As a new freelancer, you might be wondering whether you’re legally required to have a business bank account. The truth is, there isn’t a specific law mandating freelancers to open a separate business account.
However, before you decide to skip getting one, there are a few considerations to keep in mind. I’ll go into detail on these below, and I’ll suggest some reasons you may or may not want to have a business bank account as a freelancer.
Note: I am not a lawyer or a financial advisor, and the guidance below is for educational purposes only. Laws can change, and they vary from region to region. Always check with your local authorities to see what is and is not required of you as a freelancer.
Can You Use A Personal Bank Account As A Freelancer?
You can use a personal bank account as a freelancer. Typically, there is no legal requirement that mandates freelancers to open a separate business bank account. As an individual working for yourself, you have the flexibility to manage your finances as you see fit. Using a personal bank account may seem like a convenient option, especially if you’re just starting out or have a small volume of transactions.
Note: If you have set up a limited company or other business structure, you may be legally required to have a business bank account, even if you still operate as a freelancer.
Using a personal bank account for your freelance business can be relatively straightforward. You can receive payments from clients directly into your personal account and use that same account for your business expenses. It eliminates the need to maintain multiple accounts and it can simplify your financial management, at least in the short term.
However, it’s important to recognize the potential drawbacks and risks of using a personal bank account for your freelance activities.
Mixing Personal & Business Finances
When you use a personal bank account for your freelance business, it can be difficult to separate your personal and business finances. This can lead to confusion when tracking your income and expenses, especially during tax season. It may also make it more difficult to analyze your business’s financial performance and plan for growth.
Record-Keeping
Maintaining accurate records is crucial for any freelancer, especially when it comes to tax compliance. Using a personal bank account can make it more challenging to keep a clear record of your business-related transactions. It may require extra effort to distinguish between personal and business expenses, potentially leading to errors or oversights.
While it’s not mandatory to open a business bank account, carefully weighing the advantages and disadvantages is important. Evaluate your specific needs, the volume of your freelance activities, and your long-term goals. It may be beneficial to consult with a financial advisor or accountant who can provide guidance tailored to your situation.
Do UK Freelancers Need A Business Bank Account?
UK freelancers don’t need a business bank account by law. In the UK, freelancers often operate as sole traders, which means they don’t have a separate legal entity like a limited company. As a sole trader, you and your business are legally considered one and the same.
While you’re not legally required to have a business bank account, keeping your personal and business finances separate is crucial.
You need to accurately report your income and expenses to HM Revenue & Customs (HMRC) and pay the appropriate taxes each year. Maintaining clear and organized financial records is essential for fulfilling your tax obligations.
With a separate business bank account, you can easily track your business-related transactions, making it easier to calculate your taxable income and claim eligible deductions.
Do You Need A Business Bank Account As A Freelancer In The USA?
If you’re a freelancer in the USA, you are not legally required to have a separate business bank account.
Operating as a freelancer in the USA typically means you’re considered a sole proprietor by default. As a sole proprietor, there’s no legal requirement to open a separate business bank account. As with freelancing in the UK, it can still be beneficial to open a business account for tax simplification and to keep your personal and business finances separate.
Let’s take a quick look at the pros and cons of having a business bank account as a freelancer, before we go into more detail about choosing the right business bank account for your needs.
The Pros & Cons Of Business Bank Accounts For Freelancers
| Pros | Cons |
| It’s easier to distinguish between personal and business transactions | It can cost extra to open and maintain a business bank account |
| You may be required to use a business account by your bank | It can increase time spent on admin as you now have multiple accounts |
| Business bank accounts can sometimes offer extra perks |
5 Types Of Bank Accounts For Freelancers
1. Personal Bank Account
A personal bank account is the most common choice for freelancers, especially when you’re just starting out or you only handle a small volume of transactions. It’s a standard account that allows you to receive payments from clients and manage your personal expenses.
Personal accounts are typically easy to open, require minimal documentation, and may have lower or no monthly fees.
2. Business Checking Account
A business checking account is specifically designed for small businesses and freelancers. It offers features tailored to business needs, such as the ability to accept business payments, write business checks, and track business expenses separately.
These accounts often provide tools for managing your cash flow, invoicing, and integration with accounting software. Business checking accounts may have higher fees compared to personal accounts but offer additional benefits for managing business finances.
3. Business Savings Account
A business savings account is a separate account where freelancers can set aside funds for business-related purposes. It allows you to earn interest on your savings while keeping them separate from your day-to-day expenses.
Having a business savings account can be beneficial for saving money for taxes, emergencies, or future business investments. These accounts may have higher minimum balance requirements and limited transaction capabilities compared to checking accounts.
4. Business Money Market Account
Similar to a business savings account, a business money market account allows you to earn interest on your funds while maintaining liquidity. It combines the features of a checking and savings account, offering a higher interest rate than a regular savings account.
Business money market accounts often have tiered interest rates, which means the more you deposit, the higher the interest rate you earn. These accounts may have higher minimum balance requirements and withdrawal limits, and won’t be suitable for all freelancers.
