Bank Account

Have you wondered whether or not you need a separate bank account for your business? The answer is a resounding "YES"! Are you using your personal bank account, even occasionally, to make purchases or pay bills for the company? If you are, then the word we have for you is "STOP"!

Most of your business transactions will involve the payment or receipt of cash. Commingling your personal and business transactions makes it more difficult to keep track of business activity. Consider a partnership where two partners routinely make payments out of their personal funds (without first making a deposit into the company account). Imagine the trouble you'd have keeping up with their books!

Following up on the first point, its too easy to forget to record something if you don't keep separate accounts. One small business owner made a large company loan payment with his personal funds and forgot to record it on the company's books. Months after his tax return was filed, he realized the mistake and he had not taken the interest deduction on his corporate tax return.

You'll never know exactly where you stand with the business if you use the same bank accounts for both personal and business activity (or with your personal assets for that matter).

A paid check serves as proof of payment, just like a receipt. Combined accounts might raise the question about whether or not the expenditure was for business or personal reasons.

When you open an account, you have agreed to pay the fees for services associated with the account. Make sure you understand the "fine print" so that you won't be surprised by any of the charges.

Another responsibility is to prudently manage your bank account and keep up with your balance. Don't write a check if you don't have funds in the bank (unless you have overdraft protection, although this is an expensive way to "borrow" money).

Keep good records and reconcile your account each and every month.

Finally, we'll briefly mention the types of checking accounts. The type of accounts available to a small business owner will vary from bank to bank. But basically, there are two main types of checking accounts: Non-Interest Bearing and Interest Bearing.