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First, this is not a question of separating money, but a which product to choose. So put away the torches and pitchforks.

So, in researching for my wife's sole proprietorship LLC, we can't find a shred of reason to use a business checking account from our bank versus a personal checking account. The only advantage I see is a business account has her business name on the checks, and we can have multiple designated signers...

Other than that, the cheapest business accounts limit us to 100 transactions per month and $2500 in cash deposits (Bank of the West). So if she collects cash for a service she would have to deposit it in a personal account and write a check to her business account (slippery slope in terms of cash intermingling.)

Versus

Your plain old checking account that you, your kids, and your grand mama have... Down side, invoices would have to say pay to the order of my wife... and that looks less professional- but it's legal.

So, any thoughts? Thanks everyone! And as a reminder, regardless of product this account is strictly used for the LLC- absolutely no personal use ever.

10

Some benefits of having a business checking account (versus a personal checking account) are:

  1. You can deposit checks made out to the business name. This improves perception of your business's validity.
  2. You can have multiple signers on checks if you ever want to delegate paying bills to someone else.
  3. If you want to accept credit cards directly from a bank, most merchant accounts require a business account.
  4. If you are sued, it may be easier for the plaintiff to "pierce the corporate veil" if your business funds reside in a personal account in your name. If the veil is successfully pierced, your personal assets could be at risk. IMHO the fact that you have a separate personal account just for the business should help protect you to some extent, but realize it is probably not the same level of protection as a business account would have.

The first 3 should be pretty easy to determine if they are important to you. #4 is a little more abstract, though I see you have an LLC taxed as a sole proprietorship, and so I'm guessing protecting your personal assets may have been one of the driving reasons you formed the LLC in the first place. If so, "following through" with the business account is advised.

  • Ok, so using a business account would simply add evidence you are keeping business and personal separate... like for example, having quarterly meeting with recorded minutes with... yourself... seems silly but it increases your validity. That actually makes a lot of sense, and I really appreciate the answer. – Ryan Jan 20 '17 at 7:21
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    It also provides safeguards if the court order is vague and Bank's interpret a wider meaning. i.e. if as part of litigation, the Court Order is instructs Bank to freeze account in name of "xyz" and Bank freezes all accounts and not a specific account it can be an issue. Where as having a separate account name in name of business; helps bring in the clarity to Court orders. – Dheer Jan 20 '17 at 7:56
  • @Ryan - yes, that's it. If you are sued, attorneys will try to attack from every angle, and commingling assets is a big one. You'd be starting on the defensive from the get go by using a personal account, rather than having the onus be on them to prove you commingled funds. – TTT Jan 20 '17 at 13:20
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One reason to open a "business" account: your bank's terms and conditions may require you to do so. For instance, from Bank of the West's Personal Checking account page:

Regular Checking

A non-interest bearing checking account for personal use, with no service charges and no transaction limits.

and from their Business Checking account page:

Regular Commercial Checking

A non-interest bearing checking account for commercial use, with no transaction limitations.

(emphasis mine in both cases)

I picked Bank of the West because you mentioned it in your question, but I suspect other banks will have similar phrases in their terms and conditions.

  • Good point. Because your bank may require you to is certainly a valid reason! – TTT Apr 4 at 19:14
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If you have an llc instead of sole proprietorship they can only sue your insurance because the business is a separate entity than yourself.

  • That doesn't answer the question, which is purely about account types at the bank. – glglgl Apr 5 at 7:43

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