How Many Bank Accounts Does Your New Business Need?

Starting a new business means you have to make a lot of big decisions. You have to pick a name, choose your first products, and decide who to hire. One vital thing new business owners often forget is opening the right business bank accounts.

How many accounts should you start your business with? What kinds are most important at first versus later? Learning the best account setup helps you smoothly manage all the money, payments, workers, and budgets as your business grows.

Let’s talk about some business bank accounts for small business owners to start with.

Five Business Bank Accounts a New Business Should Have

When setting up your business money management system, most small business owners should start by opening three to five accounts. 

Here are five bank accounts for businesses to consider:

1. Central Checking Account

A Central Checking account is the main bank account crucial for managing day-to-day transactions for your business. It is used to pay for bills, vendors, supplies, and other regular business expenses and receive payments from customers.

Putting most money in and out through the central account makes it easy to see the following:

  • How much money your business earns each month
  • How much your business spends each month
  • Which expenses are higher

Here’s a tip on how to use your checking account in your first years of business. In your first year of operations, add up estimated regular monthly costs like

  • Payroll and independent contractor fees
  • Loan/interest repayments
  • Rent and utilities
  • Office supplies/equipment
  • Software, insurance, professional services
  • Inventory restocking 
  • Shipping & fulfillment  
  • Marketing initiatives like advertising
  • Miscellaneous petty expenses

Then, multiply your total average monthly operating costs by 1.5 or 2 to determine an ideal capital cushion to maintain in your primary checking. 

Monitoring cash flow trends will allow you to gauge if the account balance provides adequate coverage over time or needs adjustment.

When comparing checking accounts at different banks for your business, find one with the following:

  • No monthly fees
  • No minimum balance rule
  • Free payment options
  • Easy depositing from your phone
  • Ability to connect to accounting tools like QuickBooks

Choosing the right central operating account from the start prevents hiccups with cash flow management as operational needs evolve.

Read: 12 Finance Reports To Help You Make Better Business Decisions

2. Emergency Business Savings

While a checking account handles your regular business costs, having a business savings account for emergencies gives you a significant cash backup for surprises.

When first starting a business, unexpected costs can come up. Some of these cost include:

  • Supplier prices going up
  • Fixing or replacing equipment  
  • New taxes or fees
  • Last-minute business trips
  • Going over budget on freelancers’ or contractors’ work
  • Buying new computers or devices
  • Spending more on marketing if a product launch has problems

It’s no fun scrambling to find funds as surprises emerge. Hence, maintaining a bank account for emergencies allows you to handle costs smoothly without going into business debt or dealing with interest charges.

Financial experts recommend stockpiling enough to cover 3 to 6 months of typical operating expenses based on your average monthly burn rate.

For instance, if average operating costs tally $7,500 monthly, target saving $22,500 to $45,000 in your emergency account during the first year. Hitting this goal may take several quarters or the whole first year, depending on profitability – simply contribute whenever possible each month.

In terms of account features, prioritize a savings option offering:  

  • High annual percentage yield rates 
  • No minimum account balance
  • No withdrawal transaction limitations per month
  • Easy-to-establish automatic recurring transfers from checking  
  • FDIC insurance to protect account holdings

Treating savings contributions as any other non-negotiable business expense proves essential to building financial resilience for your company as market headwinds arise.

3. Payroll Account   

For startups planning to hire one or more full-time employees within the first year, setting up a separate payroll account right away makes it easier to manage paying workers and taking out taxes.

Bank accounts for payroll can make it easy to review how much you spend on labor to reach your business goals.

Special Terms To Take Note of in Payroll Accounts

A 401(K) Plan

A 401k is a special savings account employers create for employees to save for their retirement. Employees who agree to have a 401(k) account automatically agree to have a percentage taken out of each paycheck before taxes. Until the money is taken out of that account, taxes are not collected from the account.

A 1099 Form

A 1099 is a tax form for workers who aren’t employees, like independent contractors. It shows how much the company paid them. These workers have to pay their taxes on this income.

A W-2 Form

A W-2 is a tax form that goes to employees. It shows their pay for the year and the taxes taken out. Employees don’t pay extra taxes on W-2 income.

So, having a payroll account just for paying workers and taxes keeps everything organized. This works whether you have just one employee or many down the road.

Read: What Benefits Should You Provide for Your Employees?

