As an S Corporation, it is essential to have a dedicated business bank account for your private practice income and expenses to remain compliant with best practices for S Corporations. Maintaining separate finances is crucial in order to avoid “piercing the corporate veil” in any potential litigation.
Benefits of a dedicated business bank account
- A dedicated business account creates a clear distinction between business banking transactions under your business name and builds a credit profile.
- Maintaining a separate account allows you to allocate funds specifically for business needs. This can help you monitor cash flow, budget effectively, and make informed financial decisions for your practice.
- Your business bank statements can serve as a record of your financial activity, simplifying tax filing and potentially maximizing deductions.
- Establishing a legal separation between your personal assets and those of your business can provide liability protection, preventing creditors or legal actions against your business from directly impacting your personal assets.
What are the risks of a commingled account?
You could expose your business and your personal finances to several risks by keeping a commingled account.
- Time consuming: Any transaction your bookkeeper considers possibly personal will be marked as Needs Review and require you to provide notes regarding each transaction.
- Accuracy of books: Unclear financial records can make it difficult to understand your actual business's financial standing. Significant commingling of accounts can increase the risk of an audit or an inaccurate tax return.
- Delayed books: It can take more time to sort through personal and business transactions. This can result in delayed wait times for your monthly reports and important deadlines such as quarterly tax estimates, which are calculated based on completed books.
- Exposing your personal assets: if a legal separation is not established between you personally and your business.
- In case of an audit: Commingled accounts pose a higher risk of an audit and make it challenging to demonstrate legitimate business expenses, as auditors expect clear recordkeeping.
Open a new business bank and credit card account
If you don't have a business bank account yet, or you're ready to open a new one, Heard Business Banking, powered by i3 Bank, is the simplest way to set it up. It's built for therapists, included in every Heard plan at no extra cost, and your transactions sync to your Heard books automatically. No monthly fees, no minimums, and your Heard Visa Debit Card is included.
When opening up a new business account, both business checking/savings accounts and credit cards, make sure to use your business name and business EIN, then connect your new account to Heard.