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Business checking vs. personal checking: How they compare

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All checking accounts might seem to be alike.

But a business checking account may offer capabilities that aren’t available with a personal checking account.

Plus, you always want to keep your business expenses separate from your personal ones, says Pam Horack, certified financial planner at Pathfinder Planning in Lake Wylie, South Carolina.

“It’s really important to make sure that you keep good records,” Horack says.

Not separating a personal account and a sole proprietorship or a business registered as a “doing business as” (DBA) can cause you not to know if you’re actually making money or not, Horack says.

Business banking may offer personal liability protection since your funds are being kept away from your personal accounts, according to the U.S. Small Business Administration (SBA).

The difference between business and personal checking account

Business and personal checking accounts have a few key differences. They are:

  • Free transactions may be limited on a business checking account.
  • Cash counting or coin order fees may apply for a business checking account.
  • Business checking accounts usually have more advanced payment methods, such as merchant services — which is the ability to accept credit card payments.
  • Business checking accounts may have higher monthly service fees. Or the fees on business checking accounts might be more difficult to waive than they are on some personal checking accounts.

How to decide which checking account is best for you

Business owners will want to compare the key features between the two types of accounts. Business banking offers limited personal liability protection by keeping your business funds separate from your personal accounts, according to SBA.

Look at the following fees or features:

  • Minimum balance requirements
  • Monthly service fees
  • Banks offering a cash bonus to open an account (this bonus may only be available for new customers only)
  • Minimum amount required to open the account

Here are some fees or restrictions that usually only apply to business checking accounts, and not personal checking accounts:

  • The number of free transactions allowed — and the price per transaction if you exceed the free limit
  • The amount of cash that’s counted for free — and what cash counting fees would be if you exceed the free amount

Business checking accounts give a business owner options and features that aren’t usually available with personal checking accounts. You’ll probably need a federal employer identification number (EIN) to open a business checking account, according to the SBA.

Making the switch from personal to business

Separating accounts may be a good idea.

“While there are many legal entity structures for businesses, the sole proprietor is the only one that can be set up with an SSN [social security number] and therefore can open a personal checking account,” says Lynn Heitman, executive vice president, business banking segment leader at U.S. Bank.

Just like how it’s better to separate an emergency fund from your day-to-day checking account, it’s usually better to not have business transactions go through a personal checking account.

Commingling your personal and business transactions in the same checking account can complicate the bookkeeping process and make tax time a nightmare. To keep your money separate, here’s how to open a business checking account.

Who needs a business checking account?

A business bank account can help you stay legally compliant, according to the SBA. Having a business checking account can help make the following features available to you:

  • Entitlements: These allow trusted users or advisers — such as an office manager or an accountant— to access the account, Heitman says.
  • Positive pay: This is a fraud prevention system available at some banks for business customers. It uses a list of checks to help in the check verification process. A check that doesn’t match this list will likely be flagged.
  • Debit card for non-account signers: This could be a way to get an employee a debit card for expenses. You may be able to set limits on this debit card.
  • Money movement options: Merchant services accounts can help businesses accept credit card payments. Business accounts “typically have the potential for digitally enabled higher money movement or custom limits for payment transactions,” Heitman says. This can include automated clearing house (ACH) transactions or digital single or batch wire transfers, Heitman says.

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Written by
Matthew Goldberg
Consumer banking reporter
Matthew Goldberg is a consumer banking reporter at Bankrate. Matthew has been in financial services for more than a decade, in banking and insurance.
Edited by
Senior wealth editor