5. Online Business Bank Account
Online business bank accounts have gained popularity in recent years due to their convenience and cost-effectiveness. They are entirely digital, allowing you to manage your finances online or through a mobile app. Many even have dedicated freelancer or sole trader accounts.
Online business accounts often have low fees or no fees, provide easy integration with accounting software, and offer features like invoicing, expense categorization, and real-time transaction notifications. However, physical cash deposits may not be possible with some online banks.
Comparison Of Bank Account Types For Freelancers
| Bank Account Type | Features | Fees | Interest Earning |
| Personal Bank Account | Basic account for personal and freelance use | Low or no fees | No |
| Business Checking Account | Designed for small businesses and freelancers | Higher fees | No or minimal |
| Business Savings Account | Separate account for saving business funds | Higher fees | Yes |
| Business Money Market Account | Interest-earning account that allows withdrawals | Higher fees | Yes |
| Online Business Bank Account | Digital account with convenient features | Low or no fees | No or minimal |
How To Choose A Business Bank Account As A Freelancer
Account Features
When choosing a business bank account as a freelancer, the features and services offered by different banks are among the first things you should consider. Look for key features such as online banking, mobile banking apps, debit cards, and ATM access.
Consider whether the bank provides tools specifically designed for freelancers, such as invoicing capabilities, expense tracking, and integration with accounting software. Assess which features align with your business needs and which ones will actually make your financial management more efficient.
My top pick for a tool that does all this and more is Bonsai. The tool provides a bank account, invoicing, tax preparation, contracts, proposals, and so much more. It’s a great all-in-one financial management solution for freelancers.
Fees & Charges
Next, compare the fee structures of various banks. Look for monthly maintenance fees, transaction fees, ATM fees, and any other charges that may apply (although some charges may not be important to you, such as ATM charges if you don’t plan to withdraw physical cash).
Some banks may waive certain fees or offer fee-free periods for new businesses. Consider your projected transaction volume and assess which fee structure will be the most cost-effective for your business. There are some free ones out there for freelancers, but they may be digital-only options.
Minimum Balance Requirements
Check if the bank has any minimum balance requirements for their business accounts. Some banks may require you to maintain a minimum balance to avoid monthly fees or qualify for certain features.
Evaluate whether you can comfortably meet the minimum balance requirements based on your financial situation.
Accessibility & Convenience
Consider the bank’s branch and ATM network. Determine if their physical locations and ATMs are easily accessible to you, especially if you anticipate needing in-person banking services or making cash deposits frequently. Again, this might not be important if you never plan to withdraw cash from that account.
Customer Support
Also research the bank’s reputation for customer support and service. Look for reviews and feedback from other freelancers or small business owners (forums like Reddit are good for this).
Integration With Other Tools
Finally, if you use accounting software or other business tools, check whether the bank offers integration with those systems. Seamless integration can simplify your financial management and streamline processes such as invoicing, expense tracking, and tax preparation.
4 Things You Need For A Freelance Business Bank Account
1. Business Entity Information
If you operate as a sole trader/proprietor, you’ll need to provide your personal information, such as your full name, address, and some other relevant details like Social Security or National Insurance numbers.
If you have registered your business as a separate legal entity, such as a limited liability company (LLC) or corporation, you’ll need to provide the relevant business entity details, such as the business name, address, and any official registration documents. For most freelancers, this won’t apply.
2. Personal Identification
You’ll need to present valid identification documents, such as a government-issued photo ID (such as your passport or driving license). This helps verify your identity and ensures compliance with Know Your Customer (KYC) regulations.
Some digital banks may require you to provide this by taking a picture or video of yourself, often reading out a specific phrase, especially if they don’t have any physical branches.
3. Business Documentation
Depending on your business structure, you may need to provide additional documentation. For sole proprietors, this may include a Doing Business As (DBA) certificate if you’re operating under a different name.
For registered business entities, you may need to provide copies of your official business registration documents, articles of organization/incorporation, or partnership agreements.
4. Business Address Verification
Many banks require proof of your business address. You can do this by presenting utility bills, lease agreements, or official documents that clearly show your business address.
The Best Business Bank Accounts For Freelancers
There are lots of options when it comes to choosing a business bank account as a freelancer. It will vary a lot depending on where you live, but some of the best options for US freelancers include:
Some of the best business bank accounts for UK freelancers include:
You’ll need to do your own research into these to decide which is best for you. They are constantly changing their services, and each one offers its own set of useful (and not so useful) features for freelancers.
Note: It’s worth considering opening a business bank account with your current bank. You might be able to get a good deal or extra perks as an existing customer, and it can make things a bit more streamlined as you’ll have all of your accounts in one place.
Not All Freelancers Need A Business Bank Account
You might not need a business bank account as a freelancer, and this might be what works best for you. However, you should consider whether you’d make any gains from keeping your personal and business finances separate – the answer is likely yes!
Now that you know all about business bank accounts for freelancers, you can check out our guide to find out if you need a business license.
Chris is the creator of Freelance Ready. He originally started freelancing (on Fiverr) while at university, writing and editing website content. He created this website to share his freelancing experience and help others on their own self-employed journeys. He is now a freelance SEO consultant and content editor. You can learn more about Chris here.
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