The line between personal and professional finances should be a bold one, and it is essential to keep the two separate. While you can technically use a personal checking account for your small business, it is a terrible idea. It will be a bookkeeping nightmare that will add mountains of time, stress and grief to your life.
Technically, there is no law stopping you, but…
I cannot stress enough how important it is to keep your personal and professional assets separate. That is one of the great things about forming and operating under an LLC– should your business find itself in some sort of legal trouble, your personal assets are protected from that legal entanglement. But that’s a whole separate topic covered in this article that we won’t get into here.
Yet even without an LLC or incorporation, you need to keep a good distance between your business finances and your personal finances for a number of reasons.
The first reason is that when the end of year or quarterly tax time comes, it’s going to be nearly impossible to go through all of your receipts and income and debits and sort out which is which. Worse yet, imagine if the IRS decides to audit your business. You’ll want to be able to easily and clearly show all of your business dealings and not have them question your personal finances whatsoever.
Secondly, it’s difficult to see if your business is thriving or sinking with your money all mixed up with your personal accounts. You want to have a clear picture of where your business is financially at all times.
Lastly, there’s a ton of great business features that business checking accounts offer that personal checking accounts don’t. One super handy feature offered by many business accounts is built-in invoicing. You can have a custom built invoice with your own branding that looks much more professional than just asking a client to Venmo or Cash App you. When the client pays on the invoice, the money drops right into your business checking account which neatly organizes it all for you.
Check out our business checking account article for a review of some of the best digital business checking options and see what other features are available to help your new business.
…No, you should absolutely not use your personal bank account for your business.
We strongly suggest you sign up for a business checking account before you ever see any payments, and that is for all of the above reasons. While nothing in the law says you can’t use a personal checking account for your business, it is absolutely crucial that you don’t. Do yourself a massive favor and set up a business checking account for your business. It will save you time and trouble down the road.
You’ll thank us for it.
Matthew Ogden is a Minneapolis-based copywriter and content writer and editor. He’s written for national retailers and lobster roll companies alike. When not writing he can be found nose deep in a book, writing and performing music, or nerding out about guitar tone.