Can I Use My Personal Bank Account For Business? Key Tips

Many individuals looking to launch their business or create a side hustle are often forced to consider how to organize expenses and spending in an account. For many, they just consider using a personal account.

The Short Answer: Can you use your personal bank account for business?
You can use your personal bank account for business. But, there are several benefits from starting a business account: 1) Keep personal and business expenses separate for tax season and to manage your business finances 2) Protection of personal assets if facing legal or business issues 3) A separate business account helps establish your business as a legitimate entity

In this article, we’ll tell you why starting a business account is the better option for businesses of all sizes. We will also introduce you to the Wise Business account – the hassle-free way to get paid and save on currency transfers.

Are you looking for an account that helps you save while sending and receiving payments?

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Table of Contents

Can I use my personal bank account for business? Why you should switch from a personal to business bank account How to switch to a business account Costs and fees associated with business accounts Tips for what to look for in a business account 1. Location 2. Fees 3. Minimum balance requirements (daily balance requirement) 4. Introductory offers 5. Account features 6. Interest rates 7. Integrations 8. Regulations 9. Additional business services Wise Business

Can I use my personal bank account for business?

When it comes to using your personal checking account for business, there are a few things you should consider, depending on the type of business you have. Let's break it down:

• Sole proprietorship ¹: If you're a sole proprietor, you are your business. This means that there is no legal separation between you and your business and, therefore, no legal requirement to open a separate sole proprietor bank account. However, using your personal bank account for business can make it difficult to keep track of your business finances and could cause issues come tax time.
• Self-employed, freelancer, contractor ²: Being self-employed, a freelancer, or a contractor is similar, if not the same, as a sole proprietorship. While it's not legally required to have a separate business account, it’s highly recommended. Not only will it help you keep your finances organized, but it can also make it easier to separate your business and personal expenses for tax purposes².
• LLC ³: If you have an LLC, it is a separate legal entity from you as an individual. In this case, you’ll want a separate bank account for LLC purposes. While you technically could use your personal bank account for business, it is generally not recommended. This is because mixing your personal and business finances could put your personal assets at risk if your business were to face legal issues.

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Why you should switch from a personal to business bank account

Switching from a personal to a business bank account might seem like a hassle, but it's actually one of the best things you can do for your business. Here's why:

• Professionalism: Using a personal account for business can make your business seem less professional. Having a separate business account helps to establish your business as a legitimate entity and can help you build trust with customers, vendors, and investors.
• Organized finances: Keeping your personal and business finances separate can make it much easier to manage your money. You'll be able to see at a glance what money is coming in and going out of your business, which can be incredibly helpful for budgeting and forecasting.
• Tax benefits: By having a separate business account, you'll be able to keep track of your business expenses and income, which can make it much easier to file your taxes at the end of the year. You may also be able to deduct more expenses on your taxes, which can save you money.
• Protection: If you're using your personal account for business, your personal assets could be at risk if your business were to face legal issues. By having a separate business account, you can protect your personal assets and limit your personal liability.

How to switch to a business account

If you've decided that it's time to make the switch, you might be wondering where to start. Here's a simple guide to get you started:

1. Research your options: Start by researching business bank accounts to find one that meets your needs. Look for a bank that offers low fees, good interest rates, and features that are important to your business, such as online banking or mobile check deposit.

2. Gather your information: Found a bank you like? Start gathering the information you'll need to open a business account. This typically includes your business formation documents, such as your business license, Articles of Incorporation or Operating Agreement, as well as your Employer Identification Number (EIN) and personal identification documents.

3. Open your account: With your information in hand, it's time to open your account. You can typically do this online, over the phone, or in person at a bank branch. Be prepared to provide all of your information and sign any necessary paperwork.

4. Update your payment methods: Once your business account is open, it's important to update your payment methods with any vendors, clients, or customers. This might include updating your billing information on your website or invoicing software, as well as letting any regular clients or customers know of your new account information⁴.

Costs and fees associated with business accounts

As not all business accounts are the same, you’ll want to be aware of the potential costs and fees that may be associated with the one you choose. These are some common costs and fees you might come across:

• Monthly maintenance fees: Many business bank accounts charge a monthly maintenance fee, which can range from a few dollars to several hundred dollars per month. Some companies or banks may waive this fee if you maintain a minimum balance in your account.
• Transaction fees: Some banks may charge a fee for each transaction you make, such as depositing a check or making a withdrawal.
• ATM fees: If you need to withdraw cash from an ATM, you may be charged a fee by your bank, as well as by the ATM operator. Look for a bank that offers fee-free ATM withdrawals, or make yourself aware of the fees associated with using an out-of-network ATM.
• Overdraft fees: If you accidentally overdraw your account, you could be charged an overdraft fee. These fees can be quite high, so don’t forget to check out your bank's overdraft policies.
• Wire transfer fees: When it comes to sending or receiving a wire transfer, there could be local or international fees tagged onto those.

