If you formed an LLC or corporation for liability protection, a separate bank account is not optional housekeeping — it is the practical evidence that the entity is real. Run business money through a personal account and you have undermined the reason you formed it.
Commingling means mixing personal and business money — paying a personal bill from the business account, or taking business income into your personal one. It is the most commonly cited factor when someone argues that an entity should be disregarded and the owner held personally liable. It also makes bookkeeping and tax preparation materially harder and more expensive.
What you need to open one
Requirements vary by bank and entity type, but the usual set is:
| Entity | Typically required |
|---|---|
| Sole proprietor | Photo ID, SSN or EIN, and a DBA filing if trading under a name other than your own |
| LLC | Photo ID, EIN confirmation letter, articles of organization, operating agreement, and often a certificate of good standing |
| Corporation | Photo ID, EIN letter, articles of incorporation, bylaws, and a corporate resolution authorising the account |
Banks also collect beneficial ownership information under federal customer due diligence rules — details for anyone owning 25% or more, plus a control person. Have identification for those people ready.
Choosing where to bank
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Work out your actual transaction pattern
Cash deposits, cheque volume, wires, international payments, and how many monthly transactions. Fee structures are built around exactly these, and the cheapest account on paper can be expensive for a cash-heavy business with deposit limits.
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Compare the fees that will actually bite
Monthly maintenance and how to waive it, transaction count allowances, cash deposit limits, wire fees, and overdraft terms. Ask for the full schedule rather than the headline.
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Check integrations
A clean feed into your accounting software saves real time every month. See bookkeeping basics.
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Think about credit later
If you expect to want a loan or line of credit, an existing relationship helps. Community banks and credit unions are often more accommodating to small businesses than large national banks.
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Confirm deposit insurance
FDIC for banks, NCUA for credit unions. Worth checking directly if you are using a fintech platform rather than a chartered bank, since the arrangement can differ.
The accounts worth having
- Operating account — day-to-day income and expenses.
- Tax savings account — a separate account you move a percentage into on every deposit. This single habit prevents most quarterly tax emergencies. See estimated quarterly taxes.
- A business credit card — keeps expenses cleanly separated and builds a business credit profile. Note that most small business cards still carry a personal guarantee.
Some owners add a reserve account for irregular large costs — insurance renewals, equipment, annual filings. It is the same idea as the tax account applied to lumpy expenses.
Keeping the separation clean
- Never pay personal expenses from the business account, even intending to repay.
- Take money out properly as a draw or salary — see paying yourself as an owner.
- If you put personal money in, record it as a capital contribution or a documented loan.
- Sign contracts in the entity's name with your title, not in your own name.
- Reconcile monthly, so mistakes are caught while you still remember the transaction.
Stop, open the separate account, and document the transactions that crossed over as draws or contributions so the record is coherent. A clean break with a clear explanation is far better than continuing and hoping it is never examined.
Questions owners ask
Do sole proprietors need a business account?
Not legally, since there is no entity to keep separate. It is still worth it for bookkeeping, credibility and sanity at tax time — and it is required in practice if you want to accept payments in a trading name.
Can I use a personal account just at the start?
If you have formed an entity, this is exactly the habit that causes problems, and the longer it runs the messier it is to unpick. Open the account when you form the entity, before the first transaction.
Will they check my personal credit?
For a deposit account, usually not in the way a loan application would be, though banks do screen prior account history. Credit cards and lending are a different matter and generally do.
Where to check
- SBA — open a business bank account
- FDIC — deposit insurance
- Your bank's full fee schedule, requested directly