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If you are a simple sole proprietor with a DBA, do you need (by law) to have a separate bank account?

I know life is easier if you have a separate bank account, but I am wondering about the laws...

P.S. I am in Austin, TX, US...

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3 Answers

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Get a separate bank account. It wont cost you anything and it will radically simplify accounting and make dealing with the IRS easier.

I'll add that making your sole proprietorship into an LLC and setting up the account for the LLC. The reason you want to do this is to protect your personal assets from things that go wrong with your business. Setting up an LLC is very simple in most states. In WA state it took me 20 minutes and cost $200 a year.

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Usually business accounts cost money. It is very rare to find one with no fees. – TimJ♦ Aug 26 '11 at 5:11
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Weigh the cost of a fee-based checking account for the business, versus the cost in account/book-keeper hours to seperate and sort transactions in a dual purpose account. That seperate account will probably be far, far, cheaper. – JustinC Aug 26 '11 at 13:06
Wells Fargo now has a "Business Gold" account that is free if you set it up to draw $150 from checking to savings every month...even if you move that $150 back to checking 5 days later. – tig Aug 27 '11 at 3:33
@Tim, If you carry enough of a balance, you can get a business account without fees for the typical small business transactions. And always give the small local banks/credit unions a try. – BMitch Aug 30 '11 at 20:27
@JustinC - I was not saying a separate account was a bad idea - what I was pointing out is that it is not so easy to find a "free" business account. – TimJ♦ Aug 31 '11 at 13:28
up vote 4 down vote

When I first started out I had only my personal bank account. There were no laws, at that time, requiring anything different. (I don't think there are any laws now, but it's your duty to check.)

However, after a few years the IRS decided to audit my business. Since I had only one bank account, and I got married that year with lots of gifts, it took an IRS auditor one full week, in my home office, to determine I had no unreported income. You do not want an IRS auditor to spend a week on your accounts!

Get a separate bank accounts right away. There is no reason to not do this, and plenty of reasons to do it.

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In Connecticut you would not be required to have a separate bank account. But it minimizes the little pains that co-mingling your funds will cause you month after month.

How will you measure the success of your business? If you just want to do a little something on the side, then why bother, just use one account. But if you want to grow your business, try to follow best practices from the start.

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