Create a Separate Bank Account

It is important to have a separate bank account for your business because you do not want to commingle your business funds with your personal funds.

One reason that you do not want to commingle your funds is that if you are sued, your financial records could become part of that lawsuit. That means that you run the risk of airing your personal financial information in open court.

Also, if you commingle funds, an opposing lawyer could potential come after your personal assets in a lawsuit.

“It is important to have a separate bank account for your business because you do not want to commingle your business funds with your personal funds.” 

You can avoid keeping your personal finances out of a lawsuit, and to reduce the risk of losing your personal assets in a lawsuit, it is best to keep all personal and business transactions separate.

Having a separate bank account for your business is also helpful when you want to show your financials to someone. It is not uncommon for lenders, investors, and even landlords to want to take a look at your finances. This is obviously much simpler if you only have one account to show them.

The same goes for accounting. If you don’t have a separate bank account for your business, it could be a major hassle to go through your financial records every month and categorize transactions line by line.

So for liability, privacy, ease of use, and for accounting reasons you should set up a bank account for your business.

One thing we should mention: if you have already started your business and you have not created a separate account yet, it’s not too late. Set up a new account as soon as possible and only use that account moving forward.

How about selecting a bank? Here are a few things to consider.

First off, look for free checking. Obviously free is almost always better, but be aware of hidden fees.

Also, be mindful of your bank’s location. Local banks can be great because they sometimes offer better customer service. But national banks can be beneficial if you travel often for business and need local branches wherever you go.

One option that you should strongly consider is a credit union. Credit unions often support your local community while providing low fees and excellent customer service.