Businesses can open savings accounts just like individuals do

A business savings account is a deposit account held in your business's name rather than your personal name. Banks offer them to sole proprietors, partnerships, corporations, and other business structures. The account works much like a personal savings account — you deposit money, earn interest, and can withdraw funds — but it's legally separate from your personal finances and shows up on your business's tax records.

The main reason to use a business savings account instead of a personal one is legal protection. Money in a business account belongs to the business, not to you personally. If someone sues your business or you face a tax issue, creditors generally cannot touch your personal savings. This separation also makes tax time simpler because your business income and expenses are already organized in one place.

Banks treat business accounts differently from personal accounts. They may require more documentation to open one, charge higher monthly fees, and offer different interest rates. Some banks have minimum balance requirements that are higher for business accounts than personal ones.

Key Takeaways

  • A business savings account is held in your business's name and keeps your business money legally separate from your personal savings.
  • You will need to provide your business structure (sole proprietorship, LLC, corporation, etc.), an Employer Identification Number (EIN) if your business has employees, and a government-issued ID.
  • Business savings accounts typically have higher monthly fees and higher minimum balance requirements than personal accounts at the same bank.
  • Interest rates on business savings accounts are usually lower than rates on personal savings accounts, so compare offers across multiple banks.

What documents you need to open a business savings account

The documents required depend on your business structure. If you are a sole proprietor (you own the business by yourself with no employees), you typically need your Social Security number, a government-issued ID, and proof of your business address. Some banks accept a utility bill or lease agreement as proof of address.

If your business is an LLC, partnership, or corporation, you will need additional paperwork. Most banks ask for your Articles of Organization (for an LLC), Articles of Incorporation (for a corporation), or a partnership agreement. You will also need an Employer Identification Number (EIN), which is a tax ID issued by the IRS. Even if you have no employees, you may need an EIN to open a business account — requirements vary by bank.

Bring a government-issued photo ID for the person who will be the account owner or primary signer. Some banks also ask for a recent business license or a letter from your state confirming your business registration. Call the bank before you visit to ask what they specifically need, because requirements differ between institutions.

How business savings accounts differ from personal ones

The most obvious difference is cost. Business savings accounts typically charge monthly maintenance fees ranging from $5 to $25 or more, while many personal savings accounts charge nothing. Some banks waive the fee if you keep a minimum balance, which is often $1,000 to $10,000 for a business account — much higher than personal account minimums.

Interest rates are usually lower on business accounts. A personal savings account might earn 4% to 5% annually right now, while a business savings account at the same bank might earn 2% to 3%. This is because banks view business accounts as riskier and less profitable than personal accounts. Shop around, because rates vary significantly between banks.

Business accounts also come with different rules about who can access the money. You may be able to add authorized signers — other people who can withdraw funds on behalf of the business. Personal accounts rarely offer this feature. Some business accounts limit the number of withdrawals per month, similar to older personal savings account rules, though this is becoming less common.

Where to open a business savings account

You can open a business savings account at most banks and credit unions. Traditional banks like Chase, Bank of America, and Wells Fargo all offer them. Online banks like Marcus, Ally, and Discover also have business savings accounts, often with lower fees and higher interest rates than brick-and-mortar banks.

Credit unions sometimes offer better rates and lower fees than banks, but you must be a member to open an account. Membership requirements vary — some credit unions are open to anyone in a geographic area, while others require you to work in a specific industry or belong to a particular organization.

Before opening an account, compare at least three institutions. Look at the monthly fee, the minimum balance requirement, the interest rate, and whether the bank offers online banking and mobile deposits. A bank with a $20 monthly fee and 1% interest might cost you more over a year than a bank with a $5 fee and 3% interest, depending on your balance.

How to keep your business and personal finances separate

Opening the account is the first step, but you also need to use it correctly. Deposit all business income into the business account, not your personal account. Pay all business expenses from the business account. This includes supplies, rent, payroll, and utilities — anything the business needs to operate.

If you need to take money out of the business for personal use, do it intentionally through a withdrawal or transfer, not by mixing the accounts. Some business structures, like sole proprietorships, allow you to take money out as "owner's draw." Others, like corporations, require you to pay yourself a salary or dividend. Your accountant or tax preparer can tell you what method is correct for your business structure.

Never use the business account to pay personal bills, and never use your personal account to pay business expenses. This mixing, called "commingling," can create serious problems if you are ever audited or sued. It can also make it harder to prove that your business is a separate legal entity, which defeats the main reason for having a business account in the first place.

Interest rates and fees to compare

Interest rates on business savings accounts change frequently and vary widely. At any given time, you might find rates from 0.01% at one bank to 4% or higher at another. Online banks typically offer higher rates than traditional banks because they have lower overhead costs. However, online banks may not offer other services you need, like business checking or merchant services.

Monthly fees are equally important to compare. A $15 monthly fee costs $180 per year. If your account earns $50 in interest annually, the fee wipes out most of your earnings. Some banks offer fee waivers if you maintain a high balance or set up direct deposits. Others charge per transaction if you exceed a certain number of withdrawals per month.

Look for accounts with no monthly fee if possible, or a fee that is waived by meeting a straightforward requirement like keeping $5,000 in the account. If you cannot avoid a fee, make sure the interest rate is high enough to offset it. A calculator on the bank's website can show you the projected earnings on your expected balance.

Frequently Asked Questions

Do I need an EIN to open a business savings account?

It depends on your bank and business structure. Sole proprietors can often open an account using their Social Security number. Partnerships, LLCs, and corporations usually need an EIN. Call your bank to ask before you explore, because requirements vary. You can obtain an EIN from the IRS website for free in minutes.

Can I use a business savings account for personal expenses?

Legally, no. The account belongs to the business, not to you. Using it for personal expenses blurs the line between your business and personal finances, which can create tax problems and weaken your legal protection if the business is sued. Withdraw money as owner's draw or salary instead, depending on your business structure.

What happens if my business closes — can I keep the account open?

Once your business is officially closed and dissolved, you cannot keep a business account open in the business's name. You will need to withdraw the remaining funds and close the account. If there are outstanding debts or taxes owed, the bank may freeze the account until those are resolved.

Are business savings accounts FDIC insured?

Yes, business savings accounts at FDIC-insured banks are covered up to $250,000 per account, just like personal accounts. However, the coverage is separate from your personal account coverage, so you have $250,000 protection on each. If you have multiple business accounts at the same bank, they share the $250,000 limit.

Can I earn the same interest rate on a business account as a personal account?

Rarely. Business savings accounts almost always earn lower interest than personal accounts at the same bank. This is standard across the industry. However, some online banks offer competitive rates on business accounts, so it is worth comparing across different institutions rather than assuming your current bank has the best rate.