
Here is a general list of what you might need to have on hand to make the opening process most efficient:
• Your name, birthdate, and Social Security number
• Mailing address and all contact information
• What percentage you own of the business (anyone who owns 25% of the business or more will likely have to disclose personal details and identification)
• A government-issued photo ID, such as driver’s license or passport
• Business name and DBA (“doing business as” name) or trade name, if applicable
• Business address and employer identification number (EIN) (Note: sometimes Social Security numbers suffice)
• Industry/type of business
Depending on the type of business you own, you may be asked for the following documents:
• Sole proprietorships may need the business name registration certificate and the business license.
• Partnerships may need the partnership agreement, business name registration certificate, business license, and the state certificate of partnership.
• Limited Liability Companies (LLCs) may need the articles of organization, LLC operating agreement, and business license.
• Corporations may need articles of incorporation, corporate bylaws, and business licenses.
What to Look for in a Business Banking Account
Traditional banks, online banks, and credit unions all offer business bank accounts. All have different fee structures and provide different services. There are many fees and restrictions to consider when choosing a business banking account. But consider this overarching factor: online accounts are usually best for businesses that don’t need to make bank deposits.
Here’s what to compare when you’re looking for an account:
• Monthly fees, such as account maintenance
• Any minimum balance requirements
• No-fee transactions
• ATM access (for deposits and withdrawals)
• Transfer, wiring, and payment capabilities
• Incidental fees (such as, stop payment, overdraft, and nonsufficient funds)
• Online and mobile banking tools
• Additional features, such as invoicing, bill pay, or integrations with other business tools (especially tax reporting software)
Benefits of Opening a Business Banking Account
A business account can be a smart tool for a variety of reasons. Business owners may need to keep their personal and business accounts separate for tax and liability reasons. A business bank account also helps you establish a banking relationship that you can draw on in the future for lending or other services that may help your business grow. You will also establish a financial record that can come in handy when it comes time to file taxes and help your concern establish a good credit rating.
Cons of Opening a Business Banking Account
There are very few cases when a business banking account is a bad idea. Some very small sole proprietors may find they don’t need the extra fees and bookkeeping involved. But for most business owners, a separate account can be an efficient tool.
That said, one of the potential drawbacks of a business banking account is fees. High fees that you may not have anticipated can eat into your business profits. Some fees to look out for include monthly fees, transaction fees, monthly balance transfer fees, cash deposit fees, ATM fees, and wire transfer fees. These fees add up fast. Be sure to check thoroughly what fees are involved and compare from one financial institution to another.
|Pros of a Business Bank Account||Cons of a Business Bank Account|
|Keeps professional finances separate from personal||May involve additional fees|
|Establishes a business relationship with a financial institution||May involve more bookkeeping|
|Creates a financial record that can be useful for tax or credit-rating purposes|
Choosing a Business Bank Account
Now that you’ve looked at fees, here are some other considerations as you choose your business bank account:
• Banking online: Business bank accounts with online-only banks can be great for virtual businesses or any business that is not handling daily cash transactions. Many online banks do not require a monthly minimum balance.
• Network: If you’re banking in person, be sure there is a conveniently located branch near your business. Also, find out how many no-fee ATMs are available in your area.
• Electronic services: Check if online bill pay, electronic fund transfers, and other electronic services that can support your business are available for low or no fees.
• Electronic payments: Does your bank accept Zelle and Venmo? If so, are there additional fees involved? How long will it take for transactions to post? Electronic payments are increasingly becoming the lifeblood of many businesses.
• Software compatibility: Is the bank account you’re considering compatible with the bookkeeping software you use? That can make life easier when you need to track or get access to cash flow, outstanding receivables, and other items each month.
Other support: Does the bank offer small business loans, lines of credit, business credit cards, and other financial support for entrepreneurs that you may need in the future?
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
The following describes the terms that apply to participation in the SoFi Checking and Savings direct deposit promotion (the “Direct Deposit Promotion”) offered by SoFi Bank, N.A, Member FDIC (“SoFi”).
Eligible Participants: All new and existing members without any history of direct deposit transactions into their SoFi Checking and Savings account are eligible for the Direct Deposit Promotion. Members who previously enrolled in direct deposit into either SoFi Money or SoFi Checking and Savings, whether currently still enrolled or not, do not qualify for this Direct Deposit Promotion. Bonuses are limited to one per SoFi Checking and Savings account. In the case of a joint account, only the primary account holder (the member who signed up first) is eligible for a bonus.
Promotion Period: The Direct Deposit Promotion will begin on 01/01/2023 at 00:01AM ET and end on 12/31/23 at 11:59PM ET.
Bonus Terms: In order to qualify for eligibility for a bonus, SoFi must receive at least one Direct Deposit (as defined below) from an Eligible Participant before the end of the Promotion Period. Direct Deposits are defined as deposits of $1,000.00 or greater from an enrolled member’s employer, payroll, benefits provider, or government agency via ACH deposit. Deposits that are not from an employer, payroll, benefits provider, or government agency (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and external bank ACH transfers not from employers) do not qualify for this Direct Deposit Promotion. The amount of the bonus, if any, will be calculated during the Direct Deposit Bonus Period as described and defined below.
Direct Deposit Bonus Period: The Direct Deposit Bonus Period begins when SoFi receives a Direct Deposit within the Promotion Period and ends 25 calendar days later (the “Direct Deposit Bonus Period”). For the avoidance of doubt, the Direct Deposit Bonus Period shall not extend beyond the Promotion Period. The bonus amount will vary based on the total amount of Direct Deposits received during the Direct Deposit Bonus Period. Once the Direct Deposit Bonus Period has elapsed, SoFi will determine if you have met the offer requirements and will deposit any earned bonus into your checking account within seven (7) business days. For example, if SoFi receives between $1,000.00 and $4,999.99 in Direct Deposits during the Direct Deposit Bonus Period, you will receive a one-time cash bonus of $50. A member may only qualify for one bonus tier and will not be eligible for future bonus payments if Direct Deposits subsequently increase after the Direct Deposit Bonus Period.
Total Direct Deposit Amount in Direct Deposit Bonus Period
Cash Bonus Tier
$1,000.00 - $4,999.99
$5,000.00 or more
Bonus Payment Timeline: SoFi will credit members who meet qualification criteria within seven (7) business days of the end of the Direct Deposit Bonus Period.
Bonuses are considered miscellaneous income and may be reportable to the IRS on Form 1099-MISC (or Form 1042-S, if applicable). SoFi reserves the right to exclude any Members from participating in the Direct Deposit Promotion for any reason, including suspected fraud, misuse, or if suspicious activities are observed. SoFi also reserves the right to stop or change the Direct Deposit Promotion at any time.
SoFi members with Direct Deposit can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the 4.60% APY for savings (including Vaults). Members without Direct Deposit will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
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