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Is it possible to use a personal checking account for business? The answer is yes. There are some restrictions, but you can create your own DIY type of banking for a small fee.
The need of keeping company and personal money separate should be understood by new business owners. While using a personal checking account for business reasons is feasible, there are hazards connected with mixing company and personal cash. It may complicate bookkeeping and have an impact on taxes, putting you at risk of legal liability.
Personal Checking Account vs. Business Checking Account
Personal and commercial checking accounts usually have the same fundamental features and services, as well as the same structure. Personal checking accounts, on the other hand, are for personal use alone, whilst commercial checking accounts are for managing firm money. The name of the company is frequently included alongside the owner’s name on a business checking account. A personal checking account, on the other hand, solely shows the individual’s name.
When it comes to the documentation needed to create an account, minimum balance requirements, and fees, business checking accounts might vary from personal checking accounts. Some banks additionally provide services specific to company checking accounts, such as integration of business and accounting software, merchant services for processing card payments, employee debit cards, and payroll processing.
When Is a Personal Checking Account Appropriate?
You can write checks with a personal checking account, and it usually comes with a debit card. To handle your own funds, you need open a personal checking account. This may include things like personal credit cards, mortgage payments, and utility bills. Paychecks may be deposited into a personal checking account, purchases can be made using a linked debit card, and money can be transferred to a linked personal savings account. You may also use a personal checking account to withdraw cash from an ATM and make personal payments to friends and family.
When Should a Business Checking Account Be Used?
To handle their company’s banking and money, business owners should utilize a business checking account. Paying suppliers, making lease payments, collecting payments from consumers, processing payroll, and paying operational expenditures and taxes are all part of this procedure. All sorts of businesses, including sole proprietorships, limited liability companies (LLCs), partnerships, and corporations, may open a business checking account with a bank. It’s better to create a business checking account if you want to utilize a checking account for commercial reasons.
How to Open a Checking Account for a Business
Creating a business checking account is typically the same as opening any other form of a bank account. Most banks provide an easy-to-use application procedure that takes just a few minutes to complete.
While the documentation you’ll need to create a business checking account differs by bank, you’ll almost always need to provide the following:
- For a sole proprietorship, an employer identification number (EIN) or a Social Security number is required.
- Documents pertaining to the founding of a business
- Agreements on ownership
- Obtain a business license
- Documents of personal identity
Use of a Personal Checking Account for Business Has Risks
- Mixing of money: If you use your personal checking account to handle your company accounts, it’s simple to mix your personal and business cash. When it comes time to account for your company spending, this might be confusing.
- Using a personal checking account for commercial reasons might make it harder to substantiate distinct transactions for tax purposes. Later on, this may result in tax-related legal problems.
- Inability to conduct banking in your company name: Without a business bank account, doing banking transactions in your company name is difficult. You’ll also find it difficult to qualify for business loans since lenders won’t be able to verify your company’s financial history and transactions.
The Advantages of Having a Business Checking Account
- Legal safeguards: Your company is a different legal entity from you, and you should handle it as such. Keeping a separate checking account for your company might assist shield your personal cash and assets from corporate problems.
- Separates your personal and company funds: Having a separate bank account for each is the best method to keep your personal and business finances distinct. A business checking account may help you keep your company cash and expenditures distinct from your personal finances.
- Tax benefits: Separating your personal and corporate income may make accounting considerably simpler, which is beneficial during tax season.
- Access to business banking services: Most banks provide a number of benefits and features that are only available to business banking customers. You’ll have access to these services and facilities when you create a business checking account, including accounting integration, merchant services, payroll processing services, and business advising services.
- Creates a financial history for your company: A business checking account will help you establish a business banking record, which will be useful if you ever need to apply for company finance.
Conclusion
It is conceivable to use a personal checking account for business purposes, but it is not encouraged. To minimize complications linked with a commingling of cash, company owners should segregate their business and personal funds from the start. Furthermore, commercial checking accounts provide capabilities that personal checking accounts do not. Opening a business checking account may help you keep track of your transactions and save you time in the long run.
Frequently Asked Questions
Can I use personal checking as a business account?
Yes, you can use a personal checking account as a business account.
Can I use my personal bank account for business expenses?
This is a difficult question to answer in general. You can use your personal bank account for most business expenses, but not all of them as you may have some limits set by the banks that hold your money.
