Legal Guide to Banking and Bank Accounts for Businesses in the U.S.

If you have a business, whether side hustle, freelance, or fully fledged operation, you almost certainly need a separate bank account for it. Here’s what you need to know.

Does my business need its own bank account?

It’s always a good idea to separate personal from business expenses, and thus to have a separate bank account for the business. However, whether it is legally required depends on what form the business uses. Sole proprietorships do not strictly need to do so, but your lawyer and accountant will strongly recommend it. If an LLC or corporation, the business must have a separate bank account, otherwise you risk losing your limited liability. See more about limited liability at our Guide to Business Structures.

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What name and EIN should be on the bank account?

If your business is organized as an LLC, corporation, or other formal entity, you must generally use the full legal name of the entity, as well as the entity’s EIN. If your business is a sole proprietorship, you will generally need to use your (the owner’s) full legal name, unless you have a DBA. You will also need to use the sole proprietorship’s EIN. If your business is a general partnership, you will generally need to use the full legal name of the owners, unless you have a DBA. You will need to use the general partnership’s EIN.

What happens if a customer or client sends payment to my personal bank account and not the business account?

If a customer or client makes payment to an account other than the business account, you should transfer that money to your business account. Make sure that your processes are set up so this does not occur in the future.

What happens if I make a business related purchase from my personal bank account rather than my business account?

If you accidentally make a business related purchase from your personal account, you should transfer the amount of the purchase from your business account to the personal account, and make a note of it. It’s not a big deal if it happens once in a while, but if it’s a regular occurrence, it could become a problem for your limited liability and tax purposes.

What happens if I make a personal related purchase from my business bank account?

In general, you should not make personal purchases from your business account, as this is considered comingling and could jeopardize your limited liability and create tax problems. If you accidentally make a personal related purchase from your business account, you should transfer the amount of the purchase from your personal account to the business account, and make a note of it. It’s not a big deal if it happens once in a while, but if it’s a regular occurrence, it could become a problem.

Further Resources

See our Guide to the Law for Entrepreneurs and Business Owners.

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