Commercial banking exists so that business owners have a way of keeping their personal accounts separate from their business accounts. It is absolutely necessary to keep your accounts separate. The following reasons will help you understand why you should never mix business with personal affairs.
1. IRS Audits
An IRS audit could happen to your business. It could happen to you personally. Either way, it would be a terrifying nightmare to show your combined and mixed finances in one account. Your auditor would have you investigated for embezzlement, fraud, a whole host of other white-collar crimes that would make your skin crawl. Just in the off-chance that the IRS would audit you personally or audit your business, keep your accounts separate.
2. Confusing Your Accountant
If you do not handle your own books or payroll, and you hire an accountant to do it for you, you would seriously befuddle and confuse your accountant. It would take him/her weeks to sort out the mess that is a conglomeration of mixed personal and business accounts before he/she could even show you what you have in business profits and losses. If you know from the get-go with your business that accounting is not your strong suit, hire an accountant right away so that you do not have such a mess to sort out.
3. The Appearance of Impropriety
Nobody ever wants to own and operate a business and then make it look like they intentionally were using their business as a front for criminal activity. Such acts of impropriety would not be a good way to start a business or gain the trust of your customers, clients, investors, or partners! By keeping the accounts separate, as you should, you avoid any and all appearances of impropriety. You also avoid nasty messes like overdrawing your personal account and having zero money for your business that actually belongs to your business.
4. It Is Illegal in Regards to Most Types of Business
Corporations, limited liability companies, etc., are all types of businesses. Depending on what type you have opened, own, and operate, you may be doing something very illegal by mixing personal and business accounts. Virtually all types of business have very strict laws and regulations for this type of situation. If you are caught, even though you own the business/company, you could still be arrested, charged, and sent to jail for theft, fraud, and forced to repay all monies garnered from the investors or from sales.
For more information, contact a bank like LCNB National Bank.
