Business checking vs. personal checking account: Benefits and differences

What’s the difference between business and personal checking accounts?

A business checking account helps business owners hold and manage money made within a company. Personal checking accounts help individuals hold and manage their personal funds. Some of the main differences include: 

• Business bank accounts have more legal protections than personal bank accounts, meaning you won’t be offered protection from business liabilities when using a personal checking account for business expenses.
• Business bank accounts can do a better job at solidifying your brand.
• Personal bank accounts and business bank accounts have a different fee structure.

 Folks who operate under a DBA (doing business as) name, an LLC, or a corporation might want to consider opening a business checking account that’s separate from your personal checking account.

 Here are a few key factors of a business banking account:

• Includes a business checking account 
• Allows you to make payments from the account, transfer money electronically, and use a business debit card
• Helps you separate savings from working capital 
• May require a minimum deposit and/or balance requirements and monthly fees

 On the other hand, personal checking accounts are intended for personal funds. 

 Personal fund activities include:

• Depositing paychecks from an employer
• Paying personal expenses including mortgage and phone bills
• Debit card purchases
• Transferring funds to personal savings accounts
• Withdrawing money from an ATM
• Gifts and personal payments to friends, family, and acquaintances

Why should I consider a business bank account?

When it comes to business checking vs. personal checking, opening a dedicated business bank account can help you:

• Safeguard your business funds by separating your personal finances
• Easily monitor your business spending
• Create more realistic budgets
• Practice better bookkeeping habits that keep your business finances organized
• Help you get a business loan, line of credit, or a business credit card when you need one

In short, even if a separate account isn’t required for your business, it’s still a good idea to get one. We’ll explore these benefits in depth below.

Can I use the same bank for personal and business banking?

Yes! When choosing a bank for your business bank account, many people start with financial institutions they know and like. If you have a personal bank account in good standing, you may get a better offer on a business bank account at the same bank.

 Many banking institutions that offer consumer or personal bank accounts also offer business banking services. However, reviewing the specific features of a business bank account is always a good idea before you sign up. 

Some business banking service providers may offer account features specifically tailored to small businesses. For example, a QuickBooks Checking account allows you to manage all your company expenses with a mobile bank account and debit card for seamless tracking of money in and out of your business.

Business checking account benefits

It makes sense for business owners to separate their checking accounts for business and personal use. Here are a few business checking account benefits that you should consider.

Accurate accounting

When you open a business checking account, you are able to keep closer tabs on your cash flow. When you blend the two accounts, it’s common to get confused with funds moving in and out frequently. Separating your business transactions will also reduce the stress of your bookkeeper, resulting in more accurate accounting.

Banking and accounting go hand in hand with QuickBooks Checking inside QuickBooks Online. See money come in and out of your QuickBooks Checking account in real time, and use QuickBooks to get cash flow insights and projections.

Streamlined tax reporting

You can take the hassle out of tax reporting when you have a separate business checking account. Save the headache of sifting through all your transactions to decipher which are personal or business expenses. With an unconnected checking account, you will have a built-in record of all company spending.

When you use QuickBooks Checking for business banking, you can download sales tax reports and see all your transactions in one place, making tax filing a breeze.

Asset protection

Dividing your business and personal spending into two accounts can protect your assets from potential debt or fraud. If you blend the two into one account, a court could go after your personal funds if you run into legal issues with your business.

Business vs. hobby legitimacy

The IRS requires you to report all income, but a combined checking account could falsely categorize your company as a hobby instead of a legitimate business. Keeping your funds separate and providing a paper trail of business transactions would help prove you are running a fully-functioning company.

Enhances your professional brand

Your image and reputation are critical as a business owner. For example, your clients may see you as a more established business if payments go directly to a business checking account vs. a personal account. By opening a business checking vs. personal checking account, you could also expand your line of credit or chances of taking out a small business loan in the future due to establishing trust.

Business checking account factors to consider

Deciding which business checking account is best for you is a big decision. As a business owner, you will want to look at the key features of both types of bank accounts. Here are some things you should consider:

• Fees: Most business banking accounts have monthly and annual fees. Make sure to look for one that waives or reduces the monthly fees if you maintain a certain amount. Fees, on average, are $10–$20 monthly but could be more expensive.
• Minimum deposit and balance requirement: Some business banking accounts require a minimum opening deposit amount and maintaining a certain balance. It’s best to find an account that doesn’t require a large deposit or high balance requirement. 
• Interest rates: The highest interest often provides the highest return on investment, but it shouldn’t be the only priority when choosing a checking account. Most accounts with high interest rates also come with increased monthly fees that could cancel out your earning potential.
• Transaction limits: Certain banking accounts restrict the number of deposits and withdrawals you can make each month.
• Employee debit cards: You can give your employees limited access to your business banking account for company purchases. However, not all banks offer this perk. It would be beneficial to choose a business banking account that offers employee debit cards.
• Online services: With new technology on the rise, certain banks offer online services. Manage your funds and get all your banking down in the comfort of your home or office. However, not all online banks have physical branches in every town, so make sure to check to see if your business bank has a location nearby.
• Sign-up bonuses: While sign up bonuses aren’t standard at most banks, certain business banking accounts will offer new customers cash bonuses for signing up, making a certain deposit, and maintaining a specific balance.

