Are you running a business and wondering which sole proprietorship bank account is best for your needs? Whether you’re a new entrepreneur or a seasoned one looking to switch banks, we’ve rounded up the best business bank accounts for sole proprietors.
All account details and annual percentage yields (APYs) are accurate as of July 3, 2024.
Best Business Bank Accounts For Sole Proprietorships Of July 2024
Summary: Best Business Bank Accounts For Sole Proprietorships
Company | Forbes Advisor Rating | Annual Percentage Yield | Minimum Deposit Requirement | Monthly Maintenance Fee | Learn More | ||||
---|---|---|---|---|---|---|---|---|---|
PNC Treasury Enterprise Plan | 5.0 | N/A | $100 | $50 | |||||
Wells Fargo Business Market Rate Savings Account | 5.0 | 0.01% | $25 | $5 | |||||
First Internet Bank Business Money Market Savings | 5.0 | 3.46% or 5.48% | $100 | $5 | Learn More | Read Our Full Review | |||
Axos Bank Basic Business Checking | 4.8 | N/A | $0 | $0 | Learn More | On Axos Bank's Website | |||
LendingClub Tailored Checking Account | 4.8 | Up to 1.50% | $100 | $10 | Learn More | Read Our Full Review |
How To Choose a Business Bank Account as a Sole Proprietor
There are many business bank account options out there for sole proprietors. Follow these steps to choose the best one for you.
Think about your day-to-day business transactions. Identify what you need to manage your business finances efficiently to choose an account. Will you need an account that allows cash deposits or unlimited monthly transactions, such as a checking account? What about a place to save for taxes or keep your business’ emergency fund, like a savings account?
Assess monthly fees. Understand the minimum balance requirements, monthly maintenance fees and transaction limits across different accounts. Avoid accounts with excess bank fees that would cut into your profits or high account minimums you won’t be able to meet.
Consider your location needs. Remote or mobile business owners may prefer online or nationwide banks, while those who prefer in-branch banking may prefer local institutions or credit unions.
Review your business bank account periodically to ensure it meets your needs. A bank account that served you well as a new startup may not be the best fit as your sole proprietorship expands. Don’t be afraid to switch banks if needed.
How To Open a Business Bank Account for Sole Proprietorship
Opening your first sole proprietorship business bank account is simple with the proper paperwork.
1. Decide which account(s) you’d like to open.
It may be beneficial to have both a business checking and savings account if you plan on building up cash reserves for taxes, payroll and rainy days. This list is a great place to explore options.
2. Gather your documentation.
Most sole proprietorship bank accounts require a Social Security number or EIN (Employer Identification Number) to open. You’ll also need your photo ID, business license and articles of organization, if you filed any.
3. Fill out your application.
You can open most sole proprietor bank accounts online. But in some cases, you may need to visit a branch. However you apply, follow instructions carefully and make sure all owners are present.
4. Have your basic information ready.
Expect to provide basic business and personal information like your company name, address, nature of business and estimated monthly deposits and withdrawals.
5. Make your minimum deposit.
Many banks require you to deposit $25 to $100 when you open an account, but others may have higher or lower minimums. In many cases, you can do an online transfer from an external account.
6. Start using your new business bank account right away.
Set up account access online or via the bank’s mobile app and request starter checks, ATM cards and other tools as needed.
Having a business account opens the door for more business banking products down the road. Ask about other services you may need, like merchant services, lines of credit or cash management tools.
Find The Best Banks Of 2024
Does a Sole Proprietor Need a Business Bank Account?
In most cases, the answer is yes—it’s highly recommended that sole proprietors open a business bank account. Here’s why:
- It separates your personal and business expenses. This makes it easier to track your income, expenses and eligible tax deductions. It also helps you avoid accidentally spending your business money on personal items and vice versa.
- It can help you qualify for other business banking products. As your business grows, you may need a business credit card or small business loan. Your sole proprietor bank account can help you apply and qualify for these products.
- It projects a professional image. When working with clients and vendors, they’ll see your business name on checks and payments, which adds to your legitimacy as a company.
Can I Use My Personal Bank Account for a Sole Proprietorship?
Yes, you can use your personal bank account for your sole proprietorship, at least initially. A sole proprietorship is not legally distinct from its owner, so you aren’t technically violating any rules by depositing business income into and paying business expenses from a personal account.
If your business is very small and has minimal transactions, you could get by using a personal account for now. But as your business grows, a separate account is almost essential. Keeping business and personal finances separate in a business bank account will make your record-keeping and taxes much simpler, helping you avoid accounting mistakes and drawing from the wrong funds.
Also, keep in mind that banks have the right to close your account at any time, for any reason. If an institution suspects you’re using a personal account primarily for business transactions, it may not go over well. Opening a free business account from the start can ensure you don’t run into unexpected account issues.