Why you should keep personal and business bank accounts separate
One of the most exciting things about living in the digital age is in having the ability to start a business literally overnight. From filing with the proper authorities to setting up a website for your new business, it has never been easier. Unfortunately, this has led to a few major concerns in terms of banking and personal vs business finance.
Altogether too many first-time entrepreneurs don’t understand just how many problems they could be facing unless they separate all personal and business financial concerns. This includes bank accounts, checking as well as savings. If you are a new small business owner, some of the following might help you understand why it is important to keep things separate.
Legal restrictions on commingling of funds
At the very least, commingling of funds is seen as a breach in trust. It actually pertains to keeping all money together in one account whereby it is difficult to tell where the money came from and what it should be used for. This should never be an issue when it is a simple process to open separate accounts online. You can click here for more information on opening Bank of Labor accounts as an example of just how easy it is to handle from the comfort of your home.
If you doubt just how seriously the US takes commingling of personal and business bank accounts, you can easily see how the courts have handled commingling cases brought before them. In a 2018 case, a medical doctor was found guilty of posting $1 million into a commingled account and was convicted for money laundering.
Preventing an accounting nightmare
Then there is the whole process of keeping the books. If you have not kept your business and personal accounts separate, how will you know whose money is being used for what? Using just one account for both business and personal use is an accounting nightmare of the highest degree. How would you even be able to show a realistic ROI if you had no way of accurately tracking cost and revenue? At best it would be an accounting nightmare, but in reality, it would probably be impossible!
Keeping things simple come tax time
Then there is the tax man, and we all know it doesn’t pay to get on his bad side! If you have any hope at all about an accurate filing with the IRS, then it would behoove you to keep all business and personal accounts separate. There really is no reason to keep just one bank account when it is so easy just to go online to apply for separate accounts.
Even when working as a sole proprietor you should always keep accounts separate. Not only will you be more compliant with US laws and regulations, but you will make life so much easier in both business and personal financial concerns. Since there is no reason ever to have just one account, make sure you have both open and funded today.