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Why you need a business checking account

A business checking account can help business owners in multiple ways. Getty Images/iStockphoto

Millions of Americans have side hustles, freelance, or run their own business. And while it is possible to use your personal bank account for the money coming in and out of your operation, many professionals are best off with a business checking account — a designated place for your business-related expenses, earnings, taxes, and more.

Do you have a business checking account for your work? If not, there are multiple reasons why you might want to open one.

You can easily explore your checking account options (and the interest you could earn) here now or simply use the table below to get started.

Why you need a business checking account

Here are four reasons why you should open a business checking account now.

It keeps business and personal finances separate

Having a business checking account helps you separate your business transactions from your personal ones. This isn't just smart for your own protection (you don't have to give out your personal bank account info to buy supplies or get paid), but it also makes for a much easier tax process.

This is particularly important given that small business owners pay taxes quarterly — not just once per year. 

With business checking accounts, estimating your quarterly taxes is a breeze. You can easily tally up your income, as well as any expenses that might be deductible. Doing this with a personal account can be tricky and time-consuming (you'd have to sort through the hundreds — maybe even thousands — of personal transactions multiple times per year).

It helps establish credit for your business

Having a checking account for your business can help build up your company's credit profile, which is vital if you ever want to apply for a business loan or credit card.

Not only will having credit make it easier to qualify for these items, but you'll likely get better rates and terms, too — at least if your business credit is good.

But just having a bank account isn't enough. To reap the credit benefits, set up net payment terms (net-30, net-60, etc.) with any suppliers or vendors you use, and make sure they report to business credit agencies. Then, make your payments to each party on time, and watch your credit grow.

It's easy to get started with a business checking account, too. You can explore your options online here now or simply use the table below.

It adds credibility to your business

A dedicated business account can add credibility to your business — particularly if it's just starting out. It also shows you take your work seriously and that you're confident in its trajectory.

While using your personal accounts for business doesn't necessarily equal the opposite, it could raise red flags with new clients and vendors. Is this just a hobby or something you're not truly invested in pursuing? Are you skirting taxes or running things under the table? These kinds of hangups could mean the difference between snagging a new client and losing valuable business.

It can protect you from liability

Finally, separating out your business from your personal life can provide a certain level of liability protection — especially if you register your business as its own entity, like an LLC or S Corp. If you don't take these steps and are sued by a consumer or other business, it could put your personal finances and assets at risk (meaning your money, car, or house could be seized to pay a court judgment).

For added protection, always consider investing in professional liability insurance. This offers an extra layer of insulation just in case you're sued.

Shop around for your account

If you're ready to open a business checking account, make sure to weigh your options first. Banks, credit unions, and online banks offer these accounts, and their terms can vary quite a bit. You'll want to consider any deposit limits, minimum balance requirements, fees and transaction limitations an institution has in place before making your decision. 

You might also consider opening a high-yield savings account for your business. This can help you prepare for unexpected repairs or expenses that might crop up. Again, terms and rates can vary widely on high-yield savings accounts, so be sure and shop around. You can shop around for the best business checking accounts here or by using the table below.

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