Do I Need to Have a Separate Checking Account For My Business?
The answer is yes! It is important that you have separate business bank accounts—be it checking, savings, money market or any other kind. You should also keep a credit card just for business use.
Here are three reasons to keep your business accounts separate from your personal accounts:
1. Separate accounts require less thinking and recalling. There’s one for business and one for personal use. Easy.
2. Separate accounts make your accounting and taxes faster, easier and less expensive.
3. If you have to recreate your records for any reason (hard drive failure, for instance), recovery is faster, easier and less expensive with separate accounts.
And two reasons NOT to commingle funds:
1. If your business is set up to shield you from personal liability—a C-Corporation, S-Corporation or Limited Liability Corporation (LLC)—that liability protection could be invalid. Commingling of funds can permit the piercing of the corporate veil and open your personal assets to liability.
2. Finally, if you are audited, the IRS disapproves and is suspicious of commingling funds. They will question everything. To prove the validity of your business transactions, you might find yourself having to provide support for all transactions, business and personal.
Harriet Gatter, owner of Accounting Support LLC, was an ad specialty distributor for 23 years and an adjunct professor of accounting at Neumann University. She sold her ad specialty business in 2012, became certified as a QuickBooks ProAdvisor, and now works exclusively with ad specialty distributors nationwide on their QuickBooks & accounting needs.
Please email accounting questions you would like considered for the column to HGatter@AccountingSupportLLC.com with the subject line of "Ask the Accountant".