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 building 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 maximize 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 understanding your actual business's financial standing difficult. Significant commingling of accounts can increase the risk of an audit or 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
These should be specific business credit cards and not personal credit card that you just use for business. You can choose to open a business account with one of the major banks Heard therapists use: Bank of America, Wells Fargo, Chase, TD Bank, U.S. Bank, