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boxoffire
10-13-2004, 11:02 AM
Hi, I have a general question about opening a business checking account. I already have a personal one, and I'm starting out as a sole proprietorship and I am the only employee. What are some good reasons to open a seperate account in my businesses name? Does it make it easier for tax purposes? If it's my only income, when would I use my personal account? I mean I'm going to need my money for bills and whatnot, and it seems silly to deposit money into one account, only to have to xfer over to my personal account to pay my bills. I'm just wondering what the big deal is for doing this if you are on your own. Just curious. Thanks for opinions/suggestions.

Adam

b727guru
10-13-2004, 11:20 AM
Wow!
I was just going to post a similar question!!!

Just paid for my business licence and need to purchase equipment.
When I go to apply for credit, I'd like to purchase it with my company name as oppose to my name. Does this make sense? I want to build credit under the company name.

How do I go about doing this?

Do I open a business checking account first?

Is that necessary?

Since it's a new company, do I have to open a business account under my name and "dba" next to it?

Thanks for all the help in advance.
Mario

Metro Lawn
10-13-2004, 11:21 AM
Taxes are just one aspect. It is easier to keep tabs on business money if it is in a seperate account. I use a check card from my account to buy everything. Gas, parts, ect. I get a statement every month that shows what went in and out. Second thing is " are you going to run your business with a trade name?". ie Joe's Lawn Service ect. When a customer pays you with a check made out to the company, you won't be able to cash it without a business account.

tonygreek
10-13-2004, 11:31 AM
absolutely open a business account. some banks are now offerering free small biz accounts, so there's no reason not to. and as the others said, it's more professional to have the customers make the check out to your business.

you should always keep a clear separation between your business and personal life so that everything is easy to track, and easy to present to your local IRS agent when you are blessed with an audit.

Tony

boxoffire
10-13-2004, 11:51 AM
Thanks Tony and Metro, you make perfect sense. Lady wrote me a check yesterday and I had her make it out to my name and not company name, but I can see that being an issue down the road. I like the check card idea in company name as well and making equipment purchases with it as well as gas. Let me ask this about getting checks from customers. I know some put cash in their pockets, it's no big secret really. But if you get a check made out to you and not your company name (in which you have an account set up for), can you cash it in your other personal account and probably not need to worry about reporting? Haven't done this, and don't know if this is the right place to ask such a question, but what the hey.

Fantasy Lawns
10-13-2004, 12:44 PM
This is one of the first fundamental steps to starting a business ... in the long run it begins the seperation of personal & business .... creates credit .... looks more professional n will be much easier fore tax time

If you move $ from your personal to business it is much like a loan .... when your business pays it back it's not income

Talk to or get a CPA is the next good step

eruuska
10-13-2004, 01:54 PM
But if you get a check made out to you and not your company name (in which you have an account set up for), can you cash it in your other personal account and probably not need to worry about reporting? Haven't done this, and don't know if this is the right place to ask such a question, but what the hey.


Why would you want to do this? Seem so me that the only reason is to defraud the IRS (ie, me and everyone else). Yes, there's nothing stopping you from doing so, but one of the recurring themes here at LawnSite is scrubs who don't have insurance and don't pay taxes.

Just my .02,

Eric

tonygreek
10-13-2004, 02:21 PM
<<can you cash it in your other personal account and probably not need to worry about reporting? Haven't done this>>

if you were to be audited, your personal finances would also be looked at. if you have a bunch of checks showing as being deposited into your personal account, say $35.00, that matches the $35.00 check amounts in your business account, the IRS term you would be looking for is "Red Flag".

in other words, bad idea.

Tony

b727guru
10-13-2004, 02:58 PM
Yeah, but if you cash the check at their bank (the customers) there's no paper trail...

eruuska
10-13-2004, 03:08 PM
Yeah, but if you cash the check at their bank (the customers) there's no paper trail...

That don't make it right, though. I value a good night's sleep very highly.

