Yes, corporations can open interest-bearing checking accounts, but the options are more limited than they are for individuals

A corporation can open a checking account that earns interest, but you will find fewer banks offering this product than you would for a personal account. Most banks treat business checking as a separate category from personal checking, and many do not bundle interest earnings into a standard business account. Instead, you may need to open a money market account or a business savings account alongside your checking account, or choose a bank that specifically markets interest-bearing business checking as a product.

The reason for this difference comes down to how banks make money. Personal checking accounts with interest are less common now than they were before 2008, because interest rates dropped so low that banks found it cheaper to offer no interest at all. Business accounts face the same pressure, but banks also assume that a business with cash to spare will use a dedicated savings or investment product rather than leaving money in a checking account. This means you may earn more interest by keeping your operating cash in checking and your reserve cash in a separate account.

Key Takeaways

  • Most banks do not offer interest on standard business checking accounts, so you may need to open a money market or savings account to earn interest on your cash reserves.
  • Some online banks and credit unions do offer interest-bearing business checking, so it is worth asking your bank directly or comparing options before opening an account.
  • A corporation must provide an Employer Identification Number (EIN), articles of incorporation, and a board resolution authorizing the account before opening any business account.
  • Interest rates on business accounts vary widely by bank and by account type, so the interest you earn may be very small even if the account technically earns interest.

What documents a corporation needs to open any business account

Before you can open a checking account—with or without interest—the bank will ask for proof that your corporation exists and that someone has the authority to open the account. Bring your Employer Identification Number (EIN), which you receive from the IRS when you register your corporation. You will also need a copy of your articles of incorporation, which is the document you filed with your state to create the corporation in the first place.

Many banks also ask for a board resolution or corporate resolution—a document signed by your board of directors or officers stating that the corporation authorizes someone (usually the person opening the account) to manage the account on its behalf. Some banks provide a template for this; others accept a straightforward letter on company letterhead. Call the bank before you visit to ask which documents they specifically need, because requirements vary by institution.

You will also need to bring a government-issued ID for the person who will be the primary account holder or signatory. If multiple people will have access to the account, the bank may ask for identification from each of them.

Where to find banks that offer interest on business checking

Online banks are more likely to offer interest on business checking than traditional brick-and-mortar banks. Banks like Axos Bank, Lemonade Bank, and some others market interest-bearing business checking as a standard product. Credit unions also sometimes offer interest on business checking accounts, particularly if your corporation is a member or if the credit union has a business membership program.

Before you open an account, ask the bank directly: "Does this business checking account earn interest?" and "What is the current interest rate?" The rate may be very small—sometimes less than 0.01 percent per year—so do not assume that "interest-bearing" means you will earn a meaningful amount. Compare the rate to what you could earn in a money market account or a business savings account at the same bank, because you may come out ahead by keeping your checking and savings separate.

Your existing bank may also offer interest-bearing business checking even if it is not advertised prominently. Call your relationship manager or visit a branch and ask what options are available for your corporation.

How interest rates on business accounts differ from personal accounts

Interest rates on business checking accounts are typically lower than rates on personal savings accounts, and they are almost always lower than rates on business money market accounts. This is because banks assume that a business account will have a higher balance and more frequent transactions, which costs the bank money to process. To offset that cost, they offer less interest.

The interest rate also depends on your account balance. Some banks offer a tiered rate structure, meaning you earn a higher rate if you keep a larger minimum balance. For example, a bank might offer 0.01 percent interest on balances under $10,000 and 0.05 percent on balances above $10,000. Read the account disclosure carefully to understand how your specific account calculates interest.

Interest is usually compounded daily and paid monthly, meaning the bank calculates how much interest you have earned each day and deposits it into your account once a month. The amount will appear on your monthly statement.

Why a money market account might earn you more interest

If your corporation has cash that you do not need for when ready operations, you may earn more interest by opening a business money market account alongside your checking account. A money market account is a hybrid between a checking account and a savings account: it earns more interest than checking, but it limits how many withdrawals you can make per month.

Money market accounts typically earn two to five times more interest than checking accounts, depending on the bank and the current interest rate environment. The trade-off is that you can usually make only three to six withdrawals per month before the bank charges a fee. This works well for a corporation that wants to keep operating cash in checking and reserve cash in a money market account.

You can transfer money between the two accounts online or by phone, so moving money from money market to checking when you need it is straightforward. Ask your bank whether they offer a business money market account and what the current rate is.

What happens to interest if your corporation closes or changes structure

If your corporation closes or dissolves, the bank will close the account and send you any remaining balance plus any accrued interest. Interest is calculated through the day the account closes, so you will receive a final statement showing the total interest earned.

If your corporation changes structure—for example, if you convert from a corporation to a limited liability company (LLC)—you will need to close the corporate account and open a new account under the LLC's name. The bank will not automatically transfer the account; you must open a new one and provide the LLC's EIN and formation documents. Any interest earned up to the closing date will be paid out with your final balance.

Frequently Asked Questions

Do I need a separate business account, or can I use my personal checking account?

You should use a separate business account. Mixing personal and business money makes it harder to track expenses for taxes, and it can create legal problems if your corporation is ever sued—a court may decide that the corporation and the owner are the same entity and hold your personal assets at risk. A business account keeps the two separate.

What is the minimum balance required to open a business checking account?

Minimum opening balances vary by bank. Some online banks have no minimum, while others require $500 to $2,500 to open the account. Some banks also charge a monthly fee if your balance falls below a certain level. Ask the bank about both the opening minimum and any balance requirements to avoid fees.

Can I earn interest if I keep a very small balance in my business checking account?

Yes, but the amount will be tiny. If a bank offers 0.01 percent interest and you keep $1,000 in the account, you will earn about $0.10 per year. If interest is important to your corporation, keep your operating balance in checking and move excess cash to a money market or savings account where rates are higher.

How long does it take to open a business checking account?

Online banks can open an account in one to three business days once you submit your documents. Banks with physical branches may take longer if you need to visit in person or if they need to verify your documents by mail. Ask the bank for a timeline when you start the process.

Will the bank charge a monthly fee for a business checking account?

Many banks charge a monthly maintenance fee for business checking, typically $10 to $25 per month. Some waive the fee if you maintain a minimum balance or set up direct deposit. Ask about fees before you open the account, because they can add up quickly and may outweigh any interest you earn.