Business Checking Account & Personal Account

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Business Checking Account & Personal Account

Postby tishialee on Tue Aug 07, 2007 12:54 am

When I first started my VA business I didn't bring in much income so I just never found the need for starting a business checking account. Now I'm realizing how much of a mess it is to not have a business checking account and keep my personal stuff personal.

Are you able to open a business cheking account if you don't have a DBA or a business license?
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Postby avonfromstubby on Tue Aug 07, 2007 8:23 am

Yes you can! A business license for a home-based business is something you should discuss with your accountant to find out the IRS rules on it. My accountant told me I didn't have to have one because I'm classified as an independent contractor.
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Postby kamckinley on Mon Aug 27, 2007 10:53 pm

Tishia,

Many banks require you to have an EIN (Federal tax ID number) to open a business checking account. They don't care if you have a business license or not, just the EIN. If you're going to get an EIN, might as well have a DBA as well, although you can get an EIN just with your personal name.

And as an accountant, I highly recommend separate business and personal checking accounts. It makes doing taxes sooo much easier!

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Postby tishialee on Mon Aug 27, 2007 10:55 pm

I think 2 seperate checking accounts is just overwhelming to me. I don't understand how to keep business and personal $ seperate because...well I guess just because I don't understand...lol.
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Postby kamckinley on Mon Aug 27, 2007 11:03 pm

Keeping separate business and personal checking accounts can be a challenge at first, but it's not so bad once you get started.

Basically, when you need money to pay personal expenses, you write yourself a check from your business account. The best thing to do is to budget your personal expenses and write a check to yourself once a month or on a regular basis. But if you can't do that, you can write yourself a check whenever you want.

The problem with NOT having separate accounts is that

1. You don't really know how your business is doing, because you've got all your personal finances intermingled with your business finances

2. Preparing your taxes is much more difficult because you or your accountant has to wade through all of your transactions to determine what's personal and what's business, and

3. If you ever get audited, you could be totally screwed (excuse my language). An IRS auditor who sees business and personal transactions intermingled in the same account is more likely to disallow legitimate business expenses than if you have separate accounts.

So... yes, it's hard to get used to at first, but it's definitely worth it to have separate business and personal checking accounts.
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Postby Annette Elton on Tue Aug 28, 2007 10:02 pm

Hi Tishia and Kristine,

Tishia, thanks for posting this question! I have a business account, it wasn't difficult to get, but I don't use it like I should.

Kristine, thanks for the reminder of how important it is! Do you have any suggestions about keeping good records and basically how to run your business finances?
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Postby kamckinley on Tue Aug 28, 2007 10:23 pm

Annette Elton wrote:Kristine, thanks for the reminder of how important it is! Do you have any suggestions about keeping good records and basically how to run your business finances?


Sure! Here are some recordkeeping tips for you...

1. Keep separate personal and business checking accounts (I know I've beaten this one over your heads, but it's that important!)

2. Keep track of your income and expenses at least monthly. It's important to know how your business is doing on a continuous basis, and it's murder trying to catch up on your bookkeeping when you're 6 months behind.

3. Use an accounting software program, such as Quicken Home & Business, QuickBooks, or there's another one I haven't tried yet that someone else on this forum mentioned (I think it's called bookkeeping-for-you.com). Or, if you won't keep the books yourself, hire a bookkeeper to do it for you.

4. Keep all business receipts. Put them in an envelope - one for each month, labeled for that month.

5. Get a business credit card and try to use it for all of your business expenses. Or, if you use PayPal, get a separate PayPal account. This makes your bookkeeping and tax preparation much easier.

6. Learn the basics about income taxes. Whether you do your own taxes or hire a tax pro, you need to know enough about taxes to know what's deductible. If you don't know the basics, you'll probably miss out on deductions/credits available to you.

That's all I can think of at the moment, but I'm happy to answer any bookkeeping/tax questions you guys may have.

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Postby soapin'Angela on Wed Aug 29, 2007 12:27 am

Wow - I'm happy to say I'm doing most of the things you listed! I was doing so well with my tracking but now I'm two months behind on entering my receipts into quickbooks but I plan on catching everything up this weekend -- it's a long weekend and I'll be out having some fun too!

I just listened to Mom's Money and I LOVE the idea of having separate bank accounts on your personal accounts.... one for your monthly expenses, one for your spending money and one for savings. I've actually already got these set up but haven't started using them yet so MM has got me motivated to do so (sorry OT from the business account stuff)...
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Postby Carrielee on Wed Aug 29, 2007 8:41 pm

I wanted to mention a simple free bookkeeping system I use, it's at www.bookkeeper-for-you.com

I've used it for a couple of years now and it's perfect for my needs.

Tishia it might be simpler for you to use two separate paypal accounts for your purposes since most of your clients pay you with paypal.

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Postby Mel on Wed Aug 29, 2007 8:52 pm

Will PayPal allow you to have multiple accounts? I thought you could only have one... or was only one "premium" account?
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Postby kamckinley on Wed Aug 29, 2007 9:22 pm

Yes, you can have more than one PayPal account. I have one for business use, and one for personal use, and I have several clients that do the same thing.
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Postby Mel on Wed Aug 29, 2007 10:25 pm

But the downfall is that you have to use separate email addresses and financial institutions for each account, right?

Also... when you transfer from say your business to your personal account, do they hit you with another fee? I already give PayPal a full paycheck each year in fees so I wouldn't want to give them two for transferring money to my other account each time I wanted to pay myself from the business.

I guess I could go look this info up on their site, huh? :lol:
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Postby kamckinley on Wed Aug 29, 2007 10:49 pm

I know you have to have 2 email accounts, I'm not sure about the answers to your other questions.
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Postby Mila on Thu Aug 30, 2007 3:27 am

And as an accountant, I highly recommend separate business and personal checking accounts. It makes doing taxes sooo much easier!


Definitely. I have a seperate account and it's much easier. I'm finding Paypal's record system a nightmare. Ideally I would like to open another business account to seperate things but they don't make it easy. They let you add different emails to each account but you can't get accurat recording on those emails... I wish they would fix that and make it easier.
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Postby Kit on Thu Aug 30, 2007 7:39 am

According to what I read on the site, the personal account has a $500 per/month limit. I, too, wish that paypal would make things easier for those of us who are helping them amass millions. humf!
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