As a small business owner, it can be challenging to keep track of your company’s financials—be they daily cash flow concerns or long-term tax preparedness. Separating your operating cash from your long-term money needs, such as small business taxes, can be crucial for keeping your money straight.
Every small business needs to start off with a business checking account, for sure, but you might also ask yourself, “Can I have two business bank accounts?” After all, you probably have two or more personal checking accounts if you’re married (and co-own a joint checking account), and find this to be a helpful way to keep track of your personal and shared finances. This could lead you to ask, “Can a business have two bank accounts as well?” If so, it could certainly make certain parts of managing your business finances easier.
The good news is that you can open multiple business bank accounts. You’re not limited to one checking or savings account for your small business. In fact, you can open as many as you like, so long as your bank approves your application. But just because you can open two business bank accounts doesn’t always mean it’s the wisest option. Here’s when it makes sense to open two business bank accounts, or more, and when you might want to pursue another money management strategy instead.
The biggest upside to having two business bank accounts of the same kind (i.e. savings or checking) is that you can separate your money more easily. One account can be earmarked for everyday expenses, such as buying equipment or taking payments from clients, while the other could be used for other strategic purposes, like managing payroll. Having an account that’s dedicated to operational expenses allows you to have a better sense of money coming in and going out every month (or year). Plus, it can help you see when you experience revenue dips, better preparing you for cyclical events within your company’s financials.
Having a second business bank account also makes it easier to set aside money for tax time: Many small business owners pay estimated quarterly taxes, which means that they have to apportion some amount of money to go toward a tax payment every three months. Putting money aside makes it easier to have the right amount of money on hand without impacting the funds needed for day-to-day money management.
The benefits of having two business bank accounts also extends to savings accounts, as well. First, you’ll want to make sure you have at least one business checking and one business savings account, which helps you set aside money you don’t need for daily activity while earning interest on your savings account balance. If you already have checking and savings accounts, a second savings account may help you by establishing a dedicated emergency fund that you won’t be tempted to touch. Or, alternatively, you could always open a second savings account to help pay for certain goals without having earmarked funds sit in the same pot as those you’re more free to use.
For as many benefits that two business bank accounts can offer, there are also plenty of drawbacks as well. You’ll have to keep track of several accounts on a frequent basis, rather than tracking the balance of one checking or savings account for your small business. Plus, there are other ways to track your business finances without the need for separate accounts, which may be an easier and more efficient way to control your money.
Keeping two or more business bank accounts means, of course, having money in a few different places. You’ll have to track several balances, making sure that your money is accounted for in each. This could make it difficult for you or your accountant to maintain an up-to-date glimpse of your company’s finances at a glance, which is vital for small business owners who operate with slim margins. Multiple accounts can make it tough to keep track of cash flow, or make it more onerous for you to transfer funds between accounts when necessary.
Most business bank accounts offer methods of tracking separate financial goals as well, which obviates the need for two business bank accounts. You can earmark funds for specific needs, which makes it easier to hit savings goals and stay organized. Or, you can open a high-yield business savings account. Alternatively, some good old-fashioned accounting can help accomplish many of the same goals that two or more business bank accounts would, all while making your accountant happier to manage fewer bank ledgers.
Whether you’re opening your first, second, or fifth business bank account, it’s important to remember that all business bank accounts are not created equal. Some come with high minimum balances in exchange for more features, while others may not require a minimum initial deposit but offer fewer perks in return. There are also other kinds of accounts, such as high-yield checking accounts, which give you the features of a checking account while offering a return on your deposit like a savings account would. Here are a few of your best options.
The Chase Business Complete Banking account is a great entry-level business checking account, either for your company’s first checking account or for an additional account to use for stashing tax or payroll money. This account comes with a low monthly fee (which is waived with a $2,000 daily balance).
With Chase Business Complete Banking, you’ll get unlimited free electronic deposits and can deposit $5,000 in cash without having to pay a fee. This makes the account a great option if you only need a few services on your main business banking account, or if you’re looking to add a second checking account that won’t need tons of support or features.
Chase Performance Business Checking takes the entry-level account a step further, with more support for midsize businesses and entrepreneurs who need a little more from their bank. This account offers 250 free transactions, $20,000 worth of free cash deposits, and has a $30 monthly service fee that’s waived with a balance of $35,000. Plus, you’ll also get two outgoing domestic wire transfers for free every month.
A Chase Performance Business Checking account is a good option for a main checking account, given the monthly balance requirements and support for more transfers without a fee. This can be a great account to complement with another checking or savings option, as it gives you the freedom and flexibility to do more banking on a daily basis without incurring additional charges.
Business savings accounts can put your excess business cash to work for you. But if you’re really doing a great job with extra revenue, consider stashing some of it away in a high-yield business savings account, where your money will go even further for you. The Axos Bank Business Savings account offers higher than average interest rates in exchange for higher balance requirements.
With a balance of $1,000, you’ll get access to some of the most competitive savings rates out there, which can help you earn more money over the long run. Axos is an online-only bank, which is part of the reason why they offer better interest rates than some of their brick-and-mortar competitors. But since you won’t want to touch your savings account balance too often, having immediate access to your savings shouldn’t be as much of a concern. If you find that you do need to withdraw cash, you can always use your Axos debit card at ATMs across the country.
If you’re interested in opening two business bank accounts or more, and one of your major goals is earning interest on money you don’t need to access, then a business certificate of deposit might be a great option to consider. CDs offer higher interest rates than savings accounts in exchange for limitations on when you can withdraw your funds. Typically, the longer these terms are, the more money you’ll make in interest. This can be a great way to take advantage of excess cash and earn a handsome return on the money you’ve stashed away.
Bear in mind that there are downsides to CDs, however. Interest rates may increase during the term of your CD, which means you’re locked in at a lower rate until the CD ends. There are also penalties for early withdrawal, which means that you should avoid taking money from your CD until it’s time to renew the account. But if you’d rather lock in higher rates now, and know you won’t need to access the funds within, a CD can be another great option for boosting your company’s cash.
There are plenty of upsides to opening two or more business bank accounts, depending on your needs. So long as you have a clear understanding of your goals for the accounts, a strategy for keeping track of their balances, and a good sense of your alternatives, there can be plenty of reasons to have more than one account for your company. Be sure to have clear ambitions in mind, choose the right accounts for your needs, and know what the potential pitfalls are before you open several accounts.
Sally Lauckner is the editor-in-chief of the Fundera Ledger and the editorial director at Fundera.
Sally has over a decade of experience in print and online journalism. Previously she was the senior editor at SmartAsset—a Y Combinator-backed fintech startup that provides personal finance advice. There she edited articles and data reports on topics including taxes, mortgages, banking, credit cards, investing, insurance, and retirement planning. She has also held various editorial roles at AOL.com, Huffington Post, and Glamour magazine. Her work has also appeared in Marie Claire, Teen Vogue, and Cosmopolitan magazines.