Eric

tonygreek
10-13-2004, 03:23 PM
if you want to go to that effort to skate on the IRS, b727guru, many banks now charge a service fee for cashing (mine, one of the largest in the country, charges 4 bucks) a check if it's not your bank. then there's the thumbprinting, and hassle of hitting individual banks.

Team Gopher
10-13-2004, 04:53 PM
Hi boxoffire,

Here is a quote from this site (http://www.quicken.com/cms/viewers/article/small_business/55801).

"Rule #1: Don't mingle your money

There are numerous reasons why you should maintain separate personal and business checking accounts. "If I comingled all my funds, I would not know whether the business was self supporting," points out Char Norton, president of The Norton Group, a foodservice management consultant company in Missouri City, Texas. If you're audited and provide the IRS with a bank statement mixed with business and personal activity, you're also asking for trouble. Also, it is more businesslike to have a separate account. "I used to keep everything together, but it seemed unprofessional to write business checks on my personal account," says Mark Batenburg of Mark the Handyman in Hayward, California.

If you haven't revisited your banking arrangement in a while, you may be surprised by the number of new options, including sweep accounts, better electronic banking choices and creative package plans. For instance, AmSouth Bank in Florida, Alabama, Tennessee, Mississippi, Louisiana and Georgia offers a Business Relationship Plus account that bundles together a business checking account, business money market account, a line of credit, a business Visa card, a personal checking account and a personal credit card all for $15 to $18 a month. "

HOOLIE
10-13-2004, 07:12 PM
I don't have much to add here, looks like everyone else has summed it up well.

As far as buying things in the company name and establishing credit, so long as you are a sole proprietor, you and your business are considered one, there won't be a separate credit report established for you business. Even when you incorporate, lenders still look at the owners personal credit (this used to tick my old boss off)

As far as I'm concerned, and not everyone may agree, if FROM TIME TO TIME, someone pays you cash for a one-time cut or something small, well, I usually just keep it. Technically not right, but every once in a while, not a big deal either. Note I said "cash", vs. a check made out to you personally.

midtnstone
10-13-2004, 11:42 PM
hoolie i kind of agree with you i am guilty of this myself but i am more of stick it in my pocket and later that day stop to grab a drink and a snack pay for it with the cash you just bought but it really depends on the amount just did a paver job the women payed with cash so this money got deposited in the bank but a few weeks back person called needing a limb cut and removed that had fell in a storm made $30.00 cash guess where this went

Metro Lawn
10-14-2004, 01:12 AM
It is one of the things that make this business bad for larger operations. When you are a small one man show, you can put almost all of the money you make in your pocket. Since homeowners can't write off lawn maintenance, there is nothing to point at you for that money. For us larger companies that generally do mostly commercial work, we get those IRS forms by the handful. This is one of the big lures into this business for the person looking to make extra money. If you have someone that has a full time job but is looking for extra income... go cut 4-5 lawns after work each day... at the end of the week... wow and extra $500.00 or so... then if you figure what it would have been if it had been taxed... prob. around $800.00 so not to bad huh? Now you guys wonder how these guys can work so cheap... I could too if I didn't pay taxes... $$$$$$$$$ :angry:

