Should Freelancers Get a Business Checking Account?

Before you ask, yes, freelancers can open business checking accounts, even if they don't have an employer verification number. That said, freelancers aren't legally required to open a separate checking account designated for business expenses. In fact, for many, using a personal checking account might be sufficient, especially if freelancing is a side hustle and not a full-time venture.

But for those who are investing a lot of time into growing their freelance business, separating business income from personal expenses could be worthwhile down the road. If you're not sure if opening a business checking account is right for you, let's consider the perks and drawbacks.

Pro: Business checking accounts are "strictly business"

Perhaps the strongest argument for business checking accounts is the separation of personal and business transactions. Organizing your business income in one bank account can give you a clear picture of your business's cash flow. This can help you visualize how much your business is spending and give you one central place to tally expenses for tax purposes.

Of course, as freelancers, we don't usually have as many expenses as, say, the owner of a coffee shop. But this only adds to the argument that these accounts are useful. If your business expenses are variable, they can easily get lost in the bulk of personal expenses you're already making. And unless you're keeping track of them in some other way, like with a spreadsheet, you might forget about them come tax time.

Likewise, when you deposit all your business income into one account, you can better prepare for your quarterly taxes. Since the IRS isn't withholding taxes from your pay, you have to deduct the appropriate amount yourself. Mixing this with your personal money can start to get confusing, not to mention tempt you to spend it. By keeping quarterly tax money in a business checking account, you can pay the IRS directly from that account.

Truthfully, I don't keep quarterly tax money in my business checking account. Instead, I have a high-yield savings account that I save my tax money in each quarter. This money earns a little interest, helping me capitalize on the IRS's cut before I pay it. While some small business accounts are interest-bearing, few can compete with the best free savings accounts.

Con: Fees, fees, fees

Business checking accounts can help you stay organized. But even if you get a free business checking account, you might eventually pay up thanks to all the extra fees.

This came as a surprise to me after I opened my first free business checking account. I was diligent in picking an account with no monthly maintenance fee, as I didn't want the hassle of meeting requirements to waive one. Within one month of opening the account, however, I was hit with a $6 fee. When I looked into it, I saw this fee came from a mailed paper statement, which wasn't something I really wanted. Later, I discovered a fee schedule with a slew of other hidden fees, like one to connect my account with QuickBooks and another for ACH transactions above a certain limit.

If you're a freelancer who conducts a lot of bank transactions every month, you might also pay fees on transactions. Many business checking accounts come with a limit of free transactions, like 125, after which you'll pay a small fee for each. Likewise, you might pay a fee for cash deposits above a certain limit.

These extra fees shouldn't stop you from opening a business checking account. If anything, they should only make you more diligent in your research so you know about them and can choose an account that doesn't charge a lot of them. After all, business checking accounts can really help you manage your business's finances and prepare you for taxes.

Check out our list of top business checking accounts and see which could help you better organize your business.