[ The Money Side of Lifeā„¢ ]

Personal & Business Accounts: Why splitting up makes sense

By Jessica Dabrowski on November 1st, 2009 •

You wouldn’t wear a business suit to the beach, so why would you mix business transactions with personal ones? These actions confuse everyone involved: you, your tax preparer, the government… not to mention everyone else on the beach. If financial dealings aren’t separated, come tax season you could have to sort through the entire year’s transactions to ensure your tax return is filed correctly. Avoiding that is just one of the advantages to setting up a separate business account.

Matter of fact

Businesses must keep records of their transactions so that the IRS can make sure each business is following all the rules. As long as you accurately disclose the businesses’ financial position, there shouldn’t be any problems. Establishing business checking and savings accounts that are separate from personal accounts helps serve this purpose. It also benefits your business by providing:

Opportunities--Running an organized business can lead to tax deductions not found by disorganized companies.

Budgeting--Next year’s budget will be a cinch. Separating your personal and business accounts ensures that money isn’t mislabeled.

Time savings--With all transactions neatly recorded in one spot, you’ll have more time to focus on managing the business.


In addition to an opening deposit, you should expect to pro¬vide some or all of the following information, depending on your type of business:

  • Name and address of the business
  • Date established and the state in which it is legally registered
  • Business Tax ID Number (also known as an EIN)
  • Type of entity (Sole Proprietorship, LLC, Corporation, Partnership, Association, etc.)
  • Fictitious Name Certificate, Articles of Incorporation, Corporate Resolution, or Articles of Association
  • Personal information of owner(s), such as name, date of birth and Social Security number

To learn about starting a business check out the “entrepreneurship” section at brassmagazine.com.

Familiar and additional services

Many of the services commonly found at financial institutions for personal accounts are also common to business accounts. For example, many business accounts offer free checking, free bill pay, debit cards and overdraft protection. But business accounts sometimes offer additional features like merchant services.
Merchant services allow you to process payment options like credit and debit cards, and have the money deposited in a business account.

While merchant services are helpful, each provider charges different fees. Expect some or all of the following:

  • Setup or application fees
  • Monthly service charges (generally $15–$25 per month)
  • Equipment costs
  • Transaction fees (generally $0.25–$0.35 per transaction)
  • Percentage of sale
  • Miscellaneous fees

Business accounts make accounting and everyday operations run smoother. It would be hard to find an established business that doesn’t use them, so make things easier on yourself and look into starting one for your business, sooner rather than later.

The Bottom Line

In 2008, there were 29.6 million businesses in the U.S. Get ahead of the competition by simplifying your record keeping and separating your financial accounts.

Sources: irs.gov, bankrate.com, fool.com, allbusiness.com, visa.com, kauffman.org