← Back to Blog

Business account vs personal account: which one do you need?

minute read
Get the benefits of a business bank account. Open an account today. No hidden fees.
Get the benefits of a business bank account. Open an account today. No hidden fees.
Try it free
Updated on:
December 12, 2022
December 12, 2022
Table of contents
Get the benefits of a business bank account. Open an account today. No hidden fees.
Discover Bonsai all-in-one business management software.

If you are running a business, having a separate bank account for your business is key to avoid mixing your finances.

You don't want to intermingle your business funds because it can cause problems later if you run into any trouble with the IRS. Since sole proprietors are their business, they often mix their personal and business bank account. But what's the difference between a business bank account vs personal bank account? Which one is the best option for you to use?

Below we'll look at the key differences between business bank accounts vs personal bank accounts to compare the benefits and help you choose the best one for your trade.

Note: Check out HelloBonsai for everything you need to launch your side hustle into a full-scale business. We'll help you prepare everything from proposals and contracts to accounting expenses during tax season. Start your free 7-day trial today.

What is the Difference Between a Personal Bank Account and a Business Account?

First of all, what is a business bank account?

A business bank account is an account that is created specifically for business banking. It is used to manage the cash flow and profits of the company. As the owner of a small company, you may be looking to open a business bank account to keep your finances separate from your personal accounts.

Owners separate their personal accounts from their professional accounts which are used only for business purposes. All of your work-related transactions and expenses will be done on these accounts whereas your personal finances will be handled in your personal bank account.

When opening a business bank account, you'll typically be able to open a checking account and a savings account depending on your financial institution.

Checking Accounts

Business checking accounts and personal checking accounts are fairly similar. Both types of checking accounts are used for your normal banking transactions. Just like you would with a personal checking account, on a business checking account you can withdraw money, write checks, and make payments through a debit card or Automated Clearing House (ACH) payments.

The biggest difference is that your business checking account will be used for your transactions related to your work. This is key because it will keep all of your related expenses in one account that is easy for you to keep track of on a bank statement.

It will be easy to monitor your expenses and income since it will be completely separated from everything else.

Another important difference is the fees associated with the checking accounts.

Most personal checking accounts are free to open with a bank or credit union. Depending on several factors such as your daily minimum balance, direct deposits, and more, you can have your checking account fees waived.

A business bank account will typically have higher fees than your personal checking account. Also, the minimum requirements to have these maintenance fees waived will generally be a bit higher.

Savings Accounts

Similar to personal savings accounts, a business savings account will be used to help you set aside some money.

Both, a personal savings account and a business savings account, will help you store your money while also earning interest on it. This will help your money grow even more depending on how much money you have deposited and the interest rates offered by your bank.

Another similarity is that they can both be used as a source for overdraft protection. Sometimes accidents happen and you mismanage your finances. If you overspend on your company’s checking account, some money can be pulled from the savings account to cover the transaction. This will save you from getting hit with overdraft fees for spending more money than you have in your checking account.

Monthly Maintenance Fee

Business checking accounts tend to have higher fees than a personal checking account.

The monthly fees will depend on the bank or credit union you open your account with. Also, there is the possibility of having these fees waived.

When opening a business bank account, you should check with your financial institution to explore possible ways to be free from those account charges.

Common ways to escape these fees include maintaining a daily minimum balance. If the checking account has a certain amount of money in it each day, then you can be excused from the maintenance fees.

You can also avoid the fees by spending a minimum amount of money on your business debit card. Having consistent transactions is another criteria that you can meet so that you don't have to pay the fee.

Another way that you can waive the fee is through direct deposits. If the checking account has a lot of direct deposits and a steady stream of cash flow coming in, then your business checking account can be eligible to not be charged the service fees.

Lastly, it is worth noting that some banks and credit unions will offer free accounts for small businesses. A small business checking account will usually be free, depending on the institution, however, the guidelines will usually be a bit stricter.

So, double-check with your bank or credit union on their guidelines for business checking accounts before opening your account.

Is It Better to Have a Business Bank Account or a Personal Bank Account?

Generally speaking, it is better to have a business bank account.. In fact, the Internal Revenue Service (IRS) recommends you open a bank account specifically for your organization.

This is because business bank accounts generally provide tax benefits along with other benefits that we'll cover below.

Can You Use a Personal Account as a Business Account?

Depending on the structure and type of company that you are operating, you may be able to use a personal bank account as a business account.

If you are operating your organization as a sole proprietorship, then you can use your personal bank account as a business account. Technically, a sole proprietor doesn't need to open a business bank account. You are running your operations under your name. There is no difference between your personal finances and your business finances. The option to use this type of bank account is up to you, but not required by law.

If your company is organized as a corporation or a limited liability company (LLC), then you are not able to use your personal account as a business account. Per the government, an LLC requirement to open a business and personal bank account in order to separate the finances.

This is because of the way that a corporation and LLC are structured. A corporation and LLC are not eligible because you are operating your business as a different legal entity from yourself. Because the structures separate you entirely as a different entity, you must also create different business checking accounts that separate the transactions from your personal ones.

You can open a business bank account with the same bank as your personal account, however, it must be opened under the name of the company and those funds can only be used for business spending. You are not allowed to mix it with your personal transactions under this account.

Why Have a Business Bank Account?

So, if you are not required by law to open a business bank checking account, why should you consider opening one?

There are a lot of different benefits to having a business bank account versus a personal one.

Organizing Your Account for Taxes

The best way to separate business and personal taxes is with a business bank account. Having a separate business bank account is that you are able to organize and keep track of all of your finances. Since these checking accounts will be used only for business transactions, you will be able to clearly see all of the income and cash flow related to your company.

