Business Banking Made Simple

Opening an account and keeping your money separate from day one.

Why Separate Accounts Matter

Remember the LLC lesson? We talked about how mixing personal and business money can destroy your liability protection. A business bank account is how you prevent that.

It's also just easier. When tax time comes, you don't want to scroll through a year of personal transactions trying to figure out which ones were business expenses. One account for business, one for personal. Clean and simple.

What You Need to Open an Account

Most banks require:

  1. EIN (Employer Identification Number): Free from IRS.gov, takes 10 minutes
  2. Articles of Organization: The document from when you formed your LLC
  3. Operating Agreement: Your LLC's internal rules document
  4. Personal ID: Driver's license or passport
  5. Initial deposit: Usually $25-100 minimum

If you're a sole proprietor (no LLC yet), you can still open a business account with just your SSN and a DBA ("doing business as") filing. Check your local requirements for DBAs.

Choosing a Bank

You have three main options:

Big National Banks

Chase, Bank of America, Wells Fargo, etc.

Pros:

  • Branches everywhere
  • Robust mobile apps
  • Can deposit cash easily
  • Merchant services available

Cons:

  • Monthly fees ($10-30 unless you maintain minimum balance)
  • Less personal service
  • May push unnecessary products

Local Banks and Credit Unions

Regional banks and credit unions in your area.

Pros:

  • Often lower or no fees
  • Personal relationships
  • Community-focused
  • Sometimes better rates on loans

Cons:

  • Fewer branches and ATMs
  • Mobile apps may be less polished
  • Fewer business services

Online Business Banks

Mercury, Relay, Novo, Bluevine, Lili, etc.

Pros:

  • No monthly fees (usually)
  • Great mobile apps
  • Modern features and integrations
  • Fast to set up
  • Good for tracking expenses

Cons:

  • No physical branches
  • Depositing cash is difficult or impossible
  • May have limits on certain transactions
  • Newer companies (less track record)

Our Recommendation for Starting Out

For a new service business, consider this combo:

  1. Online bank (Relay or Mercury) for your main operating account

    • No fees
    • Easy expense tracking
    • Good apps
    • Quick setup

  2. Local credit union for backup and cash deposits

    • Somewhere to deposit cash payments
    • Backup access to funds
    • Building local banking relationship

Many service businesses collect cash, especially starting out. Having a local option for deposits is practical.

Setting Up Your Accounts

Once approved, do these things immediately:

1. Download the Mobile App

You'll use this constantly. Set up notifications for every transaction so you always know when money moves.

2. Order Checks

Yes, some vendors and landlords still want checks. Order a basic box—you won't use many, but you'll need a few.

3. Get a Debit Card

For business purchases, fuel, supplies. Keep it separate from personal cards.

4. Set Up Online Bill Pay

If you have regular business expenses (insurance, subscriptions), automate them.

5. Create a Simple System

Decide how you'll track income and expenses. Options:

  • Just use bank's built-in categorization
  • Connect to QuickBooks or Wave (free accounting software)
  • Simple spreadsheet

Don't overcomplicate this. The goal is to know how much you made, how much you spent, and what's left.

The Cash Flow Basics

Here's how money should flow:

Customer pays you
      ↓
Deposit to business checking
      ↓
Set aside money for taxes (25-30% of profit)
      ↓
Pay business expenses from business account
      ↓
Transfer remaining profit to personal account ("owner's draw")

About That Tax Money

As a business owner, nobody withholds taxes from your income. You need to pay estimated taxes quarterly. The biggest mistake new business owners make is spending all their revenue and having nothing left for taxes.

Simple rule: Every time you deposit money, transfer 25-30% to a separate savings account labeled "taxes." Don't touch it until tax payments are due (April 15, June 15, September 15, January 15).

Your actual tax rate might be lower or higher depending on your total income, but 25-30% is a safe starting point. A tax professional can help you dial this in after your first year.

Keeping It Separate: The Rules

These rules protect your LLC and keep your finances clean:

DO:

  • Deposit all business income to business account
  • Pay all business expenses from business account
  • Transfer profits to personal account as "owner's draws"
  • Keep receipts for business purchases
  • Reconcile your account monthly (make sure it matches your records)

DON'T:

  • Pay personal bills from business account
  • Deposit business income to personal account
  • Use business card for personal purchases
  • Loan money between accounts without documenting it
  • Let the accounts run negative

The Occasional Exception

Reality: sometimes you'll pay for a business expense with your personal card, or deposit a check to the wrong account by accident. It happens.

When it does, document it and reimburse the correct account. If you pay for business supplies with your personal card, write yourself a reimbursement check from the business. If a customer payment goes to your personal account, transfer it to business and note why.

Occasional mistakes don't kill your LLC protection. A pattern of mixing funds does. Keep it clean, fix mistakes when they happen, and move on.

Getting Paid: Your Options

You'll need ways to accept payment. Common options:

Cash

Simple, no fees. Deposit promptly to your business account. Keep a receipt book or invoice to document cash payments.

Checks

Still common, especially with older clients. Deposit via mobile app (take a photo) or at your bank.

Card Payments

Convenient for clients, but you pay processing fees (typically 2.5-3%). Options:

  • Square: Popular, easy to set up, works with phone
  • Stripe: Good for invoicing
  • PayPal/Venmo Business: Familiar to consumers, but fees add up

Zelle/Venmo/CashApp

Technically possible, but muddy for business use. If you use these:

  • Set up a separate business profile where possible
  • Transfer immediately to business bank account
  • Document everything carefully

ACH/Bank Transfer

For larger jobs or recurring clients. Usually free or cheap, but takes a few days to clear.

Simple Invoicing

You'll need to send invoices for most jobs. Keep it simple:

  • Your business name and contact info
  • Client name and address
  • Description of work performed
  • Amount due
  • Payment terms ("Due upon receipt" or "Net 15")
  • How to pay (your accepted methods)

Free invoicing options:

  • Wave (free accounting software with invoicing)
  • Square Invoices
  • Invoice templates in Google Docs or Word
  • Your bank's invoicing feature (some online banks include this)

You don't need fancy software starting out. A clean, professional invoice you can email or text is fine.

Month-End Routine

Spend 30 minutes at the end of each month:

  1. Review all transactions: Make sure everything is categorized correctly
  2. Reconcile the balance: Your records should match the bank
  3. Note any issues: Uncollected payments, unexpected expenses
  4. Check your tax savings: Is 25-30% going to the tax account?
  5. Review profitability: Revenue minus expenses = profit

This simple habit prevents surprises and keeps you in control of your finances.

Action Steps

  1. Get your EIN from IRS.gov if you don't have one yet
  2. Choose a bank (online, local, or both)
  3. Open the account with your LLC documents
  4. Set up separate tax savings at the same bank
  5. Pick an invoicing method for billing clients

Next up: the licenses and permits you actually need to operate legally. Spoiler—it's probably less than you think.

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