Personal checking vs. business checking

When you first start a business, it might make sense to use your personal checking account for business purposes. On one hand, personal checking accounts typically have less fees and requirements than business checking accounts. On the other hand, you might think that a business checking account is unnecessary when you’re just starting out, especially if you’re a sole proprietor, entrepreneur, or freelancer working from home.

In actuality, setting up a business checking account right away gives you added protection and flexibility so you can run and grow your business on your terms—regardless of the size of your business or whether or not you have a traditional office. 

If you’re using a personal checking account now, you can easily switch to a business checking account and reap all the benefits it affords business owners like you. To help you, here is a breakdown of why and how to separate your accounts.

Personal checking vs. business checking: What’s the difference?

Personal and business checking accounts are very similar in nature—both types of checking accounts allow you to deposit and withdraw money, make ACH or check payments, and use debit cards for purchases and withdrawals—but there are a few key differences:

Personal checking:

  • Uses an SSN. Opened by an individual using their social security number
  • Free. Typically free to open 
  • Some liability. Personal assets at risk if used for business purposes

Business checking:

  • Often uses an EIN. Opened by a legal business entity, such as an LLC, using a Federal EIN (or employer identification number) — but not always, especially if you’re a sole proprietor LLC. 
  • Sometimes carries fees. Traditionally associated with fees and/or minimum requirements
  • Liability protection. Personal assets are protected if your business gets sued

Can I use a personal checking account for business?

If you’re a sole proprietor, you technically and legally could use a personal checking account for business, but there are a couple of considerations to make before you do: 

  • Your bank might have certain terms and conditions that prevent you from using a personal account for business purposes. 
  • You’ll have to manually separate business and personal expenses come tax season, which could lead to inaccurate filings (and time spent away from your business).

Do I need a business bank account for a sole proprietorship?

So do you need a business bank account if you’re self-employed?

As we just mentioned, sole proprietors can use a personal checking account for business—but it would be in your best interest long-term to opt for a business checking account instead. 

What are the benefits of a business checking account vs. personal bank account 

There are a number of reasons to open a business checking account, including:

  • Tax simplification: With a small business checking account, your business expenses will be easier to identify and track, and the IRS will be more likely to accept certain deductions if they are associated with a business account.
  • Liability reduction: If someone tries to sue your company, courts will only go after your business assets. This is because they consider corporations to be separate from the individual owner(s), and it will be clear what constitutes those assets in a business checking vs. personal checking account.
  • Growth flexibility: Having a legitimate business entity signals to the credit bureaus that it’s time to start building business credit, which could help you get the right financing to invest in growth.
  • Subaccounts: You’ll be able to open accounts for employees that may incur business-related expenses.
  • Fee friendliness: Many online and alternative banks have emerged that charge minimal to no business banking fees. 
  • Credibility: A business account can help legitimize your business. Having business checks with your business not only looks more professional to vendors but also builds your business brand.
  • Account integrations: Easily connect to other accounts — like a business line of credit or credit card — to easily make transfers or payments.

When is the right time to open a business checking account

Ideally, you’d open a business checking account before you officially launch your business. That way, your business finances (and legal protection) will be in place from the start.

This goes for all types of businesses—even if you’re a sole proprietor who works from home. The last thing you want to do is risk losing your personal assets due to an unforeseen legal issue.

How to separate personal checking and business checking accounts

Opening a business bank account as a sole proprietor might require you to actually incorporate and get an EIN to open an account. We recommend discussing your options with your accountant and/or legal advisor.

If you’re already incorporated, your first step is to find a business checking account that fits your needs, which brings us to the next section.

What should I look for in a business checking account?

When it comes to business banking, you want to be able to protect your personal assets and have added flexibility and convenience as you grow. Personal checking accounts can’t offer this.

Here’s what to look for in a business checking account compared to a personal checking account:

  • No fees: No hidden or monthly service fees, no ATM fees, no non-sufficient funds fees.
  • Unlimited transactions: Make as many deposits and withdrawals as you need
  • No balance requirements: No minimum balance required
  • Easy payments: Easily pay vendors and bills by ACH, wire, or check — and schedule one-time or recurring payments as needed
  • Mobile-friendliness: Easily manage banking, check balances, make payments and transfers, etc. from a mobile device
  • High APY: Higher than the national average, which is 0.1%. 
  • Dedicated support: Whether it’s a dedicated member of your local bank branch, or an actual person on the phone, you’ll likely need real, live support from time-to-time.

BlueVine’s business checking account, which was built with sole proprietors in mind, checks all these boxes. 

What do you need to open a business bank account?

Opening a business checking account requires more documentation than a personal account. Here’s what you might need:

  • Social Security number if you are a sole proprietor
  • Employee Identification Number (EIN) if your business is a corporation, partnership or limited liability company (LLC)
  • Government-issued ID, such as a driver’s license or passport
  • Business license and Articles of Organization (for LLCs) or Articles of Incorporation (for corporations)
  • Organizing documents filed with the state
  • Partnership agreement with the name of the business and its partners (for a business with multiple owners)
  • Certificate of assumed name/Doing Business As (DBA) name, if applicable

To open a free account with BlueVine, you must be a small business owner, at least 18 years old, and have a verifiable U.S. address. 
BlueVine’s business checking account was designed to help you take better control of your business finances so you can focus on growth. With no hidden or monthly fees, 1.00% interest, and no balance or transaction requirements, BlueVine offers the flexibility and convenience you need in a business checking account. Learn more about BlueVine checking.

Small business checking, built for your needs

Open a no monthly fee online business checking account today. Unlimited transactions, live support, and high interest.

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The information, opinions, and advice in this blog post are provided for educational purposes only, and do not necessarily state or reflect those of BlueVine and/or its partners, including Coastal Community Bank, Member FDIC and Celtic Bank. Neither BlueVine nor its partners are responsible for the accuracy of any content provided by author(s) or contributor(s). For information about BlueVine products and services, please visit the BlueVine FAQ page.