Can I use my personal bank account for business?

Should a bank account for business be personal or corporate? Developing your business is a great feeling. However, it can be overwhelming with tons of things to handle, like considering opening a bank account to manage your business finances.

If you’re new in business, you will wonder about the question: “Can I use my personal bank account for business”, here is your answer!

Can I use my personal bank account for business?

Basically, a personal bank account is for an individual with his/her own funds and other assets. For a personal account, it should only be for depositing and withdrawing money. Hence, security measures will be personally taken for the right person to access their funds.

Can I use my personal bank account for business?

Although having two bank accounts seems inconvenient in management, you shouldn’t use a personal account for your business purposes.

Here are some typical reasons why you shouldn’t use a personal bank account for business.

1. It can get confused

When your business grows, the volume of your business transactions will increase.

To some extent, your bank will notice you are using your personal bank account for transaction business demands. It’s hard for your bank to accept your personal bank account for business purposes.

The charge fees for personal and business accounts are totally different. Basically, fees for a business account tend to be higher. If you use a personal account for business activities, the banks’ revenue is lower than that of a business account.

2. Bookkeeping headaches

Doing a business involves accounting and bookkeeping tasks. They serve as the basis for your profit and loss summaries, and balance sheet.

It’s best to have your bookkeeping and accounting records in order to avoid trouble with your tax authorities.

For tax authorities, they also save more time in checking your records and identifying, categorizing your business expenses with a business account, instead of digging in your personal account.

3. It’s hard to identify the tax deductible expenses

Basically, business expenses are tax-deductible. They can be deducted from the revenue made by your business.

By tracking your business transactions in a separate business account, you will clearly identify the expenses related to your business. This can help to increase your expenses and reduce your tax bill.

If you want your taxes to be reduced, it’s in your interest to keep your business expenses separate from your personal funds. Having a business account is the easiest way to do that.

4. You’ll frustrate customers, or can even lose them

Many customers will refuse to make payments to personal bank accounts for business purposes. They are always compliant with business rules and insist on making payments into business bank accounts.

If you were in their shoes, you could do it. For legal and secured reasons, they just desire to match the company name issuing the invoice with the name of the bank account.

To avoid the confusion when being asked by a customer, get a business account and run in the name of your business company.

5. Difficulty in raising funds

If you intend to raise funds for your business and discuss with your investors, they will want to know your accounting records and business information called due diligence.

Investors want to check bookkeeping and accounting records to understand your financial business status.

Discovering a personal account is in use instead of a bank account will get confused and worried.

They want a separate business bank that helps to follow your bookkeeping, accounting records and legitimizing your business.

6. Personal accounts limit legal structure options

A company is considered as a legal entity. Through a company structure, the owner doesn’t bear the risk of being personally responsible for the company debts.

If you have a company structure, it’s required to have a bank account in the name of the company, separate from the personal account.

From the 6 above-mentioned reasons, you know the answer to “Can I use my personal bank account for business”.