How to Open a Business Bank Account for Your Design Firm


You’ve already started a business. Now you’re figuring out financials. Mixing personal expenses with business expenses can spell trouble when tax time comes along. As such, the IRS — and most accountants — recommend separating your personal accounts from your business accounts. Of course, tax prep is not the sole way in which businesses benefit from separate checking, savings and merchant accounts. Opening a business account is one of the first steps to building business credit. In this post, we explain how to open a business bank account for your interior design firm. We also get into why your interior design firm needs separate checking and savings accounts.

Answering 10 FAQs About Opening a Business Bank Account

#1 What is a Business Bank Account?

In many cases, a business bank account functions identically to a personal bank account. The primary way in which business accounts differ from personal accounts is how much they cost to open and maintain. Most business accounts charge monthly fees and have minimum balance requirements.

There are a few different types of business accounts. These include checking, savings, investment and merchant services accounts. As with a personal checking account, you can deposit income and withdraw money to cover expenses as needed.

Business savings accounts are similar to personal savings accounts. They allow business owners to save money — and earn interest on that money — for emergencies, tax payments and future expansion.

Investment accounts allow business owners to leverage the money they save. Like a personal investment portfolio, a business investment account allows entrepreneurs to invest in stocks, funds, trusts and more.

Of the four types of business bank accounts, you are probably least familiar with merchant services accounts. In “How to Choose a Business Bank Account” for the US Chamber of Commerce, Dan Casarella explains why you might need a merchant account. Casarella writes that “a merchant account is a bank account that allows business-to-consumer businesses to accept and process electronic card transactions.”

In most cases, businesses that receive direct payments from clients and customers must have a merchant account. Some businesses use a payment processing platform instead.

#2 Why Should You Have a Business Bank Account?

From protecting your personal identity to preparing for tax time, there are many benefits to opening a business bank account. Below are nine reasons to open a separate business bank account.

You Must Separate Personal and Business Finances Before Incorporating or Selling the Business

First, a business bank account makes forming a partnership, incorporating or selling your business much easier. A corporation — typically an LLC or S-Corp — is a separate entity. As such, you must open a separate bank account to handle any and all business transactions. But why do you need to separate your business bank account from your personal bank accounts when trying to sell or transfer ownership?

In his article “8 Reasons Why You Need A Bank Account For Your Business” for Money Under 30, Kevin Mercadante explains. According to Mercadante, “there are a few reasons why you [should] have a bank account for your business in connection with [a] potential sale.” Having a separate business checking account or savings account allows you to easily transfer assets at the time of sale.

A business bank account also provides prospective buyers with “a history of financial transactions.” This demonstrates the financial health of your business. By separating your business account from your personal account, you also protect your personal identity when trying to sell the business. As Mercadante notes, “you certainly don’t want prospective buyers looking at two or three years’ worth of personal bank statements.” A business account allows potential buyers to audit your company’s finances without snooping through your personal finances.

You Cannot Accept Credit Card Payments Without a Separate Account

You Cannot Accept Credit Card Payments Without a Separate Account

Second, opening business checking accounts allows you to accept and process credit card payments. A merchant services account allows you to process payments made via credit card or check. When shopping around for the right merchant account, be sure to review any transaction fees or daily batch fees associated with the account.

Separating Accounts Protects Against Identity Theft

Third, it protects against identity theft. From purchase orders to direct payments from clients, creative businesses like our residential design firm handle dozens of transactions each day. Because of this, there is a greater likelihood of identity theft and other types of fraud.

Using a business account for these transactions protects your personal funds and personal identity from any potential loss or damage. Opening an account with your EIN — or employer identification number — instead of your social security number offers even more protection.

A Separate Business Account Looks Much More Professional Than Using Your Personal Accounts

A Separate Business Account Looks Much More Professional Than Using Your Personal Accounts

Fourth, writing checks from a business account makes you and your company look more professional. You might have started your small business as a part-time job or even a hobby. Using your personal account might have been easier and somewhat acceptable in your business’ early days. However, clients will probably feel more comfortable sending payments to an account that bears the business’ name instead of your name.

Business Accounts Help Streamline Bookkeeping

Fifth, a business account helps you streamline bookkeeping and prepare for tax season. According to this resource from the Accion Opportunity Fund, “having a bank account helps automate your tax prep.” When you use a business checking and/or savings account, you can easily keep track of all income and expenses related to the business. There is no need to sift through your personal accounts and separate business-related transactions from those related to your private life.

You can also streamline accounting by syncing your business account to whichever bookkeeping software you use. In doing so, “you can check up on the health of your business by plainly assessing your cash flow and income and expenses.”

A Business Checking Account Shows the IRS Your Business Isn’t Just a Hobby

Business Checking Accounts Show the IRS Your Business Isn't Just a Hobby

The sixth reason why you need a business bank account is that a business checking account serves as a source of evidence. If the IRS ever conducts an audit regarding deductions claimed on your taxes, you can prove that those truly were incurred by the business.

A Business Savings Account Will Ensure You Have Enough to Pay Taxes in April

A Business Savings Account Will Ensure You Have Enough to Pay Taxes in April

Seventh, opening a business savings account in addition to your checking account helps you squirrel away enough money to actually pay your taxes. Transitioning from an employee to a business owner is such a joy, but it is also a major paradigm shift. One of the most difficult parts of transitioning from employee to business owner is budgeting to pay taxes when they come due.

