For many small business owners, it can be tempting to use their personal checking account for their business. This is especially true for sole proprietors or those who start a business as a side project to their regular job.
There are many reasons why a separate business checking account makes sense for businesses of any size. It makes keeping track of your business expenses much easier, streamlines your billing and accounting, and can give you access to free invoicing and payment systems. For some businesses, a separate account is legally required. In fact, the IRS recommends keeping your business and personal accounts separate because it makes it much easier to keep your financial records in order.
Why Mixing Business & Personal Money Can Create Problems
Separating your business and personal bank accounts is a simple and easy way to make sure you don’t co-mingle your business and personal expenses, which could lead to a host of problems.
Messy Records
Having your personal mortgage payments and other transactions in the same account you use to pay vendors and receive payments can make it difficult to keep track of them. It involves a kind of mental gymnastics you’re better off avoiding to ensure you’re managing your business and personal life as efficiently as possible.
Tax Time Headaches
Separating your business and personal finances is especially important when it comes to preparing your income tax returns. A separate account makes it much easier to keep track of all your deductible expenses that your business is entitled to, while making sure your personal expenses aren’t included.
Think about how many times you use a debit card or credit card for your business and personal life. Now imagine looking at a monthly statement from six months ago and trying to remember if a purchase was for business or personal use. Having a separate checking account for your business makes it easier to keep track of your expenses and prepare an accurate tax return.
If the IRS or your state tax authority should look at your returns, you’ll want to make sure that your business expenses are fully accounted for and clearly identified by having separate accounts for your business and personal life.
Harder Cash Flow Tracking
Cash flow is the number one reason why small businesses fail, according to the U.S. Chamber of Commerce. Knowing where your business stands financially is crucial to remaining profitable. A separate business checking account makes it easy to see where you stand financially, to monitor any outstanding payments you’re yet to receive, and to know whether you could cover a particular expense. This also makes it much easier to spot any cash flow problems, to monitor your profitability, and to keep track of your transactions.
Benefits of a Dedicated Business Checking Account
There are many benefits to having a separate Business Checking Account, such as more efficient handling of payments, a professional look for your business, and maintaining a clear picture of your business losses and profitability.
Cleaner Bookkeeping
We offer the use of Autobooks for all our business account customers, which makes it easy to manage your business finances, send invoices, and receive payments through our Online and Mobile Banking platforms. A separate business account also makes it easy to keep track of payments to your business and when you receive them.
Make a Better Impression
Having someone write a check or make a payment to your business account gives a much better impression than having them issue a payment to you. A separate account also makes it easier if you’re seeking funds from potential investors or pursuing a business loan. Any potential investors or partners will want to get a clear picture of your business finances and cash flow by seeing your business account information, without any personal transactions.
This is especially true when your business checking account includes cash management services that you can use to make automated clearinghouse (ACH) transfers, initiate wire transfers, and control access to multiple users within your business. With a business checking account, you can also receive access to our merchant processing services and other tools like remote deposit capture.
Check Out Our Business Banking Solutions
Separate Your Business & Personal Life
If you have any of your employees overseeing your invoicing and payments, a separate business account lets them do so without having access to your personal bank account.
A Better View of Business Growth
A separate checking account for your business lets you get a clear picture of where your business stands financially, so you can measure your growth more accurately and predictably. This makes it much easier for you to look for trends and plan for any gaps in cash flow or surges in demand, without your personal expenses getting in the way and muddying the waters.
Protect Your Personal Finances
Many small business owners create a limited liability corporation (LLC) to create a clear separation between themselves and their business. This creates a legal and financial shield that can help protect your personal assets from claims against your business. If you co-mingled your business and personal funds in the same account, a court could rule that your personal assets could be used to cover any business debts. This is also true if you formed your business as an S Corp or a C Corp.
Simple Steps to Separate Your Finances
These steps for separating your business and personal finances don’t just make it easier to run your business - some of them are legally required.
Get an Employer Identification Number (EIN)
The IRS requires a business to have an Employer Identification Number (EIN) if:
- It has one or more employees.
- It pays federal excise taxes.
- The business deals with alcohol, tobacco, or firearms.
- It withholds taxes for non-wage employees.
- It’s operated as a partnership, corporation, or nonprofit.
- The business manages trusts, retirement plans, or estates.
Many businesses obtain an EIN even when not required because it helps them establish business credit, apply for business loans, and business credit cards, which also makes it easier to keep their business and personal finances separate.
Open a Business Checking Account
The right business checking account can help you better manage your business expenses and make it less likely for you to accidentally co-mingle your business and personal spending.
Use Business Cards and Digital Tools
Our Business Checking Accounts include free services such as Online & Mobile Banking, with Mobile Deposits and Bill Pay, which make it easier to manage your small business finances. You’ll also receive a free Peoples Bank Mastercard® Debit Card, free E-Statements with online check images that you can review at any time.
Pay Yourself Consistently
Keeping your business and personal funds separate makes it easier to run your business and see where it stands financially. You can also more accurately gauge your income and how much you can afford to pay yourself.
How Peoples Bank Supports Local Business Owners
We offer three business checking account options, and each one of them includes a free Peoples Bank Mastercard® Debit Card, plus access to our online banking portal and free use of Autobooks. We also offer a Peoples Bank Business Visa® Credit Card, for flexible credit to meet the financial needs of your business while earning Peoples Points for qualifying purchases, which you can redeem for rewards.
Business Checking Options
We offer three different Business Checking Account options to choose from.
Simply Free Business Checking
Simply Free Business Checking is perfect for most businesses.
- No minimum balance requirement or monthly service charges.
- Up to 1,000 free monthly transactions.
- Up to $10,000 in free currency deposits per month.
Business Interest Checking
Business Interest Checking is designed for sole proprietorships and nonprofits.
- Earn a competitive interest rate.
- Up to 1,000 free monthly transactions.
- Just a $1,500 minimum balance requirement.
- Up to $10,000 in free currency deposits per month.
Commercial Checking
Commercial Checking is preferred by businesses with more complex banking needs.
- Receive an earnings credit allowance on deposit balances, which may offset activity fees.
- Only a $10 monthly service charge (plus tax).
- Transaction fees of just $0.10 per item.
- Currency deposit fees of just $0.50 per $1,000.
Online Tools for Invoicing & Payments
Using our free Online & Mobile Banking platforms, and free access to Autobooks, you can create invoices, make and receive payments through our online portal.
Local Support When You Need Guidance
As a community bank, we take a personal approach to our business banking services, and we make all our lending decisions locally. This allows for faster approvals for business loans and agricultural loans, with support from people who take the time to understand your business and can help you find the right solutions.
Open a Peoples Bank Checking Account Today
Please take the time to compare our business checking accounts, and if you have any questions, feel free to contact us or visit one of our locations in Iowa, Minnesota, and South Dakota to set up a consultation with one of our business bankers.