The headline to this post asks a common question. And the answer is, yes!
There are three reasons why. Let’s look at them:
ONE: It’s Cleaner
If you’re mingling business funds with personal funds, it makes recordkeeping a mess. You’ll need to identify business expenses vs. personal expenses. And if you’re ever audited, and the bank account became an issue and you needed to supply bank statements, you’d be supplying statements that have your personal transactions on it as well as your business transactions.
TWO: If You Have an Entity (LLC or Corporation, for Example), A Separate Bank Account is a Sign of a “Real” Business
I get paranoid about things, and this is one I warn my entity clients about. If you’re an entity — especially an S-corp formed for no reason other than to save on self-employment tax — and you are running corporate business through your personal bank account, I could see that blowing up badly if the IRS ever came calling. And yes, I have seen S-corps with no separation at all on anything.
THREE: Legal Implications
I’m not an attorney, so I won’t go too deep into this. But, I believe if you’re ever sued, and the other person’s attorney found out you don’t have a separate bank account for your entity, their eyes would probably light up at the thought of “piercing the corporate veil.”
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”