What Is a Business Bank Account?

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In the U.S., there are an estimated 33.2 million small businesses. Whether you’re a current business owner or are considering starting a company, having a business bank account is a wise move. With a business bank account, you can definitively separate your personal and company financial activities, making it easier to file taxes accurately, track expenses, and do more.

However, many people may wonder how business bank accounts work and how they’re different from personal bank accounts. If you’re among them, here’s what you need to know.

How Does It Work?

Generally speaking, business bank accounts work similarly to their personal bank account equivalents. For example, business checking accounts can accept incoming deposits and issue payments using connected checks or debit cards. As a benefit, you can connect a business banking account to a company-run payment system, simplifying business transactions.

Like personal bank accounts, business bank accounts are also FDIC insured on amounts up to $250,000. That maximum amount is based on the total held at one financial institution, not necessarily the value of a single account. As a result, if you have business checking and savings accounts at the same bank, the total amount in both of those accounts combined is insured up to $250,000. Any amount above that is not insured.

Essentially, business bank accounts do what personal accounts do; they just allow you to separate your personal spending and income from business transactions.

How Does It Differ From a Personal Account?

Overall, the biggest difference between business and personal bank accounts is that business accounts hold and manage company money, while personal accounts focus on an individual. In some cases, business bank accounts also offer some additional protections — such as from business liabilities — that aren’t offered if you’re using a personal account.

With a business bank account, the fee structures or interest rates may also differ from what an institution offers for personal savings and checking accounts. Exactly what those look like may also vary depending on the business type, as some banks have specific programs for sole proprietors, LLCs, corporations, partnerships, and other structures.

Some other potential differences include what’s required to open the account, such as minimum deposit amounts. Minimum balance requirements may also differ, particularly when it comes to avoiding maintenance fees.

What Extra Services Are Available?

With a business bank account, you might get access to services that aren’t generally available with personal bank accounts. For example, debit cards you can provide to employees for handling company expenses are often available. Integration with popular bookkeeping platforms, payroll processing services, card payment processing for customer purchases, and financial advisory services are potentially available.

Automated Clearing House (ACH) access is another feature that comes with many business bank accounts. With ACH, electronic money transfers that don’t involve checks, cash, or wire transfers are processable. Often, ACH can simplify accepting payments from customers, especially if the total amount owed is large or recurring charges occur.

Fraud insurance protection is another increasingly common benefit offered to business banking customers. That helps limit the risk associated with fraudulent transactions, including reducing financial losses related to fraud and avoiding negative remarks on the company’s credit report.