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Tips for what to look for in a business account

Are you ready to take your business to the next level? Whether being able to open a business account online or low fees are top of the list, the best bank accounts will offer many perks that are sure to fit your criteria. We've put together some helpful tips to help you find the perfect business account for your needs.

1. Location

When you're shopping around for a business account, don't forget to consider location as a factor. Maybe you're looking for convenient in-person banking services or a strong international presence – location can play a role in many ways.

For instance, having a bank branch nearby can be a lifesaver for those who need to deposit cash or have a complex question that can't be answered online or over the phone. If your business operates in multiple states or countries, you'll want to consider an international bank. This can make it easier to transfer funds, deposit checks, and manage your accounts across different regions.

2. Fees

One of the most important factors to consider is the fees associated with each account. But it's not just about the monthly fees or transaction fees - you need to dig deeper to ensure you're not hit with unexpected fees later on.

If your business operates internationally, you'll want to pay close attention to the currency conversion costs and international transaction fees associated with your account. These fees can add up quickly, especially if you do a lot of business overseas.

Another thing to look out for is hidden fees – those sneaky charges that banks may not disclose upfront. These could include fees for paper statements, account maintenance, or even customer service calls.

3. Minimum balance requirements (daily balance requirement)

Some banks require account holders to maintain a minimum balance in their account at all times in order to avoid fees or earn interest. This can be a challenge for some small business owners, particularly those just starting out or operating on a tight budget. If your account falls below the minimum balance requirement, you could be charged, which can add up quickly over time.

By finding an account with no minimum balance requirement, you can have greater flexibility and control over your finances, without being held back by strict account requirements.

4. Introductory offers

Occasionally, banks might have introductory offers to attract new customers. For instance, cash bonuses, waived fees, or even interest rate promotions.

While these offers can be tempting, read the fine print to make sure you're not sacrificing long-term benefits for short-term gain. For example, a bank may offer a cash bonus when you first sign up for a business account, but then tack on high monthly fees or transaction fees down the line.

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5. Account features

You want an account that can keep up with your fast-paced business and help you stay organized, all while providing the tools you need to succeed. Look for accounts that offer features like mobile banking, online bill pay, overdraft protection, and transaction alerts – all designed to make your business run smoother.

Of course, every business has different needs when it comes to account features, so think about what will be most valuable for your specific business.

6. Interest rates

When it comes to running a business, every little bit of extra income helps, and that's where interest rates come in. It’s worth looking for an account that offers a decent rate of return on your deposits, as even a small increase in interest can add up over time.

Be sure to take a look at the interest rates on offer and check out how they stack up against the competition.

7. Integrations

Integrations can make it easier to manage your business by allowing you to connect your bank account to your favorite accounting software, payment processors, and other tools. With the right integrations, you can save time and reduce errors, while also gaining greater insights into your finances and staying on top of your cash flow.

8. Regulations

It's essential to ensure that any account you choose is fully compliant with all relevant regulations, including those around data protection and financial security. By choosing a regulated account, you can have peace of mind knowing that your money is safe and that your personal information is being protected.

9. Additional business services

In addition to the standard features of a business account, many providers offer extra services that can help you manage and grow your business more effectively. These might include things like invoicing tools, payroll services, and business credit cards.

It’s worth looking beyond just the basic features and seeing what other services and tools can make life easier. You may be surprised at what you find!

Learn More: How to change business bank accounts

Wise Business - the international business account that helps you save

And speaking of making things easier, the Wise Business account is the perfect solution for anyone looking to simplify their business finances. It's important to remember that Wise is not a bank, but a smart online alternative to traditional business bank accounts.

With the Wise Business account, you can send and receive payments from anywhere in the world, in multiple currencies, and at low cost with the mid-market rate.

Plus, you'll have access to tools to help you manage your cash flow, pay bills, and more.

1. Account Software Integration: QuickBooks, Xero, Sage, and Wave
2. Batch Payment Tools: Pay up to 1,000 invoice in one instance
3. The Most International Account: Hold up to 50 currencies at once
4. Transparency: Wise Business is trying to get rid of all your business account fees with no monthly fees or minimum balance requirements.

Open a Wise Business account 🚀

Please see Terms of Use for your region or visit Wise Fees & Pricing for the most up to date pricing and fee information.

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Sources:

1. https://www.investopedia.com/terms/s/soleproprietorship.asp
2. https://www.investopedia.com/terms/l/llc.asp
3. https://www.investopedia.com/terms/i/independent-contractor.asp
4. https://www.sba.gov/business-guide/launch-your-business/open-business-bank-account