I'm an independent software developer and I do business under my real name. As such, I'm not a DBA, nor am I incorporated. Since I'm not filed as a business anywhere, it's difficult for me to open a business account with any bank because they want me to be filed in some way. I'm a very new entrepreneur and I'm still learning a lot that I never needed to know before. The only reason I really wanted a business account that's separate from my personal account is to keep my finances organized for tax purposes.
My question is, what are the benefits of having a business account if I work alone and do business under my real name? Does it even benefit me to have one at all or will a separate personal account suffice?
Also, one of the representatives at one of the banks told me that having a business account allows you to wave some $4000.00 tax fee at tax time. She wasn't very clear on what it was, so I'm not too sure she knows what she's talking about. Does anyone know what she's talking about?
Thanks so much in advance for your wisdom!
For a corp or LLC, you definitely want to keep the money separate. Failing to do so can cause you to lose your liability shield in certain cases. For a sole proprietorship, there is less advantage to a separate account since you and the business are really one and the same.
Still, if you want, you should be able to open an account with out too much trouble. My local credit union (BECU ) only requires that you show your state business license if you're a sole proprietor. In contrast, for opening a bank account for my LLC, I had to show: business license, LLC operating agreement, and certificate of formation.
$4000 "tax fee" sounds like a load of crap. Never heard of anything like that.
In addition to the points made by nsanders, having a separate bank account will definitely help for record keeping. It makes it possible to quickly look at one account to show you how much money is left over specifically related to your business.
When I first started my business I just opened up a 2nd personal chequings account and called for a 2nd Visa account. This made it unbelievably easy for book keeping and record keeping.
In this case you should open a 2nd account (at the same bank or a different one) it will just be you have 2 bank accounts, one for your personal use, and one for your business, but they are both in your name. Its mostly just an issue of book keeping and such
I'd agree with the prior posters. I know the situation varies often, but early in my startup life, it made it a lot easier to have some kind of incorporation status and a business banking account. Like a lot of people, I was put off by the up-front cost/hassle, but it was well worth it
Separation of business and personal assets. You probably want to be able to track what are business expenses and what is business revenue.