Business checking accounts are specifically designed to meet the daily financial needs of a business rather than an individual. Such types of businesses include:
- Limited Liability Companies
- General Partnerships
- Limited Partnerships
- Limited Liability Partnerships
- Sole Proprietorships
There are several reasons a business owner may elect to open a business checking account rather than a conventional checking account, including:
Taxes: The IRS requires that business and personal finances be kept separate. The purpose is to protect the business owner’s private finances, but doing so also makes filing taxes simpler. Separating personal and business accounts allows you to keep track of any deductions or special transactions that must be noted at tax time.
Establishment of Identity: Conventional checking accounts are opened with the account holder’s social security number. A business, however, is identified by an Employer Identification Number, which establishes the business as its own entity, and both are needed to open a business checking account in most cases. Checks will also list the business name and address instead of that belonging to a single person.
Daily Transactions: Businesses tend to make many more transactions every day with larger sums of money than an individual. While banks often place daily or monthly limitations on the transaction number or amount allowed, the business checking accounts they offer are also better equipped to handle the high load.