By Gayle Sato
Edited by Michelle TipswordBusiness Checking vs. Personal Checking Account: What’s the Difference?
Quick Answer
Business checking accounts help you manage your business finances; personal checking accounts handle your personal income and expenses. If you own a business, you probably want both account types.
Business checking accounts and personal checking accounts are similar, but one key difference sets them apart: Business checking accounts are for managing business finances, while personal checking is for your personal income and bills.
Both business and personal checking accounts are secure places to deposit and keep your money. They allow you to make payments and transfer funds easily. Here is a quick side-by-side comparison of business checking and personal checking.
Personal Checking Account vs. Business Checking Account
| Personal Checking Account | Business Checking Account | |
|---|---|---|
| Purpose | To hold personal income, make and receive payments and pay bills | To hold business revenue and pay expenses |
| Features |
|
Same as personal checking, plus:
|
| Fees | Monthly maintenance fees may be waived with minimum balance | May require a higher minimum balance to waive or reduce fees |
| Taxes | N/A | Separates business transactions for easier tax preparation |
| Legal protection | N/A | Avoids commingling of business and personal funds, which may help protect your assets in a lawsuit |
| Insurance | Insured up to $250,000 by the FDIC or NCUA | Insured up to $250,000 by the FDIC or NCUA |
What Is a Personal Checking Account?
A personal checking account allows you to accept deposits and make payments so you can manage your personal income and finances. Typical checking account activities include:
- Writing and depositing checks
- Paying for purchases with a debit card
- Accepting and initiating automated clearing house (ACH) transfers
- Accepting direct deposits
- Using online bill pay
- Doing wire transfers
- Accessing ATMs
Can I Use a Personal Checking Account for Business?
Technically you can, but using a personal checking account for business isn't ideal. If you own a business, you probably want both a business and a personal account. Commingling personal and business funds in a single account makes it more difficult to document income and expenses at tax time, track your business finances and protect your assets if your business is sued.
A dedicated business checking account is better suited to managing your business revenue and expenses, for reasons outlined below.
What Is a Business Checking Account?
A business checking account is similar to a personal checking account, but it's meant to handle business finances. In addition to the personal checking functions outlined above, a business checking account may offer any number of business-friendly features. Here are a few examples:
- Integration with business accounting software
- Invoicing, payroll, bookkeeping or tax-planning tools
- Debit cards with separate spending limits for employees
- Integration with merchant services (to accept credit card payments)
- Permissions that allow limited access for employees, accountants or consultants
- Interest on checking account balances
- Rewards
Because business checking accounts serve a wide range of clients, from sole proprietorships to major corporations, they offer a range of features. They also have different fee structures, minimum deposit and balance requirements, and transaction limits, compared to personal checking accounts. Be prepared to shop around for a good fit.
Business checking accounts can also open the door to business banking relationships: access to loans and credit, financial advisory services, savings and investment accounts, and more. If these are of interest to you, look for a financial institution you'd like to work with across the board.
Do I Need a Business Checking Account?
Yes, you need a business checking account if you own a business. Here's a quick rundown of reasons why business checking works for businesses large and small.
Doing Taxes Is Easier
Reporting your business income and expenses at tax time is simpler when you don't have to sort through a tangled mess of business and personal transactions in a common account. Some business checking accounts also come with digital tools that help you automatically categorize expenses and generate the right tax forms when it's time to pay.
Accounting Is Simpler
Managing your business finances through a dedicated business checking account allows you to quickly track profits and expenses, monitor cash flow or project sales. Operationally speaking, business software integration can streamline your workflow. Some online banks offer accounting tools that help generate invoices and manage tax payments using the bank's platform—no separate accounting software required.
Helps Establish Business Credit
Having a business checking account in the name of your business can help you establish and build business credit. Good business credit can be instrumental in securing business credit cards, lines of credit and loans.
Protects Your Personal Assets
Keeping business funds in a separate account can help demonstrate that you are not commingling business and personal funds, which may protect your personal assets in a business lawsuit.
How to Open a Business Checking Account
Before opening a business checking account, do a little strategizing. Consider these four steps for finding and opening the right account for you and your business:
1. Spell Out Your Needs
Think about what you need from a business account. If you have a simple, informal side business freelancing a few hours a month, you may only need a simple, fee-free checking account. If your business is more complex, added features like integration with accounting software or digital debit cards for your employees may improve your operations.
Here are some potential needs to consider as you sort through your options:
- Minimum balance and opening deposit requirements
- Account fees
- Transaction limits
- Cash deposits
- Branch access
- Integration with third-party apps
- Wire transfers and ACH transfers
- Debit cards (for you and employees)
- Rewards and sign-up bonuses
- Permissions and user controls for employees
- Low or no fees
- ATM access
- Links to high-yield savings accounts or a business line of credit
- Merchant services to accept credit cards
- Invoicing, tax planning and accounting tools
- Business banking relationship that may include business credit cards and loans
- Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) insurance
2. Shop Around
Once you have a sense of your needs, look for an account and financial institution that fit the bill. Here are three places to start:
| Pros | Cons | |
|---|---|---|
| Your current bank |
| May not have the right business checking account for your needs |
| Online bank |
|
|
| Local bank or credit union |
| May not focus on online tools for businesses |
Learn more: How to Get a Free Business Checking Account
3. Open Your Account
To open a business checking account, be ready with basic information about you and your business.
- Tax identification number: Sole proprietors may use their Social Security number. Corporations, partnerships and employers need an Employer Identification Number (EIN).
- Government-issued photo ID: You'll need to provide your full name, address and date of birth.
- Business documents: These may include your business license, fictitious name certificate and corporate documents.
Be prepared to fund your account with at least the minimum opening deposit amount if there is one.
The Bottom Line
Opening and maintaining a business checking account can help you manage your business finances successfully. Smart account features and a growing variety of banking options make it easier than ever to find an account that will meet your needs—and maybe even make you a better, less frazzled money manager.
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About the author
Gayle Sato
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
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