QuickBooks Checking is a business bank account that’s free to open — with no monthly fees and no minimum balances.* Get instant access to a debit card, so you can start using your money right away. QuickBooks Checking is all digital — from set-up to accepting payments to customer support. And now, it’s available in QuickBooks Money without a QuickBooks Online subscription. Upgrade to QuickBooks Online to manage banking and accounting all in one place.

What do you need to open a business bank account?

One of the biggest differences between personal vs. business banking accounts is the application process and requirements. 

Nearly everyone can open a personal banking account, but to open a business banking account you will need the following:

• State-issued ID
• Social Security number or employer identification number (EIN)
• Business license 
• Articles of Organization for LLCs
• Articles of incorporation for corporations

Keep in mind that the exact documentation required will vary depending on the bank you are applying to and your overall legal structure. Sole proprietors typically use their own personal information, while corporations and LLCs need to provide more business-related documentation in addition to personal information.

Business banking account FAQ

Still not sure about the ins and outs of business checking vs personal checking accounts? Check out some frequently asked questions to ramp up your understanding of these bank accounts.

Can I use my personal account for business expenses or my business account for personal expenses?

No, it’s not recommended that you use your personal bank account for business purposes. Nor should you use your business account for personal expenses. Separating your business and personal financials may help you avoid legal issues or problems with recordkeeping.

Can I use my personal checking account if I own a corporation or LLC?

No, if you’re registered as an LLC or corporation, a separate bank account for business finances may help protect you legally. It’s a good idea to open a bank account under your business name as soon as you start handling business transactions.

Can I use my personal bank account as a sole proprietor?

You’re not required to have a separate business bank account as a sole proprietorship, but separate accounts are still a good idea. A dedicated business account can help you separate business and personal finances and manage your business finances more easily.

Do you need business revenue to open a business checking account? 

No, you do not need to earn money or show proof of a profit before you open a business checking account. Opening a separate bank account for your business should be one of the first steps you take as soon as you start your company. 

However, keep in mind that some business checking vs. personal checking accounts require a minimum deposit amount when you sign up. Make sure you read the terms and conditions before opening your business account.

Are business checking accounts FDIC insured?

Folks that aren’t sure whether to choose a business checking vs. personal checking account should know the Federal Deposit Insurance Corporation (FDIC) protects personal deposit accounts up to $250,000 per account. Business checking accounts can receive the same amount of protection. 

The FDIC protects the following items:

• Checking accounts
• Savings accounts
• Negotiable Order of Withdrawal accounts
• Money market deposits
• Certificates of deposit (CDs)
• Money orders
• Cashier checks
• Other official bank-issued items 

Keep in mind that the FDIC protections do not apply to investments, safe deposit boxes, annuities, or life insurance policies. However, you do have the reassurance that your funds are covered up to the applicable amount.

Final thoughts

While personal checking accounts are great for storing your funds, opening a separate account for business expenses could serve a larger purpose. Business banking accounts allow you to legitimize your company, streamline bookkeeping, and protect your assets. Making the switch could greatly enhance your overall business.

Now that you have more information regarding business checking vs. personal checking accounts, you are ready to enhance how you run your company. If you are looking for other ways to manage your business expenses, check out out QuickBooks Checking — an online business bank account with no monthly subscriptions or minimum account fees — for seamless insights into your business finances.

QuickBooks Checking account: Banking services provided by and the QuickBooks Visa® Debit Card is issued by Green Dot Bank, Member FDIC, pursuant to license from Visa U.S.A. Inc. Green Dot Bank operates under the following registered trade names: GoBank, GO2bank and Bonneville Bank. Registered trade names are used by, and refer to, a single FDIC-insured bank, Green Dot Bank. Deposits under any of these trade names are deposits with Green Dot Bank and are aggregated for deposit insurance coverage up to the allowable limits. Green Dot is a registered trademark of Green Dot Corporation. ©2023 Green Dot Corporation. All rights reserved. QuickBooks products and services, including Instant Deposit, QuickBooks Payments, Cash flow planning / forecasting are not provided by Green Dot Bank.

*No minimum balances or monthly fees: There are no minimum balance requirements to open or maintain this account or obtain the listed competitive APY. Other fees and limits apply. See Deposit Account Agreement for details.

QuickBooks Money: QuickBooks Money is a standalone Intuit offering that includes QuickBooks Payments and QuickBooks Checking. Intuit accounts are subject to eligibility criteria, credit, and application approval. Banking services provided by and the QuickBooks Visa® Debit Card is issued by Green Dot Bank, Member FDIC, pursuant to license from Visa U.S.A., Inc. Visa is a registered trademark of Visa International Service Association. QuickBooks Checking Deposit Account Agreement applies. Banking services and debit card opening are subject to identity verification and approval by Green Dot Bank. Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit

https://www.intuit.com/legal/licenses/payment-licenses/. No subscription cost or monthly fees. Other fees and limits, including transaction-based fees, apply.

Competitive APY: Competitive rate information based on publicly available data for small business checking accounts provided by the largest national and online banks as of September 18, 2023. APYs are subject to change at any time.

Claims

1“Get paid 4x faster”: 'Four times faster’ based on U.S. customers using QuickBooks Online invoice tracking and payment features, compared to customers not using these features, from Aug 2022 to Jul 2023.