What Is the Difference Between a Small Business Account & a Regular Checking Account?

Most financial institutions offer checking accounts to both consumer and business customers. Checking accounts enable account owners to make regular deposits and withdrawals. Checking accounts are demand deposit accounts designed to hold short-term funds. There are many similarities between consumer and nonconsumer accounts but also some significant differences.

Identification

• Consumers must produce a form of government issued identification that includes a photo at account opening. The ID must show the customer's name, date of birth and physical address. Most banks accept only U.S. passports or state-issued driver's licenses and non-driver's ID cards. Banks also record the Social Security numbers of all account signers.

  Business signers must provide the same personal identification as consumer account owners. Business owners must also provide the bank with the entity's tax identification number, business license and articles of incorporation or partnership agreement, if applicable.

Types

• Most banks offer free consumer checking accounts that have no minimum balance requirements and no monthly service fees. Customers must pay for checks but can use debit cards and Internet banking for free. Banks provide free checks to only customers who open accounts that have minimum balance requirements. Typical balance requirements are $2,500 or more.

  Some banks have free business checking accounts that work similarly to free personal accounts. Most banks assess monthly fees of $15 or $20 on business accounts and very few provide free checks.

Features

• Consumers access account funds through in-person withdrawals at the bank, Internet transfers, check writing or debit card transactions. The Visa logo on debit cards enables cardholders to use them at Automated Teller Machines and to make purchases at point-of-sale terminals.

  Business customers use the same methods to access funds, but banks issue business debit cards to individuals rather than the business entity. Some business owners do not allow account signers to have business debit cards because they allow easy access to funds which sometimes leads to embezzlement.

Considerations

• Banks cannot remove a signer from a personal account unless the signer dies. People wishing to remove divorced partners or adult children from their accounts must close them and open new ones. This disrupts established direct deposits and automatic debits.

  Banks can remove signers from business accounts. When new signers are added or removed from a corporation or partnership, the new signers must provide the bank with an updated business resolution and signature card. Sole proprietors cannot add or remove themselves from their own accounts but in most states they can add or remove a spouse.

Warning

• All bank accounts are covered by the Federal Deposit Insurance Corporation. Coverage limits extend to $250,000 per individual, per bank. Account owners can increase account coverage by adding additional account owners or beneficiaries each of whom brings an additional $250,000 of coverage.

  The FDIC only insures business entities up to $250,000 regardless of the number of account owners. The business owners personal coverage does not effect the business coverage limits. It is illegal to create additional business entities for the sole purpose of increasing FDIC coverage limits.