You won't have to sift through all of your transactions to figure out which transactions were related to your work and which were personal expenses. This makes it significantly easier for when it is tax season. You will be able to easily identify and deduct business expenses when you file your taxes to the IRS.

So, it is a good idea to open a separate checking account to consolidate all of your business banking activity from your personal expenses into one account.

Establishing Professionalism

Another great benefit that a business checking account provides is professionalism.

With your own checking account titled under the name of the company, you will add a level of professionalism to your company. People will feel more at ease about completing transactions and making payments to a legitimate company rather than an individual's name.

When writing your own checks or even receiving payments, the name of your small business will be what your customer sees.

Limiting Your Liability

Also, having a separate account for business will help you limit your liability. If you are a corporation or LLC, you are required to separate your personal and business checking accounts. However, if you choose to do this as a sole proprietor, you still get some liability benefits.

As you constantly operate, you are at risk of fraud and theft. If a thief was to get their hands on your account, they would have access to all of your personal funds and personal assets. However, if you detach your business's checking account from your personal account, then you are able to protect your money. A thief would only be able to reach the funds in the account for your business and not your life savings account.

Even if the thief accessed the funds in your work account, you would still be covered since your checking account is still insured by the FDIC (Federal Deposit Insurance Corporation).

Building Business Credit

Another key benefit of having separate accounts is allowing your company to build business credit. If your account is separated from your name, then it will build its own credit as an individual entity.

This means that you and your company will have separate credit scores. This will open more opportunities for your company. As your company grows credit, it will be eligible to open business credit cards and small business loans.

Business credit cards and loans can be used to cover additional expenses that are required to grow your company to the next level. A credit card and a loan can be used to acquire more equipment as your company grows.

Having a separate credit card for your small business will help you spend the cash that you need while also protecting your personal credit score. That is because the amount of money spent on your company card will not have an effect on your utilization ratio. This is when creditors penalize your credit score by calculating how much credit you've used in comparison to how much credit you've been granted.

A big business loan can also help you obtain property so that your organization has a building to operate out of. These loans will usually be much higher than a personal loan if you were working out of your personal banking account.

Granting Business Partners Access

Lastly, a huge benefit for opening a business checking account is being able to add your business partners as authorized signers on your accounts. Unless it is your spouse, some people may feel uneasy about adding their associates as authorized signers on their personal checking accounts.

Authorized signers are people who have access to the funds in the checking accounts and can conduct transactions with the funds in the account. Your business partner will need to be able to do this in order to help manage the cash flow of operations and work-related activities. However, if it was your personal checking accounts, then they would have complete access to all of your personal funds.

So, it is a good idea to keep business operations independent from your personal life.

The Best Business Bank Account

To open the best business checking account, there are several things to consider.

You can choose to open your checking account with the same bank or credit union that you have your personal checking accounts with if you trust and enjoy the services provided by that institution.

You should also consider shopping around for the financial institution that provides the best perks for small businesses.

Interest Rates

Depending on the bank or credit union, they will provide different interest rates for your business savings account.

You should think about opening a business account with an institution that offers a high interest rate on their savings accounts.

As you deposit more of your savings from your business checking account, you have the potential to earn even more money while it is held aside for safekeeping. Consider opening your business accounts with the institution that pays you the most to save your money.

Merchant Services

Merchant services accounts help companies accept various forms of payments. When operating your organization, you will need other payment methods available besides cash and checks.

Merchant services allow your business to handle credit and debit card payments. You will need this if you want to process any card transactions.

When opening your business checking account, you should consider which banks provide the best incentives for signing up with their merchant services.


When choosing the best bank account to sign up for, you should review the account fees.

You should compare the fees that different banks charge for having a business checking account. This will help save you money by avoiding unnecessary costs.

Just because a bank may have high service fees, it doesn't mean that it is the worst option.

Remember to compare the account guidelines to see at which banks you can be more likely to have the fees waived.

Limits on Cash Flow

In order to have your business running smoothly, you should ensure your bank does not restrict your operations.

Some business bank accounts will have certain restrictions that can affect your company.

Some common limitations are cash deposits and transaction limits.

If your company deals with a lot of cash or large transactions, then you need to open your account with a bank that allows for this. Some banks may restrict how much cash can be withdrawn or deposited over time. Be sure to double check that your business will not be controlled by these limits.

How to Open a Business Bank Account

Opening a business checking account is fairly easy once you've decided which institution you want to go with. To open your checking account, you just need to provide the necessary documents about your company to the bank.

The required documents include:

  • Your government issued ID and Social Security Number (SSN)
  • Employer identification number (EIN) if you are operating as a corporation or LLC
  • Business license and Articles of Organization (for LLC)
  • Articles of Incorporation (for corporations)
  • Certificate of the business name along with the address
  • Partnership agreement if your organization includes business associates

Bonsai's business account

Bonsai's business account is a new online business checking account that lets you manage your organization and keep track of your funds.

It is free to use and easy to get started with since there are no minimum balance requirements.

Bonsai's business account allows you to use Bonsai Payments which lets you use physical and digital debit cards to handle payments for your business.

These debit cards can be used to make purchases and can even be used at the ATM to withdraw up to $300 every day.

Bonsai is easy to use and provides you with the tools that you need to grow your business further. These tools include an invoice, savings, tax management, and more when you start your free 7-day trial. Get started now.

Get the benefits of a business bank account. Open an account today. No hidden fees.
Related Articles