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Opening a Business Account

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Self-employed

Freelancer, independent contractor, etc

Salaried employee

Full-time or part-time W-2 employee

Business owner

LLC, S corp or partnership

Why to get a business bank account?

Let's be honest, we've all dreamed of starting a business, but truth be told, it's easier for some and difficult for others. To start a business, your best bet is to jump into the exciting entrepreneurship space. To start as an entrepreneur, you have to be self-employed and pay self-employment taxes. We could say that being a self-employed professional, a freelancer or an independent contractor is one of the best ways to grow into a business owner. It's also your best chance because when you start as a freelancer or single self-employed individual, your business risk is minimal, and you can also manage your business-related debts easily.

Table of contents

Key takeaways:...Read more

Do I need a business bank account?...Read more

What is a large enough business?...Read more

What's a multi-party business?...Read more

What's the purpose of a business bank account?...Read more

How to open a business bank account?...Read more

Is there a minimum balance to open a business bank account?...Read more

Key takeaways:

You need to ensure that your business needs a business bank account.
There are several parameters to check if you need a business bank account like the number of transactions, if you need to pay your employees

You can use this time to understand the critical aspects of your business and how to scale it. It's essential to deal with the nuances of your business, be it self-employment, a sole proprietorship or a freelance gig. And setting up a business bank account could be what you need to simplify your day-to-day tasks. But is having a business account always a good thing? We'll try to uncover some common misconceptions here and look at why it might be a good idea in other cases.

Do I need a business bank account?

It all depends on the scope of your work; you don't always need a business bank account just because you own and operate a business. For example, for some people, a business bank account could be a priority because they want to keep a separate account for their business expenses, so it's easier to track and find deductions when you file your taxes. For instance, if you’re a freelance photographer and you have multiple clients like social media influencers, to-be weds, real estate clients, a separate business account can easily help you distinguish between payments. However, with the latest tools like FlyFin's A.I.-enabled automatic deduction tracker, you can use any account and it will find your business expenses in minutes. This tool boosts the efficiency of your single-person operation, like freelancers, self-employed individuals, gig workers or independent contractors. Another useful tool you can use is a tax estimate calculator to help figure out how much 1099 tax you'll owe. But, there can be other more valid reasons to open a business bank account, like:

Alt text: Image with text "Two Reasons to Open a Business Bank Account: You run a large enough business and Your business has multiple parties" promoting the benefits of having a business bank account. No mention of self employed, 1099, freelancer or taxes.

What is a large enough business?

If you work alone and take care of your business, you don't need to go through the long and complicated process of getting a business bank account. This is true for sole proprietors, but only if you don't have a high number of payments. If you’re getting hundreds and thousands of dollars in payments from your clients and customers, then it's time to take the next step towards understanding the intricacies of getting a business account.

Quick tip

Always check the number of payments you get every month to gauge the size of your business.

What's a multi-party business?

If you need to pay the salaries of multiple people that work for you, you'll need a business bank account. This works for partnerships and LLCs, so if you own or are part of any of these two entities, it's a good idea to open a business bank account.

Image displaying types of businesses including Sole, Partnership, LLC, S-corporation, C-corporation, proprietorship, and limited liability company. No mention of self-employment, 1099, freelancer, or taxes.

What's the purpose of a business bank account?

A business bank account counters a variety of unique business problems, such as:

It helps keep your business income separate from your income.
Your funds can have protection against any business liabilities.
The business account becomes a necessity if you have a corporation or LLC.

Business bank account for business loans

If you think you might need a business loan sometime in the future, setting up a business bank account is a smart choice because your bank will have more confidence in you when sanctioning a loan. Getting a loan as a self-employed individual isn't easy, and showing the bank that you are worthy by having an active business account is a great place to start. For example, if you want a mortgage loan as a self-employed individual, you'll need to prove to the bank that you can comfortably repay the loan and you'll need to provide a lot of documentation to the bank, like bank statements, client details, income proof.

Easy access to business funds for partners

How to open a business bank account?

Alt text: A guide to opening a business account with FLYFIN. Steps include choosing a bank, selecting an account type, and submitting necessary documents.

Choose a bank

Once you've decided to get a business bank account, look for an ideal bank that satisfies your needs. The natural impulse is to go for the same bank that you use for personal banking. However, it might not be the best thing to do. When choosing a bank, look out for the things:

Low monthly service fee
Low-interest rates on loans and credit cards
Special offers on business credit cards
A recent APY (Annual Percentage Yield)
High deposit number cap

Choosing the correct business bank account type

After you choose a bank account, you need to select the type of bank account from the following three options:

Business checking account – if you want to withdraw money, write checks and use a debit card.
Business savings account – if you want long-term business savings and earn a higher interest rate on your business savings.
Merchant account – if you want to offer a higher level of customer satisfaction. This type of account protects the customer from fraud.

Fulfill the documentation needs

Once you have chosen the bank, you'll need to provide the following documents:

Personal identity card
Business identification – use your business's employer identification number (EIN)
Declare the kind of business – partnership/LLC/etc
Type of ownership – if it's a sole proprietorship or has multiple owners
Licenses – declare any business licenses you have
"Doing business as" (DBA) certificate – some states will want you to present this certificate.

Is there a minimum balance to open a business bank account?

In most cases, yes. The simple reason is that the bank also wants to protect your business and wants you to have an amount limit cap to maintain for times of crisis. This minimum amount in your bank also dictates the number of transactions you can have in a day.

Adjusted Gross Income

A lot of terms get thrown around when it comes to the tax season and your adjusted gross income (AGI) is one of them.