MORE LIKE THISSmall Business
Business checking accounts let you take in business revenue and pay for business expenses, while personal accounts are meant for your personal income and bills. In fact, some bank account agreements prohibit customers from using personal accounts for business spending.
No matter how small the business is, every owner should separate their business and personal finances; having a business checking account is a good first step. You can open a business checking account at many brick-and-mortar banks, credit unions, or online financial institutions.
Bluevine
Bluevine Business Checking
Read ReviewLearn more
What’s the difference between business and personal checking accounts?
In general, business checking accounts are pretty similar to personal checking accounts. Both will likely offer you a debit card, Automated Clearing House (ACH) transfers and online platforms for checking your balance and transaction history. The biggest difference between these accounts is what they’re used for.
You should use business checking accounts for business transactions, such as paying suppliers and collecting sales revenue. Personal checking accounts should be limited to your personal income and expenses such as housing, food and entertainment.
» MORE: Best business checking accounts for freelancers
Business checking accounts may also offer business-specific features. A few examples include:
User roles and spending controls. Some business checking accounts, such as Relay business checking, let you set up accounts with different permissions for different users. For example, a staffer might be able to add payees and pay bills, but a manager will have to approve those payments.
Tax-planning tools. Many accountscan integrate directly with your accounting software. Some, like Found business checking, also come with invoicing and bookkeeping tools.
Accepting credit card payments. Chase business checking, for example, offers an integrated credit card processing tool that lets you take payments from customers in person over the phone.
Are business checking accounts FDIC insured?
Yes, business checking accounts are insured by the Federal Deposit Insurance Corp. up to the same $250,000 limit as personal checking accounts. That means the federal government will pay up to $250,000 per account if your business bank fails.
Can you use a personal checking account for business?
You may technically be allowed to use a personal checking account for business spending, but some companies have rules against it. For example, financial technology company Chime says it may close your personal account if it determines you’re using it for business purposes.
Even if your financial institution doesn’t say this (check your depositor agreement), you still shouldn’t use the same checking account for business and personal expenses. All businesses, even very small ones, should keep these finances separate.
You can get a business bank account for any business, including a sole proprietorship or working as a freelancer.
» MORE: Best business bank accounts for sole proprietorships
If your business is a limited liability company, it’s vital to avoid using personal checking accounts for business expenses and vice versa. Commingling those funds could create space for creditors to argue that you are, in fact, personally on the hook for your company’s expenses, despite setting up an LLC.
» MORE: Best business bank accounts for LLCs
🤓Nerdy Tip
Comparable to personal checking accounts, business checking accounts usually come with relatively low interest rates. Consider a business savings account to get a higher annual percentage yield (APY) on your company’s cash.
Should you open a business checking account?
No matter how small your business is, you should open a business checking account. Here are some of the benefits:
It can be inexpensive. Financial institutions often offer free business checking accounts with no monthly fees. Many of these options also come with a minimum opening deposit of $0, making setting up a business bank account relatively affordable and easy.
Accounting and bookkeeping can be more manageable. When all your revenue and expenses are recorded in your bank’s transaction logs, keeping track of your spending is much easier. Plus, business checking accounts can often sync with accounting software.
Applying for future financing can be made simpler. If you apply for a business loan, lenders often request your recent bank statements to evaluate your cash flow. Having a dedicated business bank account makes it easier to provide this information. Plus, you may be asked to link your bank account during the loan application process, especially if you’re working with an online lender.
» MORE: What you need to open a business bank account
Ready to start business banking?
1. Choose a business bankShop around for a bank with the features you need.
2. Apply for an accountThis can often be done online in a matter of minutes.
3. Deposit funds and make paymentsYou can now use your account and debit card.
FAQs
Business checking accounts are required for partnerships, LLCs, and corporations. They offer higher transaction limits, streamlined recordkeeping, and payment flexibility. Personal checking accounts don't offer the same level of professionalism or legal protection to businesses.
What is the difference between a personal account and a business account? ›
The biggest difference between these accounts is what they're used for. You should use business checking accounts for business transactions, such as paying suppliers and collecting sales revenue. Personal checking accounts should be limited to your personal income and expenses such as housing, food and entertainment.
Can I use my business checking account for personal use? ›
To put it simply, when you mix your business and personal finances, you're essentially treating your business as a personal piggy bank. 🐷 And while it's not technically against the law to make a personal purchase from your business account, it can lead to major issues with taxes, bookkeeping, and compliance.
Is it OK to use a personal account for business? ›
In theory, you can use your personal bank account for business transactions. However, you should consider the advantages of having a separate business bank account, as outlined above.
What are the disadvantages of a business bank account? ›
Disadvantages of a business bank account may include higher fees, minimum balance requirements, and more paperwork during the account opening process.
Can you use a personal checking account for an LLC? ›
In this case, you'll want a separate bank account for LLC purposes. While you technically could use your personal bank account for business, it is generally not recommended. This is because mixing your personal and business finances could put your personal assets at risk if your business were to face legal issues.
Is it better to have a business account? ›
It simplifies your bookkeeping: When you have a separate business account, your money records become simpler. You won't have to search through your personal spending to find your business expenses, or wonder whether the money that just dropped into your bank account was from your latest invoice or an Amazon return.
What is an example of a personal account in business? ›
Some examples of personal accounts are customers, vendors, salary accounts of employees, drawings and capital accounts of owners, etc. The golden rule for personal accounts is: debit the receiver and credit the giver. In this example, the receiver is an employee and the giver will be the business.
Can I buy groceries with my business account? ›
It is essential to separate personal and professional expenses to maintain financial transparency. 2. Grocery Shopping for Home: While it may be tempting to utilize a business credit card for grocery shopping, it is best to avoid this practice. Groceries for personal use should always be paid for using personal funds.
What kind of bank account should I open as an LLC? ›
Opening a business bank account for your LLC doesn't just help streamline bookkeeping and operations (though it does that, too). A dedicated LLC bank account is an essential step to maintaining the legal distinction between the business and its owners, which is necessary to preserve limited liability protections.
There's no limit on the number of checking accounts you can open, whether you have them at traditional banks, credit unions or online banks. There is, however, a limit on how much of the money you keep in your checking account is FDIC insured.
Is it better to have a business bank account or personal account? ›
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.
What are the risks of using a personal bank account for a business? ›
The disadvantages include potential legal risks, confusion in record keeping and tax reporting, and limitations to business growth and scalability. If you operate an LLC or corporation, using a personal bank account for business can endanger your limited liability status.
What are the benefits of a business account vs personal account? ›
With a separate business account, you're likely to benefit from faster and more accurate bookkeeping. When it comes to filling out your self-assessment tax return each year, it will be much easier to work out your taxable benefits and deductions if you have a separate business account.
What's the difference between business checking and regular checking? ›
Business checking accounts give a business owner options and features that aren't usually available with personal checking accounts, including advanced payment methods and lines of credit. Some banks also offer checking accounts for small businesses specifically.
Is a business check better than a personal check? ›
Business checks may have more security features than personal checks, like holograms, watermarks, special ink and even chemically sensitive paper. Personal checks have some security features but generally fewer.
