When it comes to banking, small businesses have markedly different needs from individuals. The account itself is critical because the business’s finances should be completely separate from the owner’s personal finances. In addition to easing the accounting burden come tax time, separation helps to ensure that business liability does not shift to the owner.

A checking account’s features must meet the business’s needs now and in the future. Many small businesses expect to apply for financing. Other businesses need a strong physical presence, with convenient branches and ATMs. Small banks and credit unions have a reputation for being more willing to lend money in the community, and large banks score better on convenience. Before selecting an account, the business owner should conduct a careful assessment of the company's typical or expected banking habits, as well as any need for financial advice and guidance, or industry analysis (provided free by some banks).

The most important characteristics to consider are:

  • Fee structure
  • Terms (intimately related to the fee structure)
  • Service (good service means different things to different businesses and may include convenient locations, extended hours, availability of financial professionals, customizable account alerts, reporting tools and downloadable account data)

Fees and Terms

Business checking fees are directly related to the type of account and how it is used.

Monthly maintenance fee. Most banks impose a monthly fee, which generally ranges from $8 to $50. While the fee on a personal account can sometimes be waived for customers who have direct deposit or linked accounts, the best (and sometimes only) way to avoid the fee on a business checking account is to maintain the required minimum average daily balance. Businesses that want to avoid the fee should pay special attention to requirements for getting it waived.

Number of transactions. Many banks limit transactions to 100 or 200 per month on low and no-fee accounts. Excess transactions typically cost 30 cents to 50 cents each.

Cash deposits. Most business accounts limit how much cash may be deposited free of charge.

Banking fees. Banks charge fees for all kinds of services. Providing check images on monthly statements, paying bills, transferring money from one account to another, ATM use, replacement debit cards and more. For example, here’s a fee schedule from Bank of America.

When you compare accounts, factor in how you plan to use the account, review the bank’s fee structure and figure out what a typical month would cost. Don’t forget to see whether your business qualifies for waiver or reduction of fees.

Some nonprofit organizations qualify for a free business checking account, for example. For charity-minded businesses, the IOLTA account is popular: Fees are deducted from the interest earned and any remaining interest earnings are donated to programs that provide civil legal aid to economically disadvantaged people. The IBRETA is similar. It’s an interest-bearing real estate trust account set up by brokers for down payments, earnest money and other funds related to a real estate transaction. Earnings are used for emergency and transitional housing programs. Other fee-free accounts are available state by state.

ATMs or Branches

The best accounts can be managed online or on a mobile device (don’t open an account that can’t), but most businesses also need a branch or ATM at some point. Of course, this is especially true for any business that deposits cash. Look for a bank that offers branches and/or ATMs, fee-free, in locations that are convenient not just to the business owner, but also to any employee responsible for handling transactions.

Best Checking Accounts

In addition to your community's local banks, here are some to investigate. Compare these terms with what you are offered locally.

US Bank. This is one of very few banks that offers a business checking account with no monthly maintenance fee. The Silver Business Package is free and includes 150 transactions, including $2,500 in cash deposits per month. It includes online and mobile banking, and free bill payment. The account includes a very handy free invoicing service and is tied to several financing products.

Navy Federal Credit Union. This institution offers several business accounts. Navy Federal accounts all include online and mobile banking, and free bill payment. Also, business accounts earn interest. Monthly maintenance fees range from zero to $20; more expensive accounts allow more transactions per month. The transaction allowance on free accounts is low (only 30), but up to 12 checks in a single deposit are counted as one transaction. Replacement debit cards are free.

First Citizens Bank. Look here for a great free business checking account. The account has no minimum balance requirement and allows up to 175 transactions per month and $5,000 in cash deposits for free. The account also comes with a nice reporting and monitoring tool, and account data is downloadable into Intuit, QuickBooks or Quicken. To up the transaction and cash deposit limits, First Citizens offers a Value Business Checking account for $25 per month. A nice perk on the Value account is a free safe deposit box.

PNC Bank. Its business checking account products are particularly good for businesses that take frequent credit card payments. The monthly fee on any of PNC Bank's three basic business accounts – Checking ($12), Checking Plus ($20) and Checking Preferred ($50) – is waived for customers that also maintain a PCN merchant services account. Merchant services accounts come with their own menu of fees, providing opportunities to streamline costs. Transaction and cash deposit limits on the three basic PNC accounts are 150/$5,000, 500/$10,000 and 1,500/$50,000 respectively.

The Bottom Line

The most important criteria to consider are the business’s banking needs. A corner store that processes dozens of transactions a day has different requirements from a landscaper who makes 20 or 30 transactions a month. If your business has significant cash reserves, talk to a few banks about options they can offer you. The greater the average daily balance, the more benefits thrown into the account package.

Finally, review your banking products once a year, including reviewing all fees paid. Business bank accounts change, and so, too, do business banking needs. As your business grows, you may be eligible for better terms (or subject to higher fees for more transactions); as it evolves you may require different types of services. For more on managing your business, see 5 Biggest Challenges Facing Your Small Business and Retail Banking Vs. Corporate Banking.