Do I Need a Business Bank Account?
Many small business owners are uncertain whether they need to establish a separate bank account. While there are many situations that do not absolutely require it, it is always best to separate funds to make bookkeeping and tax reporting easier. In some cases, however, capital is in short supply or activity is minimal, and it may not be desirable to open a separate business account unless it is truly necessary. To help with the decision, here are the most frequently asked questions about when a business bank account is required.
Do I need a business bank account to accept credit card payments? Generally, no. Most merchant accounts are willing to make deposits to your personal account. Keep in mind, however, that any charge backs will be taken from the same account, which can prove disastrous for your personal finances.
Do I need a business account if I have employees? No, you can register for an Employer Identification Number, or EIN, issued by the Internal Revenue Service. This allows you to deduct and remit employment taxes. This is a totally separate issue from banking arrangements.
Do I need a business bank account if I am self-employed? No, you can receive payments and issue checks for expenses out of your personal account. However, to take deductions for expenses, you must be able to track them and, if necessary, support them. This is difficult to do when all money flows through one account.
Do I need a business checking account to establish utility service in the name of my company? That will depend on each utility company, but usually you will not except in certain circumstances. For example, many companies prohibit the drafting of a bank account to pay a bill in a different name. Therefore, you might have difficulty setting up an automatic payment from your personal account if the statement is in the name of the company.
Do I need a separate business bank account to accept payment through Paypal for online sales? Under their current policy, no. At present, they only require that you register for a business account, which carries a higher fee, and not a personal account. However, keep in mind that, like credit card payments, disputes will be deducted from the bank account into which the deposit was made. If this is the account you use for your daily activity, even a small charge back can be problem.
Do I need a business bank account to apply for credit in the name of my company? Possibly, depending on the lender’s policy. A separate account would definitely expedite the process and may make the difference between approval and rejection. In addition, you will not need to disclose as much personal data.
Do I need a business bank account if I am incorporated? There is no law requiring it, but it is strongly recommended. For one thing, corporations and LLC’s have different protections under the law. One reason for incorporating is to limit your potential personal liability. Mingling corporate and personal funds can sometimes remove that protection.
If you are uncertain whether it is in your best interests to establish a separate bank account for your business, you should consult an accountant or attorney for guidance specific to your situation. However, as a general rule, even if it is not necessary to segregate personal and business activity, it is a good idea. It allows greater accuracy for tracking expenses, simplifies bookkeeping, and offers an extra layer of protection for you.
-->
Related ChexSystems Banking Information:
Comments on this entry are closed.