For the self-employed, freelancers, and contractors, it can be daunting to figure out everything you need to thrive in your business. You’ve got a lot of balls in the air since you’re doing everything to run your business on your own. Understandably, it can be challenging to manage it all.
So I’ll make one aspect easier for you and help you figure out what type of business checking account you need…and you DO need one!
Can I Open a Business Bank Account as an Independent Contractor?
If you work as an independent contractor, you might think you don’t need the same things that a business with employees might need, but a business bank account should definitely be on your list.
Whether you operate as a sole proprietor, LLC, or corporation, you can open a business bank account with a traditional bank, credit union, or online bank.
Why Independent Contractors Need a Business Bank Account
The biggest reason business owners need a business bank account is that it’s important to keep personal and business expenses separate. Not only does it give you more of a precise understanding of your business’ financial situation and cash flow, but it also makes filing business taxes easier.
Many contractors get paid with checks, debit, or credit cards, and they need to transfer money from merchant processing services like Paypal or Stripe. That’s where online banks come in handy. Others may get paid in cash, and if you have a bank account, you can deposit that cash at a local branch or through the ATM.
What Kind of Bank Account Do Independent Contractors Need?
There are several types of business bank accounts to consider for your independent contracting business. You can consider an account with a local bank as well as an online business bank account. You may prefer mobile banking if you don’t need to go into a physical branch and don’t need to deposit cash.
In addition to opening a business checking account, you may also want to consider a business savings account so you can set aside money for unexpected expenses.
A money market account is a hybrid between a checking account and a savings account in that it earns interest but you can also conduct business transactions and make purchases.
Best Banks for Independent Contractors
The best business checking account is truly the one that delivers everything you need, and your needs may be different from other business’. Here are a few account options we at Nav recommend.
Chase Business Complete
If having local branches is important to you, there are more than 4,800 branches nationwide. The Chase Business Complete bank account lets you manage your cash in- and outflows, and with the QuickAccept app, you can accept payments on your phone and online.
Currently, there is a $300 bonus to open an account with certain qualifying activities.
Bank of America Business Advantage
Another traditional bank option to consider is Bank of America with its Business Advantage accounts. If you’re also looking for business services like loans or business credit cards, Bank of America can provide those too.
Also, its Preferred Rewards program offers perks like no fees on certain banking services and a 25-75% rewards bonus on business credit cards.
You can get a $100-500 bonus when you open a new account with qualifying activities.
If you like the idea of doing your business online (or through a mobile app) and earning 1% interest, check out Bluevine. There’s no monthly service fee, unlimited transactions, and the company also offers small business loans and lines of credit.
Another online banking option is Axos Bank, especially if you’re looking for a free business checking account. There are no minimum balance requirements, and you can earn $100 when you open a new account.
How to Choose a Bank as an Independent Contractor
These are just a handful of the banking options available to you. Before you dive into each, decide what’s important to you in a bank account. You might want the convenience of having business accounts where you already have your personal accounts, but determine whether your current bank offers all the perks and features you need.
If a fee-free account is a priority, know that even though some brick-and-mortar banks charge a monthly maintenance fee, they’ll often waive it if you meet certain criteria. Others may charge a fee only if you go over a certain number of monthly transactions.
Also look to see if there is a minimum opening deposit, as some banks require this.
You may also want to work with a bank that offers other business services. Some banks are also lenders and offer small business loans and lines of credit, as well as credit cards with cash back and other rewards. Many offer a lower interest rate on these financial products to existing customers.
Also look at features like employee debit cards, wire transfers, online bill pay, and financial services like invoicing and merchant services, since some banks offer more than others.
And finally, see what fees a bank might charge. These can include fees for wire transfers, overdraft fees, and ATM fees.
How to Open a Bank Account as an Independent Contractor
If you already have a personal checking account with a bank, the process to open a business checking account may be simplified. If not, you’ll either be able to open your account online or be required to go to a physical bank branch to do so.
You will be asked to provide information about both your business and yourself as the business owner, including:
- Name and address of company
- Time in business
- Employer identification number
- Your Social Security number
Typically you can open an account right away, though it may take a few days to receive your debit cards and checks.
Small Business Banking for Contractors
Having checking or savings accounts for your small business banking needs is important if you’re serious about growing your company over time. It’s important to zero in on exactly what you need in a bank account, then explore the options available, including those Nav partners we’ve covered here.
In the long run, you want a bank that can accommodate your growing needs as a business.