Whether your business is getting off the ground or you’re scaling up your hobby to make things official, establishing the right financial system for your business is essential to tracking and maintaining your success. 

Let’s start with a way these two are similar. A business checking account is FDIC insured in the same way that your personal bank accounts are with the same limit of $250,000 per depositor. This includes savings accounts. 

But there are more differences you’ll need to be aware of. 

Difference #1 – You Need Business Documentation to Open A Business Checking Account

Opening a personal checking account only requires you to show two forms of ID with the most common ones being a driver’s license and a debit card. That’s easy for most people to do. 

As any business owner is familiar with, you likely filed so much paperwork it made your head spin. From registering your EIN with the IRS, registering your business name with the state, and filing for the licenses and permits you need just to do business officially. It’s a lot. 

Many of those same documents are needed to open a business checking account. Without the right documentation, getting your business account opened can be delayed or the bank may request extra documents at a later time.

You’re a busy person, so let’s avoid all that. 

Get prepared to open your business checking account by gathering these documents: 

• Social Security Number for Sole Proprietorships
• EIN for LLCs, corporations, or partnerships
• Valid Driver’s License or Passport
• Business Licenses
• Articles of Organization (LLCs) or Articles Incorporation (Corporations)
• Partnership agreement with the business name and names of the partners
• Certificate of Assumed Name or Doing Business As (DBA) if your name differs from the name you’re doing business under.

Some banks and credit unions require additional documents on your business depending on the industry you’re in. Some may even require less documentation. It’s best to check out the bank’s website to see what their specifics are for opening a new business bank account.

Difference #2 – You Need to Consider Transaction Limits

There are some things business bank accounts are just better at handling. One of them is transactions. The fact is, personal banking wasn’t designed to handle the increased transactions that come with running a business. 

On any given day, you might need to:

• Place an order for coins
• Make large cash deposits
• Process payroll for employees
• Accept debit and credit card payments
• Make payments to vendors or suppliers
• Deposit or write a large number of business checks

Those things can be difficult or not possible to do if you’re still operating out of a personal checking account. Most banks won’t allow you to accept debit and credit card payments to your personal account at all, effectively limiting the number of sales you can make. 

Operating out of a personal account is out of the question if you’re running a cash-heavy business. If you make large cash deposits regularly or make large exchanges for coins, you’ll run into roadblocks when trying to do that from your personal checking account.

With a business account, you’ll encounter transaction limits you didn’t have with your personal checking account. Certain business accounts may limit the number of business checks you can process each month or limit the number of ATM or teller transactions you can make. 

On a personal side, you’re able to make as many teller transactions, ATM deposits, and payments as you want. 

Business accounts are typically limited on the number of free transactions each month. And a transaction fee is charged if you’re over the transaction limit during the billing cycle. So it’s important to find business checking that works for the number of transactions you need. 

Difference #3 – The Fees and Requirements Are Often Higher

One of the biggest differences between business bank accounts and personal checking accounts is the fee structures and the requirements to avoid those fees. 

Many brick-and-mortar banks have business checking requirements including higher minimum daily balances of around $500 to $1,000 with a basic business checking account. 

You’ll also see monthly maintenance fees or a higher opening deposit than you would see on your personal checking account. 

It’s not the most conducive for a new business without tons of revenue yet unless you absolutely need some of the services and features they offer. 

You might be able to avoid those monthly maintenance fees with some banks if you already have your personal accounts with them. Some financial institutions allow you to meet the minimum balance requirements by linking your personal and business accounts. 

You can also minimize fees by opening other qualifying accounts with the same bank. For example, when you open a business credit card or business savings account alongside your business bank account, it might waive the monthly fee depending on the bank. 

There’s also the option of choosing an online bank if that meets the needs of your company. Many digital business banking options offer free business checking accounts with minimal fees. You might even come across some with unlimited transactions. 

Some even have no minimum opening deposit while still providing great benefits like accounting integrations, invoicing tools, and access to the same ATMs as traditional banks. This can be a great option for e-commerce business owners or other online storefronts. 

