Common Bookkeeping Mistakes - #4 Not Having Separate Accounts
I see it all. the. time. And in the past, I've even done it myself! "No big deal...I'll just keep the receipts," or "I'll get around to getting a business bank account eventually," or "But my personal checking is free...business checking has fees." Sound familiar? Keep reading to find out why (and how!) to change!
The short version is that it's easiest to keep up with your record-keeping when you have everything separate. There may be times when you have to purchase something for both business AND personal uses at the same time...you can just write an expense report from the business and pay yourself back. However, it's still important to keep receipts for business transactions. A bank statement or credit card statement does not provide adequate evidence of a transaction for tax purposes.
If your operation is set up as a corporation, you simply MUST have a separate account because, by law, the corporation is considered a completely separate entity. If your operation is set up as an LLC, it depends on the state as to the legalities about a separate account. However, it is still a best practice, regardless of the structure of your operation.
Another consideration is whether your personal checking account will even allow business transactions. Mine won't. They flat out told me that if they discover that I am conducting business through my personal account, they will close my account. (I love my bank, but I do wish they had business checking!)
If cost is a concern, check out this list of free business checking accounts by state. I found it INCREDIBLY helpful when I opened my business. I was able to compare services, and then with my particular bank, I was able to apply online and just go down to the local branch to sign everything. I even found a bank that has locations in several states, just in case I move at some point. (But now I do everything online, so I may not even need a local branch.)
There truly isn't a reason to NOT have a separate business account...it's definitely something to take care of as soon as possible if you don't have one!