As an employee, your employer was responsible for subtracting a certain percentage of your income each month and allocating that to your tax bill. As a business owner, you must save enough to pay estimated taxes and cover any extra payments in April. Regularly transferring money from your business checking account to your savings account helps ensure you can afford to pay the IRS what you owe.

Your Business Accounts Could Help You Budget for Expansion

Eighth, business accounts could help you budget as you expand your company into new markets or take on additional employees. In her article “7 Ways a Business Savings Account Can Improve Your Cash Flow” for Fit Small Business, Benilyn Formoso explains. Formoso writes that “saving money in a separate business savings account allows you to prepare for future business projects and growth.”

If your expansion is planned for a few years in the future, you might consider a high-yield savings account. This way, you can finance your business’ growth “without having to take out huge loans” and pay interest on those loans. We describe the benefits of opening a business savings account in greater detail below.

Business Accounts Help You Build Business Credit

Business Accounts Help You Build Business Credit as an interior design firm

Finally, opening a separate account helps build business credit. This could improve your chances of securing a low-interest business loan if needed in the future. In certain cases, you might not even need a business credit card to start building credit.

Writing for Forbes Advisor in her article “Do You Need A Business Checking Account?,” Emily Guy Birken explains. Birken writes that a business checking account helps you “start establishing business credit, even before you apply for a business credit card.” To do this, business owners must “set up net terms with vendors and suppliers who report to a business credit reporting agency.”

Basically, your vendors and suppliers issue credit. You pay back the balance on a regular basis, just like you would with a credit card. Your vendors and suppliers report on-time payments to credit reporting agencies, which helps you build business credit.

#3 Do You Need a Business License to Open a Business Banking Account?

When opening business bank accounts, most banks require proof of your identity and proof that your business is operating legally. Here in Houston, it takes about a week to obtain a business license under normal circumstances.

The type of license and/or permits required might depend on how you organized your business — i.e. as an LLC, S-Corp or sole proprietorship. Where you work — i.e. from home or in a commercial office space — could also impact the type of documents needed.

#4 Which Documents Do You Need to Open a Business Bank Account?

what do you need to open a business bank account?

In addition to a business license, you must also provide evidence of your personal identity — like a passport or driver’s license. As noted above, the documents you need will depend on the legal structure of your business. If you are a sole proprietor, you must provide the bank with your social security number. If your business operates as an LLC or other corporation, you will need the business’s EIN.

When applying for a business bank account as the owner of a corporation, you must also provide formation documents. If you are doing business under a trade name, you must also provide a DBA certificate. For those unfamiliar with the term, DBA stands for “doing-business-as.” If hoping to open a merchant services account, you must also provide bank statements that show your business’ monthly revenue.

#5 Can You Open a Business Bank Account Online?

In most cases, you will be able to open and manage a business bank account online. Some banks allow business owners to open an account online, while others do not.

Either way, you must provide the bank with all requested documents before becoming an account holder. This NerdWallet article by Randa Kriss and Kelsey Sheehy provides a lengthy list of banks that allow you to open business accounts online.

#6 Why Do You Need Business Credit?

A favorable business credit history makes you more attractive to lenders. When you apply for a business loan or business credit card in the future, you could get a better interest rate and repayment terms.

#7 Should You Open a Business Savings Account?

Which Documents Do You Need to Open an Account?

Some business owners only open a business checking account, but there are many reasons to open a business savings account too. With a savings account, you can set money aside to pay taxes, cover costs during an emergency or fund an expansion. If you link your savings account to your checking account, you can also protect against overdraft fees. Plus, you can earn interest on your savings account balance!

#8 Can You Use a Payment Processing Service Instead of a Merchant Account?

As mentioned above, some business owners forgo opening a merchant account in favor of using a payment processing service. Payment processing platforms can process payments made to your business via credit card, debit card, bank transfer or e-wallet.

PayPal, Square, Venmo and Stripe are a few of the most popular payment processing services used by businesses in 2022. A payment processing platform could be a viable alternative to a merchant services account. However, business owners should keep in mind that there are almost always fees involved. Plus, you will still need a business checking account to use money received via PayPal, Stripe or another platform.

#9 How Do You Choose the Right Bank or Account for Your Business?

Before opening any type of business bank account, business owners should shop around for an account with favorable terms. Be sure to review any and all fees associated with each account. Also check for transaction, deposit or withdrawal limits. Take a look at introductory offers, interest rates and minimum balance requirements.

#10 Do You Need a Business Account as an Independent Contractor or Sole Proprietor?

here's how to open a business bank account as a sole proprietor

If you are the owner of an unincorporated business, you and your business are not technically separate legal entities. As a freelancer, independent contractor or other type of sole proprietor, you pay personal income tax on all business income.

Given this, you are not legally required to separate business and personal accounts. However, all business owners can benefit from the organization and security provided by a separate business bank account.

Here’s How to Open a Business Bank Account

To open a business bank account, gather your business license, driver’s license, social security card or EIN, DBA certificate and other necessary documents. Next, decide between a traditional bank and a credit union.

Review all the terms of each bank account you hope to open — including minimum balances, maximum transactions and associated fees. Finally, set up an appointment to meet with a banker in person or apply online. 


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Laura Umansky

I'm Laura

As an interior design business owner, I understand how challenging this industry can be and how hard it is to find success. For the past 15 years, I have grown my award-winning firm from a party of one (just me!) to a talented team of over 20, with two brick-and-mortar studios. And through it all I experienced set backs and the loneliness that comes with being an entrepreneur. That’s why I’m sharing all my tips and tricks on the blog. Success shouldn’t be a secret. Find your reliable path to sustainable, profitable growth right here.




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