Difference #4 – There Are Often Other Business Services to Consider

Your personal account likely comes with features including:

• Online banking and mobile banking
• Bill pay
• Personal checks
• A small APY on your deposits
• Use of a debit card for purchases and payments

That pales in comparison to the tools and services you can get with a business bank account. Many banks with business checking account services also offer:

• Invoicing capabilities to make collecting and tracking customer payments easier.
• Financial statement reports to see what your business expenses and profits are.
• Employee debit cards to handle purchases your employees need to make for the business. 
• Enhanced overdraft protection.
• Quicker Wire transfers with some banks.
• Access to treasury management services for cash-heavy businesses.
• Access to merchant services to accept debit and credit card payments.
• Integrations with bookkeeping software and other third-party business programs.
• Fraud protection features.

Many of these services aren’t free, but there are benefits to having them through the same financial institution where your business checking account is.

Yes: your business account can also help protect you from fraud in some cases. Positive pay, which is available at some banks, uses a list of your business checks to verify outstanding checks that might not match others on your bank account. 

The same feature isn’t available for personal checks. Operating out of a personal bank account could leave you open to fraud. As of 2018, US businesses reported a loss of an average of 5% of their gross profits to fraud, so it’s important to have the tools to combat it. 

Other Business Checking Considerations

A Business Bank Account Helps Separate Your Small Business Finances

Co-mingling your business and personal expenses can get messy. When you can’t tell where your finances end and where the business finances begin, it can be difficult to determine how well you’re doing. 

And if you’re having a hard time finding that information then so will your lenders, tax professionals, and accountants. Having separate accounts for your business allows you to easily manage and maintain your finances at a glance. 

Most banks make it easy to keep track of your success by integrating with common bookkeeping software like Quickbooks and Freshbooks. So your financial statements can be sent over to whoever needs them in just a few clicks. 

It can also be helpful to further separate your business finances between a checking account and a savings account to plan for the future. 

It doesn’t just end at organizing your finances. Separating your accounts can add to your credibility as well.

Imagine what your customers are thinking when they love your products or services, but have to send their payments to a personal bank account or through transferring apps like Cash App or Venmo. 

It can come across as unprofessional, and they might not trust the security of sending their payment to an individual instead of a company. 

The last thing you want is to have customers withdrawing purchases. Savvy shoppers know that making a payment to a personal account is a potential security risk. And they’re not wrong. It’s hard to keep your accounts safe these days and scammers seem to be everywhere. 

The business banking benefit of having access to merchant services allows you to accept a wider variety of payments than you could with your personal account. And it’s much more secure. 

How many more sales could you gain if you accept credit card and debit card payments? How many extra customers would you have if you used a more secure form of payment collection?

Reinvest in your business and boost your credibility by opening a small business checking account. 

It Will Help You Qualify for Business Financing

Keeping a relationship at one bank comes in handy when you start considering a business credit card or a business loan to help cover expenses. While the checking account doesn’t help build business credit, a credit card or business loan with on-time payments will. 

The business checking account helps you establish a good record with your bank when you manage your account well. When they can readily see the details of your business finances, your bank can use that to help qualify you for financing options. 

When you’re looking at expanding your business, the right financing can be essential. Some financial institutions may even offer special terms for their existing business checking account customers. 

It Streamlines Accounting and Tax Reporting

When all your financial statements, expenses, and revenues are in one place, it makes tax time so much easier. Especially if you opted for quarterly tax filing. With a few clicks, you can involve your office manager, accountant, or tax pro to get your financial to-do list done. 

Get quick access to information about your quarterly revenues for potential investors. Pull financial statements to do a progress check on your business. Easily identify your biggest business expenses and make a plan to cut extra spending when needed. 

When you streamline your business accounting, you spend less time sifting through transactions to find the information you need. I’m sure your accountant will thank you too. 

Things to Consider When Looking for a Business Bank Account

When you go to open your new business account, you’ll find plenty of options available. With all those options, you’ll need to know what to look for: 

• Account opening bonuses
• Minimum balance requirements
• Account transaction limits
• Monthly service fees
• ATM fees
• Minimum opening deposits
• Interest on your balances
• Cash deposit limits

Things like account opening bonuses and a healthy APY on your balances are nice to have, but they’re not necessary. 

You’ll want to pay special attention to the minimum balance requirements, transaction limits, fees, and opening deposits as those can determine how much you’re paying for the account overall. 

You might also want to consider how you prefer to do your banking and whether it’s online or in person. That alone can narrow it down significantly. 

In summary, differences between a business account and a personal account are far more than their similarities, but for good reason. Business accounts offer you the security, credibility, and organization that any good business needs to be successful.

Be sure to consider what your business needs when you open your account and be mindful of how you can maximize the benefits you’re receiving without drowning in fees.

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