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I'm an independent software developer and I do business under my real name. As such, I'm not a DBA, nor am I incorporated. Since I'm not filed as a business anywhere, it's difficult for me to open a business account with any bank because they want me to be filed in some way. I'm a very new entrepreneur and I'm still learning a lot that I never needed to know before. The only reason I really wanted a business account that's separate from my personal account is to keep my finances organized for tax purposes.

My question is, what are the benefits of having a business account if I work alone and do business under my real name? Does it even benefit me to have one at all or will a separate personal account suffice?

Also, one of the representatives at one of the banks told me that having a business account allows you to wave some $4000.00 tax fee at tax time. She wasn't very clear on what it was, so I'm not too sure she knows what she's talking about. Does anyone know what she's talking about?

Thanks so much in advance for your wisdom!

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Beachrunnerjoe, thanks for posting this question and reacting so helpfully to the unhelpful comments that you received! This helped me confirm that I'm also doing the right thing with my business (continuing to operate as a sole proprietorship until it makes sense, either from a financial standpoint or a liability standpoint, to establish an LLC). Having any bank account and credit card that I use solely for business purposes meets my need of keeping personal and business financial records separate... as long as accounts are separate, it doesn't matter whether the banking product used is a "bu – iblankm Nov 26 '12 at 18:40

5 Answers

up vote 4 down vote

For a corp or LLC, you definitely want to keep the money separate. Failing to do so can cause you to lose your liability shield in certain cases. For a sole proprietorship, there is less advantage to a separate account since you and the business are really one and the same.

Still, if you want, you should be able to open an account with out too much trouble. My local credit union (BECU) only requires that you show your state business license if you're a sole proprietor. In contrast, for opening a bank account for my LLC, I had to show: business license, LLC operating agreement, and certificate of formation.

$4000 "tax fee" sounds like a load of crap. Never heard of anything like that.

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Thanks, nsanders! – beachrunnerjoe Feb 21 '11 at 19:45
Yes. And if you are "not registered anywhere" you are not a business, you are illegal. Sure noone wants to deal with you. Get a business license. – NetTecture Feb 21 '11 at 20:55
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@NetTexture, I don't need a business license to make iPhone apps, nor am I illegal, but thanks for your two wrong cents. – beachrunnerjoe Feb 21 '11 at 22:11
Actually you need one to run a business, which makes you illegal. – NetTecture Feb 22 '11 at 5:53
@NetTexture, I just confirmed with the SBA that the only thing I need to continue legally operating my small business as an App developer is my social security number. Sorry, but I'm gonna take their word over yours. No offense! – beachrunnerjoe Feb 22 '11 at 6:49
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up vote 3 down vote

In addition to the points made by nsanders, having a separate bank account will definitely help for record keeping. It makes it possible to quickly look at one account to show you how much money is left over specifically related to your business.

When I first started my business I just opened up a 2nd personal chequings account and called for a 2nd Visa account. This made it unbelievably easy for book keeping and record keeping.

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up vote 2 down vote

In this case you should open a 2nd account (at the same bank or a different one) it will just be you have 2 bank accounts, one for your personal use, and one for your business, but they are both in your name. Its mostly just an issue of book keeping and such

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Thanks, Zack, I think that's what I'm gonna do – beachrunnerjoe Feb 22 '11 at 17:02
up vote 1 down vote

I'd agree with the prior posters. I know the situation varies often, but early in my startup life, it made it a lot easier to have some kind of incorporation status and a business banking account. Like a lot of people, I was put off by the up-front cost/hassle, but it was well worth it

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Thanks, Nicko! What were some reasons it was beneficial for you? – beachrunnerjoe Feb 23 '11 at 17:17
Also, can you give me any reasons why getting incorporated and having a business account would benefit a person in my situation? – beachrunnerjoe Feb 23 '11 at 20:08
first of all, from having been a self-employed contractor using my own cards and accounts for business, to then having an LLC in my case and a corporate bank account, the record-keeping alone is so much easier - especially once the number of purchases and payments start to climb. While it may not apply to your situation, but I found the form for LLC contributions (I believe it was K-1) that's generated out of the LLC to file your individual return is something my individual tax preparer reacted to a lot more positively and comfortably about. – Nicko Feb 23 '11 at 20:18
Thanks, Nicko! When I begin generating more income and gaining more liability, I plan to structure my business similar to yours. For now, it sounds like I have no need at all to spend the $300+ on getting incorporated, so I'll definitely wait. Thanks again! – beachrunnerjoe Feb 23 '11 at 20:31
up vote 0 down vote

Separation of business and personal assets. You probably want to be able to track what are business expenses and what is business revenue.

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