boxoffire
10-15-2004, 12:33 AM
Great responses folks. I went to my bank the other day and opened a new business checking account (called a "Free Business Checking Account"). My first 100 transactions are free, and after that each cost .12. I got my first check from a lady the other day and deposited my earnings into this new account (min $100 to start). I ran into this other dude at the city yard waste center when I was dumping her debris and we talked about alot of this as he is a sole proprietor also. Mentioned the cashing the check at her bank and doing the thumbprint and all, and I was like cool thanks for the tips. However after further review, I'm more of the honest type and want to sleep peacefully at night also so I'm gonna do uncle sam and myself a favor and do this the right way. If I get a 1 time cut or 2 for cash, ok that's a little different. I decided not to order checks for now (she gave me a few blank ones to start) since they were $27 starting. I did tell her to send me one of those check cards however as someone mentioned previously which I thought was an excellent idea since all merchants take these nowadays and all my expenses can be tracked there. Bank also offers free year end reports for tax purposes outlining all of your transactions and spending on the card. Finally, thank you Fantasy Lawns, a CPA was just what I was thinking about next to talk to so I know what to organize and save for my business taxes, etc... to get everything I can back from uncle sam. Lady at bank said to watch out and do a little homework first by reading up some on IRS.GOV website for small business owners so I'll be prepared when meeting with them to point out any/all questions that may benefit myself. I have no idea whom to call or start with as far as cpa's are concerned, but I'll just have to ask arond I guess. I do have a brother who owns his own business so maybe I'll start with him. All this guy at the yard waste center kept telling me was, "just get the cash man, get the cash." He's been doing yard work for 8 years and said he would never punch another timeclock for the rest of his life when he can find work on his own to make a living. I didn't say honest living in his case however, cause I think he's one to pocket all the cash he can. To each his or her own I guess.

One other thing off topic a bit. I called this guy tonite in the yellow pages with a 1 line add with his phone # and company name and asked if it has been worth it to have just a 1 liner in the yellow pages and he said most definitely. And that even in a fairly large city with many others in the book. Yellow page ad lady was trying to get me to buy an ad before deadline in a few weeks and said 1 liners were a waste of money. Of coarse she's a sales lady wanting me to spend more on a larger ad so it makes sense. He said forget her, get the 1 liner if you want and you won't be sorry at all at only $14/month. He said 20 years ago he spent over $300 a month on one of those larger ads and went bankrupt partly because of just that. I'm sure there were other factors, but long story short I guess, 1 liner ads that are much cheaper in yellow pages do work. I do know I usually pick the larger ones when looking for services in yellow pages but I just can't justify or really afford one at this time.

Thanks for the help everybody and happy halloween!

gogetter
10-15-2004, 01:54 AM
A little off your original topic, but just a couple more tips to make things go a little faster and easier.

I ordered a book of deposit tickets that already have my info printed on them (name, address, & account #). Plus they have room for a ton of checks, and they are a 2 part ticket so I have a carbon copy of each deposit.

Then I ordered a stamp for the back of the checks that has all the needed info.

I hated sitting there signing and writing my account # on each check and deposit slip.

These are nice conveniences when you have a small stack of checks to deposit.

boxoffire
10-15-2004, 11:48 AM
Thanks gogetter, I forgot about that. I mean I did think about it at the bank but since forgot. :dizzy: I now remember her mentioning that I could order just the deposit tickets with all the info on them if I didn't want the checks now. Now for the backs of the checks, don't you just sign those with your name or are you saying you got a stamp that puts your signature on it for you? Do you need to put other information on the back of checks that I'm not aware of? If so, I may want to do this as well should I ever start getting alot of checks one day. Thanks.

Grassmechanic
10-15-2004, 01:17 PM
FWIW - If you have a Fifth/Third Bank in your area, they have "Totally Free Business Checking". There are no fees, no minimum balance, etc. and they even pay for your first 200 checks. Best deal I've found, by far. Also, to Boxoffire, you can get a stamp almost anywhere for under $10. Do a google search, there are many companies that offer this service. Typically, a stamp will have "For Deposit Only", your bank name and account #, and your business name on it.

gogetter
10-15-2004, 03:56 PM
Now for the backs of the checks, don't you just sign those with your name or are you saying you got a stamp that puts your signature on it for you? Do you need to put other information on the back of checks that I'm not aware of?

As Grassmechanic said, the stamp has your name, account #, and "For Deposit Only" on it. You just stamp the backs and take them to the bank. No wiriting needed.

I had originally thought they would need a copy of my signature to put on the stamp, but they didn't. It's just typed.

HOOLIE
10-15-2004, 07:22 PM
When you get so many checks coming in that its a pain to sign the backs, you will be a happy man, my friend. A stamp, that's one of those little things I keep meaning to buy, for 3 years I've been writing For Deposit Only.