Business Checking Vs. Personal Checking: What’s The Difference?  (2024)

Checking accounts can make paying bills, accepting deposits and making purchases more manageable. But they aren’t all alike.

Personal checking accounts are just what they sound like—checking accounts for managing personal finances. If you run a business or are self-employed, having a separate business checking account could make sense.

You can open either type of account at a traditional bank, credit union or online bank. But what’s the difference between business checking and personal checking? And how do you decide which type of account you need?

Here’s a closer look at how business and personal checking accounts compare.

Business Checking vs. Personal Checking Basics

A business checking account can be used to manage business finances. For example, that may include:

• Paying suppliers
• Depositing payments from customers
• Paying your employees
• Making necessary purchases for the business
• Covering operating expenses
• Making tax payments

Banks can offer business checking accounts for all types of business owners and business structures. Sole proprietors, limited liability companies (LLCs), partnerships and corporations can all opt to set up business checking accounts. Depending on the bank, your business may not even need to be generating any revenue yet to open an account.

Personal checking accounts, on the other hand, are designed for personal use. In other words, that means things like:

• Depositing your paychecks
• Paying personal bills, such as the mortgage or utilities
• Making purchases with a connected debit card
• Transferring money to a linked personal savings account
• Withdrawing cash at the ATM
• Sending personal payments to friends and family

On the surface, the way each type of account is used is what sets business and personal checking accounts apart. But there are other things that make business checking different.

What’s the Difference Between Business and Personal Checking?

Both business and personal checking accounts can offer things like check-writing and debit cards. But a business checking account can come with features that a personal checking account doesn’t.

For example, when you open a business checking account, your bank may offer access to helpful business features like:

• Debit cards for employees
• Merchant services for processing card payments
• Payroll processing services
• Bookkeeping integrations
• Financial advisory services

These are all tools and services that a business owner may need to help run their business more smoothly. In addition to business checking accounts, you may be able to open other accounts, such as a business savings account.

Business checking accounts can also differ from personal checking accounts when it comes to things like:

• Account opening
• Minimum deposit requirements
• Minimum balance requirements
• Fees

For example, to open a business account, you typically need to prove ownership of the business. This could be a copy of your articles of incorporation, your “Doing Business As” (DBA) documentation or a business license, depending on the bank.

While some personal checking accounts can be opened with as little as $1, a business checking account might require $500, $1,000 or more to open, depending on the bank or credit union. You may also be required to maintain a higher minimum balance in your account to avoid a monthly maintenance fee. Compared to personal checking accounts, business checking accounts may charge more or higher fees overall.

Are Business Checking Accounts FDIC Insured?

The FDIC offers protection for personal deposit accounts, up to the specified limit of $250,000 per depositor, per insured bank for each account ownership type. That same protection extends to business accounts as well.

The types of business accounts the FDIC protects includes:

• Checking accounts
• Negotiable Order of Withdrawal (NOW) accounts
• Savings accounts
• Money market deposit accounts
• Time deposits, such as certificates of deposit (CDs)
• Cashier’s checks, money orders and other official items issued by a bank

FDIC protections do not cover investment accounts, safe deposit boxes, life insurance policies or annuities. But if you have a business checking account or any of the other account types listed above, then you have the reassurance of knowing your money is covered up to the applicable limit.

Who Needs a Business Checking Account?

If you run a business, maintaining a separate checking account for your business can make sense for a number of reasons. You may consider opening a business checking account if you’re interested in any of the following.

Streamlined Accounting

First, it’s easier to keep track of cash flow in your business when funds are moving in and out of a single dedicated account. You can set up a business checking account to receive payments from customers, make payments to suppliers and cover your operating expenses. This can take some of the stress out of bookkeeping.

You can simplify accounting even further if your bank offers integration tools that allow you to connect business checking to your bookkeeping or payroll software programs. This can make a potentially dreaded task easier to manage if you have employees.

Simplified Tax Reporting

If you plan to deduct business expenses on your taxes, having a separate business checking account can take the hassle out of organizing things when it’s time to file. You don’t have to sift through personal and business transactions to look for deductible expenses. And if you’re ever audited, you already have a built-in paper trail of business spending.

Legitimizing Your Business

The IRS treats business income differently from hobby income. If you want to be sure the IRS recognizes the income you reported as being related to a business, not a hobby, then setting up a business checking account can serve as proof.

Protecting Assets

Keeping personal assets separate from business assets can offer an advantage if your business is sued or you default on a debt. According to the Small Business Administration, business checking accounts can offer limited liability protection to business owners. Additionally, enrolling in merchant services can offer purchase protections to your customers and keep their personal information secure.

Growing Your Business

Having a business checking account could make it easier to grow your business in the future. For example, if you want to expand your product line or open up a second location, you may need a small business loan or line of credit to do it. Having an established business checking relationship with your bank could give you an advantage when it’s time to apply for a loan.

How to Choose a Business Checking Account

Just as business checking accounts and personal checking accounts are different, every business checking account is different. For that reason, it’s important to shop around to compare business checking options so you can find the one that fits your needs best.

When comparing checking accounts, here are some of the most important things to consider:

• Account opening. Some banks allow you to open business checking accounts online, while others require you to do so in person. Also, consider what type of documentation you’ll need to verify your business status when opening a bank account.

• Minimum deposit requirements. Banks may require you to open your account with a specific amount of money, then maintain a certain minimum balance going forward. If your business isn’t generating much cash flow yet, you may need a business checking account with lower minimum deposit and balance requirements.

• Fees. Fees are always an important consideration with both business and personal checking accounts. Consider what you’ll pay to maintain your business account monthly as well as other fees, such as overdraft fees or costs associated with merchant services.

• Online and mobile access. Being able to access business checking when you need to matters. So take a look at what type of user experience a bank offers in terms of mobile and online business banking.

• Transaction limits. Business checking accounts may impose different transaction limits on things like deposits, withdrawals and purchases compared to personal checking accounts. For example, you may be allowed a certain number of transactions free then pay a fee for transactions above the limit. Paying attention to these limits is important if you anticipate having a higher volume of debits and credits.

• Features and benefits. Finally, consider what added incentives a bank may offer that could make one business checking account more attractive than another. This could include things like access to merchant services, fee waivers for business credit cards or earning interest on your business checking balance.

If you’ve been managing business transactions from a personal checking account up until now, making the switch to business checking is easier than you might think.

You’ll just need to transfer over things like automatic payments, recurring drafts and automatic deposits associated with your business to the new account. So long as you keep the personal checking account open, you can review your transactions to make sure you haven’t missed anything once your new account is set up.

Bottom Line

Personal checking accounts can serve one purpose for managing your finances, while business checking accounts serve another. Though they share some things in common, business checking accounts can offer features that personal checking accounts lack. Having one or more business bank accounts, including a checking or savings account, can help you keep track of business finances both daily and for the long term.