Companies can open and maintain savings accounts just like individuals do

A business savings account is a deposit account held in the company's name at a bank or credit union. The account belongs to the business entity itself — whether that's a sole proprietorship, partnership, LLC, S-corp, or C-corp — not to the owner or owners personally. Money deposited into a business savings account is the company's asset, and the company controls how it is used.

The main difference between a business savings account and a personal one is the paperwork required to open it and the tax treatment of the interest earned. A business account requires an Employer Identification Number (EIN) from the IRS, proof of business registration, and often a business license. Interest earned on a business savings account is taxed as business income, not personal income.

Most banks and credit unions offer business savings accounts. The terms — interest rates, minimum balances, withdrawal limits, and fees — vary by institution and account type. Some banks have separate products for different business sizes: sole proprietors, small businesses, or larger corporations.

Key Takeaways

  • A business savings account is owned by the company itself and requires an EIN, business registration documents, and often a business license to open.
  • Interest earned on business savings accounts is taxed as business income on the company's tax return, not the owner's personal return.
  • Business savings accounts typically have higher minimum balances and different fee structures than personal accounts, though rates and terms vary widely by bank.
  • Sole proprietors can open business savings accounts even if they have not formally registered a business, though they will need an EIN or can use their Social Security number.
  • Money in a business savings account is legally separate from the owner's personal funds and is protected by FDIC insurance up to $250,000 per depositor per bank.

What you need to open a business savings account

The exact requirements depend on your business structure and the bank, but most institutions ask for the same core documents. You will need proof that your business exists: a business license, articles of incorporation, a partnership agreement, or an LLC operating agreement. You will also need an EIN, which you can obtain from the IRS for free online at irs.gov. If you are a sole proprietor and have not registered your business formally, some banks will let you use your Social Security number instead of an EIN, though an EIN is still recommended.

Bring a government-issued ID and your Social Security number or EIN. Most banks will also ask for your business address, the nature of your business, and information about the owners or authorized signers. Some banks require a minimum opening deposit, which ranges from $0 to $500 or more depending on the institution and account type.

If you are opening the account in person, bring originals or certified copies of your documents. If you are opening online, you will upload scans or photos. The process usually takes a few days to a week for the bank to verify everything and activate the account.

How interest and taxes work on business savings accounts

Interest earned on a business savings account is reported as business income on your company's tax return. If your business is a sole proprietorship, the interest appears on Schedule C (Form 1040). If it is an LLC, S-corp, or C-corp, the interest is reported on the business's own tax return. The bank will send you a Form 1099-INT at the end of the year if the account earned $10 or more in interest.

Interest rates on business savings accounts are typically lower than rates on money market accounts or certificates of deposit, but higher than rates on business checking accounts. Rates vary by bank and change frequently. Some banks offer tiered rates based on your balance: the more you keep in the account, the higher the interest rate. Others offer a flat rate regardless of balance.

Unlike personal savings accounts, business accounts may have different FDIC insurance rules if the business has multiple owners. A sole proprietorship's savings account is insured up to $250,000. A partnership's account is also insured up to $250,000 as a single entity. An LLC or corporation's account is insured up to $250,000 in the business's name. If you have both a business checking account and a business savings account at the same bank, they are insured separately, so you could have up to $500,000 protected.

Sole proprietors and business savings accounts

A sole proprietor — someone who runs a business as an individual without forming an LLC or corporation — can open a business savings account. You do not have to be formally registered as a business to do so. Many sole proprietors open business accounts to keep business money separate from personal money, which makes accounting and tax filing simpler.

Some banks will let you open a business account as a sole proprietor using just your Social Security number. Others require an EIN. Getting an EIN is free and takes about 15 minutes online at irs.gov; you can also apply by phone or mail. If you plan to hire employees, you will need an EIN regardless.

The interest earned on a sole proprietor's business savings account is still reported as business income on your personal tax return (Schedule C). The account itself is a business asset, but for tax purposes, a sole proprietorship is not a separate legal entity from the owner.

Business savings accounts versus business checking accounts

A business checking account is designed for frequent transactions: paying bills, making deposits, writing checks, and processing payments. A business savings account is designed to hold money you are not spending right away. Savings accounts typically have lower interest rates but also lower fees. Checking accounts usually have no interest but may charge monthly maintenance fees.

Most businesses use both: a checking account for day-to-day operations and a savings account to hold emergency funds, set aside money for taxes, or save toward a goal. You can transfer money between the two accounts at the same bank, usually for free and instantly. Some banks limit the number of transfers you can make from a savings account per month, though federal rules on this have relaxed in recent years.

Interest rates on business savings accounts are higher than on business checking accounts, but still modest — often less than 1% annually, though rates change with market conditions. If you want higher returns, you might explore a business money market account or a certificate of deposit (CD), though those have different rules about access and withdrawal timing.

FDIC insurance and account protection for business savings

Money in a business savings account at an FDIC-insured bank is protected up to $250,000 per business entity per bank. This means if your company has $300,000 in a savings account and the bank fails, you are covered for $250,000. The remaining $100,000 is not protected.

If you have multiple accounts at the same bank in the same business's name — for example, a checking account and a savings account — they are insured separately. So you could have $250,000 in a business savings account and $250,000 in a business checking account at the same bank, and both would be fully protected.

If your business has multiple owners and the account is held in a partnership or LLC name, the $250,000 limit applies to the business entity as a whole, not to each owner individually. If you want more protection, you can open accounts at different FDIC-insured banks. Credit unions offer similar protection through the National Credit Union Administration (NCUA), also up to $250,000 per account holder per institution.

Frequently Asked Questions

Can a sole proprietor use a personal savings account for business money?

Legally, yes — a sole proprietorship is not a separate legal entity, so the owner's personal and business accounts are the same in the eyes of the law. However, mixing personal and business money makes accounting harder and can create problems if you are audited. Most accountants and tax professionals recommend keeping them separate, even if you use a personal account for business deposits.

Do I need an EIN to open a business savings account?

It depends on the bank and your business structure. Some banks require an EIN; others will accept a Social Security number for sole proprietors. An EIN is free and takes 15 minutes to obtain online at irs.gov. If you plan to hire employees or form an LLC or corporation, you will need one anyway.

What happens to a business savings account if the owner dies?

The account becomes part of the business's estate and is handled according to the owner's will or the state's inheritance laws. If the business is a sole proprietorship, the account passes to the owner's heirs. If it is an LLC or corporation with other owners, the account remains a business asset and is controlled by the surviving owners or the business's operating agreement.

Can a business have multiple savings accounts at the same bank?

Yes. Some businesses open separate savings accounts for different purposes — one for emergency funds, one for tax savings, one for a specific project. Each account is insured separately up to $250,000, so you can protect more money by using multiple accounts. However, each account may have its own monthly fee, so check with your bank about the total cost.

Is interest from a business savings account taxable?

Yes. Interest earned on a business savings account is reported as business income on your company's tax return. The bank sends a Form 1099-INT if the interest is $10 or more. The interest is taxed at your business's tax rate, which may be different from your personal tax rate depending on your business structure.