Benefits of Creating a Payroll Account

This strategic account designation offers the following bottom-line benefits:

Simplifies Payroll Processing

Many payroll companies can automatically take the money for paychecks right out of the payroll account. Keeping enough money in there means you won’t have to worry about having enough cash when it’s time to pay your workers every week.

Optimizes Accounting

Paying workers is often a significant cost for companies. Having the money for paychecks come from its separate account keeps those costs apart from your other expenses. This makes your financial reports clearer and more functional.

Controls Tax Liability Risks

Workers’ pay has special tax rules that are different from yours. The payroll account is just for worker pay, so those regulations and taxes don’t get mixed up with your money and taxes.

When starting the payroll account, think about how many workers you might need in 1-3 years. Factoring in peak periods like seasonal volume or contract hires. Seek out systems that integrate seamlessly with your chosen payroll processor platform as well.

4. Merchant Services Account

A merchant service account allows businesses to accept credit card payments from customers. It will enable you to take Visa, Mastercard, Amex, and other card payments securely.

Rather than sending credit card transactions to your primary checking account, having your merchant account with a provider like Stripe or PayPal can be helpful.

Benefits of Merchant Accounts

Retail merchant accounts specifically offer the following benefits:

  • It gives you lower credit card fees through interchange-plus or subscription models
  • All card payments get deposited into the merchant account, separate from your other money
  • It seamlessly connects across your online stores and sales systems
  • You can potentially get cash advances based on your processing sales
  • It has increased fraud protection and account security
  • You get reporting on all your sales in one place

Be sure to thoroughly compare rates plus functionality between leading merchant processors suited for your niche – whether restaurant payments, online subscriptions, crowdfunding, or product/inventory sales. 

Consider volume expectations, merchant processor prices, average cart sizes, and international business plans when making this critical startup financial decision.

5. Client Funds Holding Account

Many small businesses, like consultants, lawyers, agencies, or contractors, work on projects for larger clients. Handling client payments in a separate client funds account can be helpful:

  • It keeps client retainers, deposits, and project funding separate from your general business money. This makes tracking unspent balances easier based on your agreements. 
  • Many contract checks say you can’t mix client funds with regular income or expenses. A separate account prevents this.
  • It shows extra transparency when reporting to clients on their project status. They can see their funds are allocated just for their work.

Even if clients don’t require it, a dedicated client funds account builds trust and accountability. Clients know you are protecting their payments.

As your business grows, think about when specialty accounts for investors, dividends, international deals, etc, could help. But the five main accounts we’ve discussed provide a good starting framework.

When picking bank partners, look for great account features, low fees, mobile apps, and accounting integration. Choose banks that can scale with your startup’s growth.


What is the difference between personal and commercial bank accounts?

Personal bank accounts are for your money and expenses as a consumer. Business or commercial accounts are specially designed for companies.
Business accounts have:
(a) Protections, rules, and auditing that keep company money separate 
(b) Features for business transactions that individuals don’t need
(c) Reporting tools to track company finances
It’s essential to keep your business and personal money completely separate. Business accounts keep company finances organized and protected.
The main difference is that commercial accounts give helpful business-focused features and protections. Personal accounts are for your consumer expenses as an individual.

What bank account features should small businesses prioritize? 

Small businesses should look for accounts with:
(a) Free unlimited transactions
(b) Mobile apps to manage phones
(c) Remote deposit to scan checks from home
(d) Connections to accounting software
(e) Support for multiple cards
(f) Detailed activity reports
Also, compare monthly fees to pick services you actually need versus extras.

Should startup partners open shared or separate bank accounts?

Partners can share main business accounts. But they often also have separate accounts for:
(a) Payroll to pay individual salaries
(b) Personal spending money
(c) Dividends and profits from the business
Having separate accounts helps partners manage their pay and dividends. Make sure your partnership agreement clearly explains the rules for accessing accounts, auditing, withdrawals, liability, and more.


When starting your business, think about how you will operate over the first 12 to 24 months. Open the right mix of 3 to 5 small business bank accounts to manage everything well. There are many bank accounts for small businesses, but you need only a few to start with. And as your business grows, you can get more depending on the goal.

You will need a primary checking account, a protected payroll account, a strong emergency savings account, and, ideally, a merchant account to take credit card payments. Together, these accounts will cover most money scenarios facing startups.

Therefore, compare different banks’ features closely. Look for ones with no fees, easy mobile apps, and tools to track spending. Pick accounts that will grow with your company.

The right startup bank accounts make handling all your company money smooth as you expand. They keep different funds organized and protected. Setting them up early on prevents issues from arising later. 

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