Should freelancers get a business checking account?

Before you ask, yes. Freelancers can open a business checking account even if they don’t have an employer verification number. In other words, freelancers are legally essential Open a separate checking account for business expenses. In fact, in many cases, using a personal checking account may be sufficient. This is especially true if freelancing is a side hustle rather than a full-time venture.

But for those who invest a lot of time into growing their freelance business, keeping business income separate from personal expenses can be worthwhile down the road. If you’re not sure whether opening a business checking account is right for you, let’s consider the pros and cons.

Pros: Business checking accounts are “completely business.”

Perhaps the strongest argument for business checking accounts is that they require separation of personal and business transactions. Organizing your business income in one bank account gives you a clear picture of your business cash flow. This allows you to visualize how much your business is spending and provides you with a central location to tally your expenses for tax purposes.

Of course, as freelancers we typically don’t spend as much as coffee shop owners. But this only adds to the argument that these accounts are useful. If your business expenses are variable, they can easily get lost in the large amount of personal expenses you’re already spending. And unless you track it in some other way, like a spreadsheet, you may forget about it come tax season.

Likewise, depositing all your business income into one account can help you better prepare for your quarterly taxes. The IRS does not withhold taxes from your paycheck, so you must deduct the appropriate amount yourself. Mixing this with your personal money can be confusing and tempting to spend. If you keep your quarterly taxes in a business checking account, you can pay them directly to the IRS from that account.

Actually I don’t Keep quarterly taxes in my business checking account. Instead, I have a high-yield savings account that saves me taxes every quarter. This money earns some interest and helps me take advantage of the IRS’s cut before I have to pay. Some small business accounts may earn interest, but few can compete with the best free savings accounts.

Cons: Fees, fees, fees.

A business checking account can help you stay organized. But if you free Using a business checking account can end up costing you money in the end thanks to all the additional fees.

This came as a surprise to me after opening my first free business checking account. I didn’t want to go through the hassle of meeting the requirements and give up on the account, so I diligently selected accounts that had no monthly maintenance fees. However, less than a month after opening the account, I ended up paying a $6 fee. Upon closer inspection, it appeared that this fee came from a paper statement sent in the mail, which is something I really don’t want to do. I later discovered the fee schedule contained a lot of hidden fees, including fees for linking my account with QuickBooks and fees for ACH transactions exceeding certain limits.

If you’re a freelancer who performs a lot of banking transactions each month, you may end up paying commissions on those transactions. Many business checking accounts have a free transaction limit (such as 125) after which you’ll pay a small fee for each transaction. Likewise, you may pay fees for cash deposits that exceed certain limits.

These additional fees shouldn’t stop you from opening a business checking account. If anything, they should make you more diligent in your research so you can get to know them and choose an account that won’t charge you a lot. In the end, a business checking account can really help you manage your business finances and prepare your taxes.

Check out our list of the best business checking accounts and see which one can help you better organize your business.

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