Business checking vs personal checking: What’s the difference?

There are some key differences between a personal vs business checking account. Each type of account has its pros and cons, depending on your needs.

In this article, we’ll go through the differences between business vs personal checking accounts, so you can decide which one is best.

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📝 In this article:
Business vs personal checking key differences Difference between a personal and business checking account Advantages of a business account vs personal Personal vs business checking pros and cons Do you have to have a business checking account? Looking for a business checking account? Discover Wise

Business checking vs personal checking key differences

👤 A personal checking account is used for personal deposits and withdrawals. These could include, for example: Sending payments to friends and family members for personal reasons Making personal purchases Depositing paychecks Paying your electricity bills or making loan payments 💼 A business checking account is used for incoming and outgoing business transactions. For example: Paying employees and suppliers Receiving payments from customers Paying your business tax Making business related purchases using your corporate credit card Paying business expenses Managing cash flow

What is the difference between a personal checking and business checking account?

With a business checking account, you have access to a wider range of business-related services. These services are not usually available to personal checking account owners.

For example, with a business checking account, you can:

• Integrate your account with accounting and payroll software and other business specific services.
• Apply for a business credit or debit card. Some banks allow you to issue multiple cards for your employees too.
• Access merchant services, allowing you to accept card payments from your customers.

If you want to accept card payments from your customers, you’ll need to open a merchant account. If this is a payment option you want to offer, then having a business checking account is essential. In order to open a merchant account, you first need a business checking account.

Business checking accounts often come with dedicated business credit cards. Some banks also require a business checking account in order to be eligible for a line of credit.

Another key difference of a business checking account is the application process. The account opening procedure is more rigorous compared to when opening a personal checking account.

🔍 Find out more about what you need to open a business bank account.

Advantages of a business checking account vs personal

A business checking account comes with a range of advantages for businesses.

Having a separate account for your business adds legitimacy to your operations. Business checking accounts also come with integrations specific for businesses. These could help streamline your operations - making your life easier and saving you time.

A business account could help to grow your business by giving you greater control and an increased financial overview.

You can clearly distinguish your business income from personal transactions, for example. Identifying tax-deductible purchases is simplified as they can’t be confused with personal purchases. This not only makes tax reporting easier - it makes any future business audits far less of a headache.

Another benefit of having a business checking account is that it simplifies bookkeeping. Having all business-related cash flow moving in and out of a single account makes accounting one step easier.

💡 Track your bills automatically with QuickBooks and Wise. If you have international bills to pay, not only can you pay them at the real mid-market rate with Wise, but you can also sync Wise with QuickBooks to save time on reconciliation.

Personal checking vs business checking pros and cons

Here’s a quick overview of the main pros and cons of a personal checking vs business checking account.

Personal checking

✅ Pros	❌ Cons
Relatively simple to set up an account Low fees and minimal requirements	Limited to no features or integrations for businesses

Business checking

✅ Pros	❌ Cons
Access to integrations for accounting and other services Clearer overview of business finances for bookkeeping and filing taxes Access to merchant services for accepting card payments Ability to apply for a line of credit Access to business credit and debit cards	Application process more complex, requires more documentation Minimum balance and initial deposits required

Do you have to have a business checking account vs a personal account?

You don’t always need to have a business checking account.

If you’re an LLC, freelancer or sole proprietor, you don’t have a legal obligation to have a business checking account.

But that doesn’t mean it’s not a good idea to have one.

💡 If you have taxable business income, the IRS recommends having a separate business account.¹

This keeps the bookkeeping and tax filing processes clear.

Additionally, if you’re an LLC, a separate business checking account provides you with legal liability protection.

If your business is ever sued, the court could go after your personal as well as business finances if they share the same account. A dedicated business checking account prevents this from happening, protecting your personal assets.²

Looking for a business checking account? Discover Wise Business

If you’re looking for an easy to set up, easy to use business account, then Wise Business may be the choice for you.

Wise Business is not a bank, but a smart online banking alternative. The Wise Business account gives you the ability to hold and convert over 50 currencies, all in one place. This makes it perfect for doing business around the world.

On top of this, you’ll always have your money converted at the real mid-market exchange rate.

Open a Wise Business account today

There’s no monthly fee with Wise Business, and no minimum monthly balance required. You can get access to a wide range of free tools, such as mass payouts, allowing you to pay up to 1,000 international employees in one click. You can also pay a one-off fee to get local account details such as EUR, GBP, and CAD. You can then receive payments to these major currencies with ease.

Business vs personal checking account: The bottom line

If you have a business of any size, it's good practice to open a business checking account alongside your personal one. This will help to keep your finances separate, and make it easier to manage your business cash flow.

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Sources:

1. Publication 334 (2022), Tax Guide for Small Business | Internal Revenue Service
2. Are you still using your personal bank account for your business? | LegalZoom

All sources checked February 16, 2023.