Ask an Accountant: Do I Need a Business Bank Account?

Short answer: Yes. Read on to find out why your personal and business finances shouldn’t mix.

Building a business from scratch brings a boatload of stress, but there are also plenty of proud moments. Looking at a fresh check made out to your business’s name is one of them.

In order to receive checks that say, ‘Brent’s Plumbing’ instead of ‘Brent Lawson,’ you need a business bank account. But just because a business bank account makes you feel more official, is it necessary?

The short answer? Yes.

A business bank account can save you loads of headaches and even money down the road. But don’t let us decide for you; you be the judge. Here’s what you need to know about business bank accounts to help you decide if you actually need one, with advice from Certified Public Accountant, Quan Ly.

What is a Business Bank Account?

Simply put, a business bank account is an account you use for business transactions. For example, paying for an employee’s lunch, buying equipment for your business, or fuel to get to a site visit are a few examples of the transactions you’ll make with this account.

Business bank accounts make your business look more professional, and give you the ability to set up merchant accounts, so you can accept credit card payments.

But the main purpose of a business bank account is to keep your business transactions separate from your personal ones.

Business Account vs. Personal Account

On the surface, a business bank account doesn’t seem very different from a personal one. It works the same way as a personal account: You can make withdrawals, deposits, and bank transfers and even check balances.

But, look a little closer, and you’ll notice a few differences.

 Business Bank AccountPersonal Bank Account
Intended UseBusiness transactionsPersonal transactions
Registered UnderYour business name (can accept payments made out to business)Your name (can only accept payments made out to you)
SetupRequires more time and documentationEasy to set up in person or online
Monthly FeeGenerally highGenerally low or free
Interest RatesGenerally lowGenerally high
PerksDepends on bank, for example, some will offer multiple cards or merchant accountsGenerally fewer perks than business accounts

We use the word ‘generally’ because there are always exceptions. Some banks today, for example, offer free business checking accounts.

Why Do You Need a Business Bank Account?

So, the two accounts seem really similar. And a business bank account can cost you more in fees and takes longer to set up. Can’t you just use a personal bank account instead?

Nothing is stopping you. But tax professionals strongly advise against it. 

“This can get very messy very quickly,” says Quan Ly.

We list the top 5 reasons for having a business bank account below.


“Even if you’re a sole proprietor, it’s best practice to have a separate business bank account. I can’t stress the importance of having a clean set of records. Life will be much simpler at year-end and in the event of an audit by the tax authorities. If you're incorporated, it's not even a question.”

Quan Ly, Certified Public Accountant Quote

Top 5 advantages of having a business bank account

1. Your business looks more legitimate, so you get more clients
Optics matter, and first impressions are especially important when trying to find and keep new customers. Running a landscaping business and making payments from your personal account, for example, can diminish your company’s perceived professionalism.

A business bank account shows that your business is legit.

2. When your finances are organized, you always know how your business is performing
Keeping transactions separate helps you organize your finances, so you have a clearer picture of how your business is performing.

If you lump all your personal and business transactions together under one personal account, organization becomes an absolute nightmare as you have to sift through bank transactions to find those transactions that apply to your business.

How will you even know how your business is doing if you can’t stay on top of your finances?

This lack of organization becomes even more of a nightmare come tax time, which brings us to our third point.

3. You’re better prepared at tax season, and will probably pay less

There are dozens, perhaps hundreds of tax breaks (deductions, rebates, and credits) available to businesses but not to individuals.

At tax time, you have to separate your business expenses from your personal ones to get those deductions. It may sound as simple as going through your bank statements with a highlighter, but chances are it will be more complicated.

For instance, which restaurant expenses were to feed your team, or simply to grab a bite with your kids? Even if you remember exactly which lunch bills were for yourself or business, how will you prove it if you’re ever audited?

Even if you keep a detailed journal, the IRS or the CRA may not accept your claims. So why take the chance?

Having your expenses come from a business bank account (especially when they are expenses that can easily be considered personal like food or gas) strengthens your case for calling them ‘business expenses.’

And the more business expenses you have, the lower your taxable income, and the less tax you pay.

4. You’re protecting your personal assets
If your business and personal funds are separate, you are only ever liable for a fixed sum. Combine the two accounts, and you’re liable for more.

This is called limited liability protection, and it’s important for any service business, but especially if you operate in an industry where the work you do is dangerous (think tree care).

If you should ever be sued in court or have to declare bankruptcy, liability protection will keep your personal wealth out of the hands of creditors. It’s bad enough to lose your business assets, why also put your personal wealth in jeopardy?

5. You can access credit during economic downturns
Business bank accounts come with the option to add a line of credit, which provides cash to cover expenses during tough times.  If you decide your business needs a loan, the lack of a business bank account will count heavily against you.

On the flip side, if things are going well, you can also use that line of credit to buy equipment and invest in larger teams, which can help you achieve your dreams of scaling faster.


"If you're incorporated, you definitely need a separate bank account under your business's name. Personal expenses do not belong to your business and should not be co-mingled. Doing so can create significant issues and will ultimately cost you more in bookkeeping and accounting fees. If your personal expenses are not properly adjusted for, you can expose yourself from a tax perspective."

Quan Ly, Certified Public Accountant Quote

How to open a business bank account

The hardest part of opening a business bank account is choosing your bank. The key here is to find one that offers excellent value (a fair fee for the benefits provided) even if it’s an account at another bank.

There are many types of business accounts, but a regular savings or checking account should be enough to start.

When deciding on the right account, speak to other local businesses to see what they use. Next, ask the following questions when talking to the bank:

  • Do you have an introductory offer? Make sure it’s not a juicy introductory offer that masks higher fees and other limitations.
  • What are your interest rates? Check that they specify interest rates for your checking and savings accounts and your lines of credit.
  • What fees are involved? Make sure you’re clear on the transaction, early termination, monthly account, and minimum balance fees.
  • Which perks are included? Different banks will offer different perks, so be clear on those.
  • Are there any other specific terms and conditions I should be aware of?

What do you need to open a business bank account?

The exact documentation you need will differ between banks, but here are common ones you’ll probably have to provide:

  • Your Employer Identification Number. Provide a social security number if you’re a sole proprietor.
  • Your Business License 
  • Your business formation documents 

Should I also get a business credit card?

A business credit card comes with the same perks as a business bank account in the sense that you can add your business name and give it to trusted employees to use. Business credit cards also have higher limits.

Keep in mind that depending on your jurisdiction, certain consumer protections (e.g., the laws and policies that come into play when you have a charge complaint) for personal cards may not apply to business cards. While many credit card companies offer these protections as a courtesy, they are not necessarily guaranteed.

Talk to other business owners in your region, or to your accountant, to find out what’s worked for them.

Yes, You Need a Business Bank Account!

On the surface level, a business bank account adds a shiny layer of professionalism and prestige to your company.

But at a deeper level, it adds organization and legitimacy to your business and can make your life tremendously easier at tax time.

While they may be a pain to set up at first, they are definitely worth the time and effort. 

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