Using Multiple Bank Accounts for Your Small Business

If you want to take your money further, you should consider opening multiple business bank accounts. Separating your expenses into dedicated accounts can help you make your cash flow clearer, which simplifies budgeting, expense tracking, and financial goal-setting. You can have multiple business bank accounts under one provider, open accounts with multiple providers, or create subaccounts under one main account.

Key takeaways

  • There are no rules against opening multiple business accounts.
  • Opening multiple bank accounts for business can help you divide your funds for specific purposes or savings goals.
  • You can have multiple business bank accounts and gain access to interest-earning potential, extended Federal Deposit Insurance Corp. (FDIC) insurance, and other banking services.
  • Having multiple accounts means needing to spend more time staying on top of monthly fees, activity requirements, and financial record-keeping.

Pros & Cons of Having Multiple Bank Accounts for Business

Pros of Having Multiple Bank Accounts for Business

1. You can see expense allocation more clearly

With multiple business bank accounts, you can divide your funds into dedicated buckets. For example, you can create separate accounts for operating costs, payroll, taxes, and savings. This makes it easier to see how much funds you have for specific purposes.

2. You can track progress on savings goals more easily

You can also create dedicated accounts for specific business goals. Let’s say you run a restaurant and plan on renovating your store. You can open a new business account dedicated to saving money for the renovation.

Having this account makes it easier for you to see how much you’ve saved for this goal. It also makes it harder for you to spend those funds on other business expenses.

3. You can earn interest on idle cash

Businesses typically keep their funds in business checking accounts, which allow them to easily move money in and out. However, this liquidity typically comes at the cost of decreased interest-earning potential.

If you want to earn money on your idle cash, you can open an interest-earning checking account, a business savings account, a business certificate of deposit (CD), or a money market account.

4. You can gain access to additional banking services

Not all banking providers offer the same services. For example, most financial technology (fintech) companies let you access useful banking perks, such as competitive annual percentage yield (APY), integrated accounting, or free invoicing tools. However, they typically lack basic banking products, such as credit cards and loans.

If you want access to multiple types of services, you should consider opening business bank accounts with multiple providers.

5. You can increase your FDIC coverage

FDIC insurance only covers deposits up to $250,000. If you have multiple bank accounts for business with different providers, you can increase that coverage by $250,000 for every account you open.

6. You have backup funds in case of provider problems

Having multiple business bank accounts with different providers makes it easy for you to access backup funds in case one of your providers has issues that prevent you from using your money. For example, if you have an account under an online provider and its website runs into technical difficulties, you’ll still have additional accounts to draw money from.

Cons of Opening Multiple Bank Accounts for Business

1. You may need to pay additional fees

If you open an additional business bank account, you may need to pay additional monthly fees. However, some types of accounts charge no monthly fees. Sometimes, providers also let you open a certain number of additional accounts for free.

2. You will spend more time maintaining each account

If you open multiple new business accounts, you will need to spend additional time maintaining each account. This means keeping track of how much money you have in each and whether or not you can meet each account’s monthly activity and minimum balance requirements.

3. You might have a harder time transferring funds

Different types of bank accounts will have varying levels of liquidity. Savings accounts and CDs, for example, will provide lower transaction allowances. This means that if you don’t want to incur additional fees, you have to know when you need access to your money.

You might also incur additional transfer fees if you open bank accounts with different providers.

4. You may have a harder time maintaining bookkeeping records

Accounting and bookkeeping may be more time-consuming when multiple accounts are involved. Having multiple accounts means needing more entries on your bookkeeping records.

Types of Business Bank Accounts

Before you open an additional business bank account, you first need to understand which type of account suits your needs best.

1. Business Checking Account

Business checking accounts are bank accounts that let you store and move money. They typically let you write and deposit checks, make debit card payments, and transfer money via ACH or wire transfer.

Because checking accounts have generous transaction limits, you can move money in and out pretty easily. You typically need to open a business checking account before opening additional account types.

2. Subaccount

A subaccount is a smaller account that exists under a parent bank account. Banks will let you create subaccounts to help you divide your funds into multiple categories. You can transfer funds between subaccounts instantly for free.

3. Business Savings Account

Savings accounts are great for storing excess funds. You can choose between savings accounts, money market accounts, CDs, and sweep accounts.

  • Savings account: Business savings accounts let you earn interest on idle funds. However, they typically come with strict monthly transaction limits. Refer to our article on business savings accounts to learn more about the key benefits of opening a business savings account.
  • Money market account (MMA): Business money market accounts are business savings accounts that provide higher monthly transaction limits and additional check-writing capabilities. They also offer more competitive interest rates but at the cost of higher monthly fees. Our guide to business money market accounts can provide more information.
  • CDs: Business CDs let you earn competitive interest over a set term length. When you store your money in a CD, you cannot withdraw your money until the term length ends. There are large penalty fees for early withdrawals.
  • Sweep account: A sweep account is a savings account that needs to be linked to your checking account. It helps automate the process of saving funds. When you create a sweep account, you set a target balance for your checking account. Whenever your checking account exceeds your target balance, your bank will sweep the excess funds into the sweep account.

How To Open Multiple Bank Accounts for Business

Step 1: Gather relevant documentation

Most business types need to register for an employer identification number (EIN) to open a business bank account; sole proprietors and single-member limited liability companies (LLCs) only need their Social Security numbers. Learn more by reading our article on how to get an EIN.

Your bank may also ask you to prepare additional information, such as documents relevant to your business structure, and government-issued IDs for authorized signers.

Step 2: Apply for a business checking account

Typically, the first type of business bank account you’ll need to open is your checking account. Since checking accounts typically have flexible transaction limits, they make it easier for you to roll your money into additional accounts.

Step 3: Determine what kind of account you need

Once you have a business checking account, decide what additional accounts your business might need. Savings accounts are best for savings goals while subaccounts are good for separating your expenses. You can open checking accounts with other providers if you need access to business services that your chosen provider lacks.

Frequently Asked Questions (FAQs)

How many bank accounts your business has depends on your specific needs. Most businesses can make do with just a checking account and a savings account. If you’re using additional bank accounts to segregate your expenses, you can open one sub-account for every expense category you have.

You should always have a checking account for your day-to-day expenses. Opening a savings account would also help you grow and protect your reserve funds. While it is not necessary to open sub-accounts, doing so will help you see expense allocation more clearly.

Bottom Line

You should have multiple bank accounts for business if you want to have an easier time staying on top of expense allocation and savings goals. Additional business bank accounts also help you gain access to banking perks like interest and FDIC insurance. However, you need to ensure you have time to put in the extra effort of monitoring account activity and updating financial records.


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