The Basics for Small Business Checking Accounts

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The Basics for Small Business Checking Accounts

September 5, 2023 By
Katherine Zhang
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As a responsible small business owner, you want to have control over your finances and enable your customers to deal confidently with your business.

That's why you must accept a variety of payments such as bank transfers, credit card transactions, and even transfers from abroad.

At the heart of all your transactions, however, is your business checking account. Nothing else can run smoothly without it. In this article, we’ll show you the benefits of having a good checking account, how you open one, and how it helps you to enhance your customer’s experience.

Navigating the world of small business bank accounts

Having a dedicated business bank account is key to many important aspects of your small business, from accepting payments and tracking your expenses, to collaborating with external partners like bookkeepers and accountants. 

It simplifies your business in several ways, including: 

  • Separating personal and business finances for record-keeping and tax reasons
  • Providing personal liability protection to protect your personal assets
  • Building business credit to help your company gain eligibility for loans

However, there are several different account options for business accounts, and the right choice for you depends on your business needs. For instance, you might need any or all of the following: 

  • Business checking account

The standard business banking account for purchases and bill payments

  • Business money market/CD account

A separate account with higher interest rates to hold earnings and earn a return

  • Merchant services account

A special account needed to accept credit and debit card transactions from customers

  • Foreign currency account

A useful account for businesses dealing with international transactions

Most small businesses will need, at a minimum, a business checking account and a merchant services account. Your checking account, though, is the everyday workhorse you'll need to receive revenue and pay expenses.

hands on a touchpad of a laptop with a screen opened to an account with numbers

Small business checking accounts vs. regular checking accounts

While some small and medium-sized businesses, especially sole traders, commingle private and business finances, it is usually a good idea to separate the two. Keeping your business and personal finances in separate accounts brings several important benefits, such as:

  • Better tax management

Separating business and personal income and expenses gives you more control over your taxes, and minimizes the time you spend tracking and identifying transactions.

  • Legal compliance and financial security

An official business banking account can help ensure you comply with all regulations, protect your finances, and reassure your customers.

  • Structure for separating business and personal finances

It helps to separate your business and personal funds, protecting both your personal and business finances, and gives you more financial control.

How to choose the best small business checking account

Everyone has their own list of priorities when they start working with a bank, and the exact list will depend on your business. However, when you’re trying to choose the right business checking account, be aware of the following points:

FDIC insurance eligibility

It should be at the top of your list to work with a reputable institution covered by the FDIC deposit guarantee for business banking. Research your preferred financial institution to verify if they are a member of the FDIC. All FDIC-insured accounts you hold at the same bank are insured up to $250,000.

Account features

Every business is unique. Check if the bank you’re considering offers support tailored to your business needs. This may include features such as accepting credit cards, payment processing services, and great customer service.

Physical branch network and location

Like everything else, banks are moving to digital-first service. However, for business banking, it can be helpful to have a partner who’s available in person when you need them. Many banks have large branch networks to serve business customers in person, along with online channels if you prefer to stay digital. 

Fees and costs

Business banking doesn’t need to be expensive. However, bank fees can be complicated. Make sure you check the list of fees and costs associated with the bank accounts you're considering, and find a fee structure that fits your business's deposit and spending patterns. 

How to open an FDIC-insured small business checking account with an EIN

Before you open a business checking account, you'll need an Employer Identification Number (EIN). This unique number, which your business receives from the IRS, serves as your tax identification number, and banks and other institutions will typically require it to start working with you. 

To open an account, you would need to provide the following details to your bank (the exact process can vary depending on the financial institution you choose):

  • Your business's EIN (as outlined above)
  • Social Security numbers for you and any other owners (SSN)
  • Government-issued identification documents such as driver's licenses
  • Additional documents relating to your business such as incorporation documents, the legal name and address, details about your business sector and trade, and your business license

Once you've gathered the proper documentation, it's easy to open an account. For instance, you can call East West Bank at 1-888-761-3967, and we'll help you get up and running in no time.

Take charge of your business with the right checking account

As a small business owner, you know how important it is to have a solid financial foundation in place. You'll rely on your business checking account every day, and it's critical to have the right partner to ensure smooth financial operations. Find out more about how East West Bank can help you on your way with our business banking services.