Question of the Day: I just started my business and what I really want to know is… do I REALLY need a separate checking account for my business? ~Anonymous
Answer: My answer is two-fold… one from the business/accountant perspective and one from the practical perspective.
In short… YES, you do need a separate checking account for your business and here’s why:
From a business, accounting and practical perspective, it’s just easier to keep business and personal separate. It’s easier on you from a tracking perspective, you accountant will definitely thank you and things won’t get all jumbled up in your mind making it a practical choice.
That’s my short answer… and here’s my long answer.
For practical reasons, you started a business… now act like you are in business! Most banks offer free business checking accounts even if you are a solo proprietor using a DBA (doing business as). So no excuses are welcome here for not having a business account. Here’s a quick tip for you: open a business checking account at the same bank where you have your personal account. This way, you only have to go to one place to take care of your banking tasks.
For accounting and business reasons, it will be easier on yourself (or your bookkeeper/accountant) if you kept things tidy, in order and separate. It’s easier to track income and expenses if you don’t muddy the waters of your business finances with those of your personal finances. Don’t get me wrong, it can be done but do you really want to have to constantly take the extra step of determining if each and every deposit is business or personal BEFORE you can actually enter the data into your accounting system? If your answer is no (which I’m going to assume it is)… you need to keep things separate.
So when does it go beyond personal preference? When do you absolutely, positively need a separate business checking account? When you are doing business as a DBA, as a LLC, S Corporation or C Corporation. Basically whenever you have taken steps with your state (or the state of your choice) and created a legal business entity separate from yourself.
If you have additional questions about why you should have a separate business checking account or if you would like us to answer your question here on our blog, contact The Common Cents team.