• Banking is an important aspect of running your small business, including where you deposit your revenue and how you pay for your business expenses.
• Some businesses — especially sole proprietors — opt to use their personal checking accounts for their small business banking.
• A separate business bank account can be vital to legitimizing your business and helping you maintain separation between your personal and business finances, especially when it comes to tax time.
• Learn the pros and cons of using a personal checking vs. a business checking account for your small business in this article from Nav’s experts.

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

All checking accounts allow you to deposit money and use money to pay for items, but there are key differences to business checking accounts and personal checking accounts. 

The biggest difference, of course, is that you can use your business checking account for business purposes. While sole proprietors can technically use their personal checking accounts to run their businesses, it’s a good idea to separate your business finances from your personal finances. Separating your personal and business assets is referred to as “the corporate veil,” and piercing that veil can have serious consequences for business owners. 

Pros and Cons of Choosing to Use a Personal Checking Account

The only small business structure that can really use a personal bank account is a sole proprietorship, and even then, we highly recommend separating your business and personal finances. But here are the pros and cons of choosing to use a personal checking account for your small business banking.

Pros and Cons of Choosing to Use a Business Checking Account

Almost every type of business structure should use a business bank account to keep their business finances separate from their personal finances. This is actually the law in some states, but we think it’s always a good idea for every small business owner. 

The pros and cons of using a business bank account include:

How to Select a Good Business Checking Account

Any business can find a business checking account, whether you’re a new business or you’ve been operating for a while. Selecting the right business account will depend on your business needs and what your company needs when it comes to checking. Some things to consider when looking for a business checking account include:

• Make sure the bank is a member FDIC — Whichever financial institution you choose, whether it’s a bank, credit union, or online bank, it’s important to make sure that they’re FDIC insured to protect your money. 
• Read the disclosures carefully for fees, minimums, etc. — If you generate a large amount of revenue, some of the perks of a larger bank may be worth the monthly fees. Some banks may charge you for going over a maximum number of transactions per month, too. But if you’re a smaller business with lower revenue, you may want to consider a no-fee checking account, like Nav Business Checking. Make sure you understand overdraft fees, minimum balance requirements, and minimum deposit requirements before you sign on. 
• Determine how much in-person or online banking you need — Some banks charge fees for making cash deposits or doing in person banking with them. You’ll also want to consider if you need to make frequent cash withdrawals from an ATM or if you will mostly deal with digital transactions. If your business is mostly online and you don’t accept many cash deposits, a fully online bank could be a good solution.
• Check out their business perks — The bank or financial institution you use could offer other perks, like a business savings account with a high interest rate or business credit cards with rewards. 
• Consider the financial institution you use for your personal accounts — If you have a good relationship with the bank or credit union you use for your personal banking, they may be a good choice for your business bank account. Of course, make sure you check out all the options to avoid unnecessary fees or so you don’t miss out on rewards. 

Next Steps: Open a Business Checking Account

Once you’ve done your research and you’re ready to open a business checking account, follow these steps:

1. Gather your business details

This includes the name of your business as it’s registered with the IRS, including any doing business as (DBA) or fictitious names. You’ll also need your EIN, business address, and any other contact information. You’ll also need to make sure you have the names and personal details of anyone else you want on the account (see more about that below).

2. Gather your personal details.

The financial institution will probably ask for your social security number and identification (drivers license, passport, birth certificate, or social security card), as well as that same information for anyone who will be a cosigner on the account. 

3. Have your business formation documents on-hand

You’ll need copies of your business formation documents if you have a partnership, corporation, or LLC. You may need other documents, such as your partnership agreement, articles of organization, articles of incorporation, or business license, depending on your business type. 

4. Apply for the account with the financial institution of your choice 

Applying for your business bank account may be done in person or online. Applying in person may be faster, especially when it comes to getting you your business debit card, but a fully online application may be more convenient. Once you’re approved, you’ll have access to your account and can connect it to payment methods for your business. 

FAQs on Business Checking vs Personal Checking Accounts

• Can I use my personal checking account for doing business?

  If your small business is a sole proprietorship, you can use your personal checking account for business purposes. If your small business’s structure is an LLC, corporation, partnership, or other more formal business structure, you should use a business checking account. It may actually be the law, depending on what state you live in.

• Can I use my personal bank to open a business bank account?

  If you have a good relationship with a bank or credit union that you use for personal banking and they offer a business checking account, it can be a great idea to open a business account with them. However, make sure that they match all your business needs, especially when it comes to fees, minimum deposits, and minimum balances. 

• What Do I Need to Open a Business Bank Account?

  To open a business bank account, you’ll need the following:
  – Business name, including any DBAs
  – Employee identification number (EIN)
  – Business address
  – Business formation documents
  – Business contact information
  – Social security number and identification for anyone who will sign on the account
  Check with the financial institution where you want to open the account to make sure you have all the documentation that they require. 

Nav’s Verdict 

While some sole proprietors may choose to use their personal checking account to run their business, it’s almost always a good idea for a small business to use a business checking account. Once you’ve secured your business checking account, you can connect it to your Nav account and get insights from the Nav Cash Flow tool, as well as personalized recommendations on your lending and credit options. Sign up for a Nav account today to see your options.