Keeping your business finances separate from your personal finances is one of the most important tenets of good business management. To that end, you’ve probably heard about business bank accounts—but what is a business account, and how do they work?

Business account types vary, from checking and savings to money market accounts and certificates of deposit. There are commercial accounts available for just about every financial need a company may have, and when you need to use a particular type of account will depend on a variety of factors unique to your company. Depending on your business’s age, size, type, and industry, certain business accounts may be more suitable than others.

Here’s an overview of business accounts, and how to determine which ones might be right for you.

What are business accounts?

Business accounts, also known as commercial accounts, are banking and credit accounts specifically geared toward business owners. Many types of accounts, like business credit, checking, and savings accounts, do not require you to own and operate a traditional business. As long as you’re generating taxable income, you may apply for commercial bank and credit accounts.

Business accounts are an opportunity for business owners and freelancers to keep their business expenses separate from their personal finances. Many business accounts also offer exclusive, business-specific rewards. These can help you stretch your profits further, and truly invest in your own company.

If you apply for a business account, there’s one primary tip to keep in mind: you cannot use your business accounts for personal spending and saving. Always keep your expenses separate. It’s not just great for tax time, either. Some banks and lenders may ask you to justify your expenses—save yourself time and hassle by keeping everything above board.

What are the different types of business bank accounts?

There are many different kinds of business accounts. Here are some of the most common:

  • Checking: A business checking account is the number one business account you need to have. You can use it to pay your employees, pay for purchases, receive payments, and more. This is typically the first type of account a business owner will open with a bank. The better you manage your business checking account, the more likely you are to qualify for more commercial accounts.
  • Savings: It’s always good to have a cash reserve on hand—especially if you can earn interest at the same time. A business savings account allows you to store funds away for a rainy day. Depending on how long you leave the money in the account, you should earn interest. However, the interest rates are lower than other types of investment accounts. It’s also important to remember that your bank may limit the number of transactions you can make per month. Read the fine print, and proceed accordingly.
  • Credit cards: Every business owner and independent contractor should consider a business credit card. Not only does it make it easier for you to keep personal and business expenses separate, but there are also better rewards and perks available. From airline miles and gas rebates to cash back, there’s a business credit card account for every company. Research creditors and find a rewards program that will help you stretch your hard-earned cash a lot further. Don’t forget that many business credit cards offer additional perks, like access to airline lounges and generous sign-on bonuses. Some companies offer interest-free financing for the first 3 months after signing up—consider strategically applying when you need to make a large purchase.
  • Lines of credit: Business lines of credit are a cross between a small loan and a business credit card. You can borrow against your line of credit. Depending on the bank’s terms, there may be a monthly or weekly repayment schedule. Once you repay your debt, the entire credit limit is available. These lines of credit usually need to be renewed annually. They’re a great way to guarantee short-term funding and build business credit. However, they do not provide the same rewards as a business credit card might.
  • Money market: Money market accounts offer much higher interest rates for savings. Along with those higher rates come higher requirements for deposits. You’re also limited in how many withdrawals you can make each month. Business owners can make 6 withdrawals per month, although teller withdrawals don’t count toward the limit. If you’re investing high amounts of money in your account, make sure that the institution is FDIC insured.
  • Certificates of deposit: Certificates of deposit (CDs) are a short-term investment opportunity that can deliver a fixed rate of interest. The minimum is typically $1,000, and terms range from several months to a year. If you can afford to tie up funds in a CD, it can be a nice way to earn some interest.
  • Commercial loans: From small business loans to commercial real estate mortgages, banks and other lenders are happy to offer commercial loans. Depending on the type and structure you need, you may need to look outside your primary financial institution.
  • Payroll: When you have employees, you can open a separate payroll account to move money from checking to payroll. This enables you to pay your employees appropriately and track your expenses. While not every company has a separate payroll account, this can usually make the process easier.
  • Accounts payable and receivable: Finally, you can create dedicated accounts payable and receivable. Like payroll accounts, these are optional accounts that can further help you separate and track your cash flow.

How do you open a business bank account?

The process of opening a business bank account is very similar to that of opening a personal account. In addition to providing your personal information, you’ll also supply information about your company, from name and contact information to number of employees and annual revenue.

Having business accounts is a smart way to separate finances, track expenses, and prove to lenders that your company has what it takes to succeed. In return, you’ll earn better rewards, better interest, and have an easier time with accounting and bookkeeping.