Opening and using a business checking account, while simple, isn’t quite as simple as opening a personal one. That’s why we decided to take some time and gather the five most commonly asked questions — and answers — about business checks and accounts.
What's the difference between cashing business checks and personal ones?
The main difference between a business check and a personal check is who the check is made out to. A check destined for your personal checking account will be made out to you, using the same name as what's found on your license or ID card. A business check, on the other hand, is made out to the name of a small business instead of an individual.
Additionally, there are more potential challenges when cashing a business check vs. a personal one. These challenges include being unable to cash checks due to the specific person they’re made out to as well as complications with business checks made out to multiple parties.
Can I deposit a business check in my personal account?
No, you should not deposit a check that was made out to a business into a personal account. While it may seem convenient to use both business and personal checking accounts interchangeably, it is never worth the potential problems involved. Problems can include:
- Getting the attention of the IRS on suspicion of fraud, leading to an audit or potential legal action
- Commingling of funds can make it difficult to track expenses and income, which can lead to tax problems and difficulty in preparing financial statements.
Can I deposit a personal check in a business account?
It is legal to deposit a personal check into a business account, but it has to be done in a particular fashion:
- First, the check will need to be endorsed
- On the back of the check, the check owner would endorse the check and then write “pay to the order of (business name).” Then the business would endorse the check normally under that.
- Write the name of your company below where you wrote “full endorsement”
- Finally, add the standard endorsement signature used for your business
While rare, there is an additional risk to anyone who deposits a personal check to a business account when they’re a member of an LLC. In very particular cases, this act can open you up to potential liability through a process called “piercing the veil,” where a shareholder in a corporation becomes personally liable for its debts or actions.
How do I cash a business check?
A business check is any check written specifically for your business. How easy it is to cash them depends on the business classification and whether it's a sole proprietorship, partnership, LLC or corporation.
How you cash checks for sole proprietorships will depend on a few things. In particular, you’ll need to keep in mind how you have the account set up and what your company name is. The naming convention of your business will impact how you endorse the check.
How do I apply for a business checking account?
With Sunrise Banks, it's easy to apply for a business checking account through our online portal Off Site Link. We offer Minnesota companies big and small the flexibility to manage and grow their money with confidence.