Can a sole proprietor have a business bank account?
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Do I need a business bank account for a sole proprietorship? Can a sole proprietor have a business bank account? Read this article for answers.
What is a business bank account for sole proprietorship?
As a sole proprietor, it can be confusing whether or not you can open a business bank account for a sole proprietor. A sole proprietorship has no legal distinction between the owner and the business. Therefore, the assumption is a sole proprietor’s personal and business finances need to be in the same bank account.
A lot of sole proprietors assume because their business entity and themselves are one of the same that they can’t separate their finances between a personal checking account and a business checking account. However, this is not the case.
What is a sole proprietor?
A sole proprietorship is a business owned and operated by one person where there is no legal distinction between the owner and the business entity. An example of a legal business entity is a single-member Limited Liability Company (LLC), an S Corp or C Corp. With a sole proprietorship the business and the owner are one and the same.
A sole proprietor can open a business bank account that is separate from their personal bank account. Therefore, a business bank account for a sole proprietor would be a bank account dedicated only to the finances of the sole proprietor’s work and business-related activities.
This means if you’re a sole proprietor you would purchase business-related items with the debit card for your sole proprietor business bank account, instead of using the debit card for your personal bank account. In addition, all payments from customers received by check are deposited directly into your business bank account for sole proprietors. Also, you can send and receive wire transfers with your sole proprietor business bank account.
Of course, what you can do with your business bank account depends on the features offered by the bank where you open your sole proprietor business bank account. We think you get our point. The basic features and services offered by a bank will be available to you. For example, depositing money, making purchases, debit card purchases, etc.
Since each bank offers a different set of services and features, it’s a good idea to research business banks. This way you determine which business bank account for sole proprietors best meets your needs. More importantly, your business’s unique needs.
Do sole proprietors need a business bank account?
Many sole proprietors ask themselves, do I need a business account as a sole proprietor?
The answer is, while you are not required to have a business bank account as a sole proprietor it is recommended that you have a business bank account. Therefore, sole proprietors don’t need a business bank account but should have one.
Should a sole proprietor have a separate bank account?
This is the more important question.
A sole proprietor doesn’t need a bank account. However, the bigger question is should a sole proprietor have a separate bank account? For example, a separate business checking account.
While we all should have a personal bank account, whether we are in business or not. Who lives off of only cash these days? No one that we know.
So a personal bank account is necessary for anyone, regardless.
However, should a sole proprietor have a separate bank account, such as a separate business bank account?
We think every sole proprietor should have a separate business bank account dedicated just to their business finances.
While there is no distinction between the individual and the business when you are a sole proprietor, this does not mean there are not many benefits to having a distinction between your business and personal finances. We recommend that all sole proprietors get a business bank account.
Keep reading to learn about the benefits of having your personal and business finances separated as a sole proprietor.
What are the benefits of having separate business and personal finances?
There are many benefits to having a business bank account for sole proprietors.
For example, when your personal and business finances are separate by having a separate personal bank account from a business bank account for sole proprietor your business transactions aren’t mixed with your personal transactions. Therefore, it’s easier and simpler to organize everything when it comes time to file your business taxes. In addition, a business bank account for sole proprietors simplifies your business operations and shows professionalism.
What do I need to open a business bank account for sole proprietorship?
As a sole proprietor or any small business owner, even if you work from home, it is important that you keep your personal and business finances separate.
There are a few requirements you need to open a business checking account.
Check out his article for a complete quite: Requirements to Open a Small Business Checking Account
How to Open a Sole Proprietorship Bank Account
Are you asking, what do I need to open a business bank account for a sole proprietorship? Or, what documents do I need to open a small business bank account?
Opening a bank account for sole proprietors is easy. Here is a list of the items that you need:
- EIN or SSN
- Personal Identification Documents
- Business License (if required)
- DBA (Doing Business As)*
*If you have a DBA you need it to open a DBA. Not all sole proprietors have a DBA; so if you’re a sole proprietor and don’t have one, skip this item.
To conclude, sole proprietors are not required to have a small business bank account. However, we recommend that sole proprietors have a business bank account.
We hope this article was valuable to you. Falcon is a community of sole proprietors and small business owners. Our community would love to hear about your experience evaluating your needs in opening a small business bank account.
Why did you decide or not decide to open a business bank account?
Please leave your feedback in the comments below to share with our community. Or email us your experience at email@example.com (we would love to share your store in a blog post).
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