Updated: Jun 14, 2019
Let's talk about business bank accounts. We all know that opening a bank account for your business is one of the top 10 things you need to do when establishing your business, but there is a lot of misinformation out there from Google, your accountant and even your lawyer regarding what type of account you need to open for your business.
Raise your hand if you are a business owner, whether your business is a Sole-Proprietor, LLC, SMLLC, Non-Profit and everything in between and you use a personal account for your business. Now take your raised hand and slap yourself in the face. Okay, don't, well unless you want to.
As a business owner, even if you are a Sole-Proprietor, you legally cannot use a personal account for your business. Your accountant/lawyer/best friend from church camp said it doesn't matter? Well, it does. It's bank regulation. Now, don't fire your accountant or BFF, they're not giving you wrong information deliberately. It doesn't matter to your accountant or lawyer because it doesn't conflict with the services they provide you (and they're an accountant, not a banker).
If you happened to fly under the radar, you need to take the time to change it. If you keep rolling with it, once the bank realizes (and it will come at some point) you are at risk of them closing the account with zero notice. They can't do that you say? Oh yes, they can, and do, A LOT.
What does that mean for you and your business? Here are just a few examples:
-You receive zero notice
-You sign in to your online banking, and your account is not there
-Your debit card will be declined because the account is closed
-All debits or credits (think employee payroll or an incoming invoice) will not process. No one wants angry employees/vendors.
-And where did all of that money go? The bank cuts a cashier's check and places it in the mail, and it does not happen same-day. You will fall on a list and whenever you are up is when it will be processed and mailed. And, no you cannot go into the bank to collect the balance. Once this process starts, you have to play by the procedures and wait. And your employees/vendors have to wait too...
Those few examples are just banking related; I did not include any possible legal or IRS problems that could also apply. I don't think any of us would be happy to be in that situation. Now, gather all of your business incorporation documents and head on over to your bank.
Before Washburn's Consulting was even a blip in my mind, I spent 15 years in banking as a Licensed Auditor (among many other titles).