Of all the advice I’ve heard about starting your own business, the sentence I hear most often is, “Keep your personal finances separate from your business finances.” I’m still trying to get the hang of this, since my personal finances often have to pay for my business and vice versa, depending on the month but this is nevertheless a good recommendation. Especially if you have a partnership, an LLC, or any other business entity other than a sole proprietorship (click here if you don’t know what these are), mixing business and personal finances can get you (and others) in a lot of trouble if you ever get sued or audited.
The easiest way to start to draw the line is to open a business checking account. You can get a separate debit card and checks that you only use to pay for business items. When you do your taxes at the end of the year, you’ll be grateful that everything on your statement ends up under one single category.
But how on earth do you decide what kind of checking account to get? Not only are there a plethora of local and national banks and credit unions, each one has a multitude of business checking accounts and extra options. In searching for my own answers, I put together a detailed comparison for the five financial institutions closest to my home office: Bank of America, Wells Fargo, Washington Mutual, Citibank, and the Embarcadero Credit Union. You can download the full spreadsheet here.
Out of the five, only two financial institutions offered free business checking accounts: Washington Mutual and the Embarcadero Credit Union. I ultimately decided to go with WaMu for a few reasons:
- The folks working at the credit union couldn’t find anything except for schwag. They didn’t know what any of the options or limitations were on a business checking account and could not locate any documentation for it. The semi-related brochures and paperwork they did find was barely legible and confusing.
- The WaMu employees were are very forthcoming about sneaky ways to avoid every fee the bank could possibly charge, including the $20 international wire transfer fee (which I incur often).
- There are WaMus everywhere, and they’re easy to find.
If you’re just starting out and have extremely simple banking needs, and/or if you have trouble keeping a three- or four-digit minimum balance, this might well be a good option for you. On the other hand, if you need an account that can handle a lot of separate deposits, or lots of cash transactions, you might want to look into some other options. No matter what you choose, take your time and don’t let anybody bully you into opening an account your first day. Always ask for a fee schedule. Brochures have no helpful information in them, they’re just propaganda. In case you can’t read the spreadsheet (or don’t need that much information), here’s a brief run-down of the five:
- Citibank’s Citibusiness:
- Monthly fee: $10-16
- Minimum balance: $0-10,000
- Per check fee: $0.12-0.30 (after 100-200 free checks)
- Maximum deposits: 100-200 or $1.25 each
- Notes: Separate teller lines for business customers. Really slow online banking site.
- Washington Mutual:
- Monthly fee: $0-16
- Minimum balance: $0-10,000
- Per check fee: $0.25 after initial 250
- Maximum deposits: 250
- Notes: Somewhat of a cattle-call environment. Bankers will encourage you towards ways to avoid their fees. Fast and easy online banking.
- Wells Fargo
- Monthly fee: $8-15
- Minimum balance: $0-8,000
- Per check fee: $0.30 after initial 20-300
- Maximum deposits: 20-300
- Bank of America
- Monthly fee: $7.50-29
- Minimum balance: $2,500-15,000
- Per check fee: $0.12-$0.30 after initial 0-200
- Maximum deposits: 300 (20 per slip)
- Embarcadero Credit Union
- Monthly fee: $0-1
- Minimum balance: $0-2,500
- Per check fee: $0.10 after initial 25-200
- Maximum deposits: 25-200 ($0.10 each thereafter)
- Notes: Banking here supports local credit unions over potentially irresponsible multinational corporations. Little knowledgeable help.
Biz Miss 
ooh how do i waive the int’l wire fee from WAMU? i could have sworn they told me they were free when i signed up, but i get hit with the $20 fee every time..
Just open a free personal checking account (you only need $1 to do this) and transfer the amount you want to wire from your business account into it. You can do this at any ATM or have the banker who’s handling your wire do it for you. Then wire the money from your personal account. WaMu doesn’t charge a fee for international wires from personal accounts, just business ones.
Hi bizmiss,
how does the Free Business Checking work these days with WaMu in bankruptcy and parts of it being acquired by chase?
Re: your comment on how to avoid the int. wire fee, doesn’t this pose the risk of mixing personal and business and opening the door for law suites to impact your personal finances?
Hi Torbu,
Those are great questions. So far there has been no change to my WaMu Free Business Checking Account. If you have one already, it operates exactly the same as it always has. If you want to open one, you can still do that, too. Basically, JP Morgan Chase has way too much on its plate to make any immediate changes to the way WaMu accounts operate, though this may change in the future. For more specific info about the takeover, here’s what Chase has to say.
You’re right that it’s always best to separate personal and business finances, but in the case of my WaMu accounts, there are no personal finances in my personal account. There’s no money in it at all, in fact. I just use it as a wire transfer funnel to avoid huge fees. Nobody can sue me for doing this since the WaMu bankers taught me how.
From a general liability standpoint, as a sole proprietor, I AM my business, so my personal assets are vulnerable to a lawsuit against my business and vice versa, regardless of what type of bank accounts I keep them in. If you’re in the type of business in which you are likely to get sued, you may want to consider setting up a Limited Liability Company. In California LLCs are more expensive and complicated to operate than sole proprietorships, but they do offer some protection from lawsuits.