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Say I invest and I'm self-employed. I have one "personal/everyday" account, but would like to separate another account purely as a "staging account" which would be used for investing and business, but would have the option of being used for personal/everyday too if needed (backup).

I don't intend on using it for personal use, but I mean it's just as possible. I use the word "staging" to mean a place where money will go before it's invested, withdrawn, transferred, etc. This account can also accept money and hold it from business transactions/sales, and possibly transfer some to the personal account if there's no need for reinvesting said amount/percentage.

I don't see the benefit of a real business account because those have features specific to maybe corporations, LLC, and etc. -- nothing beneficial to a sole proprietor who has no reports/employees.

Also, business checking has fees -- an additional "regular" checking would have no fees. I can bookkeep and manage the alternate account identically as a business account for expenses, business fees/deductions and etc. For these reasons I ask:

Would there be any benefit to a "business" account for me if I can already foresee an identical, separate checking account for business that's just an additional checking account?

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Having a separate checking account for the business makes sense. It simplifies documenting your income/expenses. You can "explain" every dollar entering and exiting the account without having to remember that some of them were for non-business items. My credit union allowed me to have a 2nd checking account and allowed me to put whatever I wanted as the name on the check. I think this looked a little better than having my name on the check.

I don't see the need for a separate checking account for investing. The money can be kept in a separate savings account that has no fees, and can even earn a little interest. Unless you are doing a lot of investment transactions a month this has worked for me. I fund IRAs and 529 plans this way. We get paychecks 4-5 times a month, but send money to each of the funds once a month.

You will need a business account if the number of transactions becomes large. If you deposit dozens of checks every time you go to the bank, the bank will want to move you to a business account.

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You don't specify which country you are in, so my answers are more from a best practice view than a legal view..

I don't intend on using it for personal use, but I mean it's just as possible.

This is a dangerous proposition.. You shouldn't co-mingle business expenses with personal expenses. If there is a chance this will happen, then stop, make it so that it won't happen.

The big danger is in being able to have traceability between what you are doing for the business, and what you are doing for yourself. If you are using this as a "staging" account for investments, etc., are those investments for yourself? Or for the business? Is tax treatment on capital gains and/or dividends the same for personal and business in your jurisdiction? If you buy a widget, is the widget an expense against business income? Or is it an out of pocket expense for personal consumption? The former reduces your taxable income, the latter does not.

I don't see the benefit of a real business account because those have features specific to maybe corporations, LLC, and etc. -- nothing beneficial to a sole proprietor who has no reports/employees.

The real benefit is that there is a clear delineation between business income/expenses and personal income/expenses.

This account can also accept money and hold it from business transactions/sales, and possibly transfer some to the personal account if there's no need for reinvesting said amount/percentage.

What you are looking for is a commonly called a current account, because it is used for current expenses. If you are moving money out of the account to your personal account, that speaks to paying yourself, which has other implications as well.

The safest/cleanest way to do this is to:

  1. Have separate accounts for personal and business
  2. Have a separate ledger / accounting book of record for each
  3. If you have to use the business account for personal reasons, for accounting purposes you now have a notes receivable to the business from yourself: this shows clear traceability that the business purchased something on behalf of you for personal use, and that it is a de-facto asset (i.e. a note receivable); you then pay back the note receivable. The net effect is the same (you still spend $X), but it clearly identifies which entity paid $X (you, or your business)

While this may sound like overkill, it is the only way to guarantee that income/expenses are allocated to the correct entity (i.e. you, or your business).

From a Canadian standpoint:

  • Use an RBC e-business account; this is a no-fee account for electronic only transactions, and minimal fees for non-electronic (e.g. cheque deposit at an ATM) transactions.
  • Incorporate. I shied away from incorporating originally, but it makes things so much easier from an accounting perspective.
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If it makes your finances easier, why not? My wife and I had his/hers/our since before we were married. I also have an account to handle transactions for my rental property, and one extra for PayPal use. I was paranoid to give out a checking account number with authorization for a third party to debit it, so that account has a couple hundred dollars, maximum. All this is just to explain that your finances should be arranged to simplify your life and make you comfortable.

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When I was younger I had a problem with Washington Mutual. Someone had deposited a check in to my account then ran my account negative with a "dupe" of my debit card. WaMu tied up my account for three months while they investigated because it wasn't simply a debit card fraud issue, this was check fraud (so they claimed). At the time all the money I had in the world was in that account and the ordeal was extremely disruptive to my life. Since the, I never spend on my debit card(s) and I keep more than one checking account to disperse the risk and avoid disruption in the event anything ever happens again.

Now one of the accounts contains just enough money (plus a small buffer) to pay my general monthly expenses and the other is my actual checking account.

There's no harm in having more than one checking account and if you think it will enhance your finances, do it. Though, there's no reason to get a business account unless you've actually formed a business.

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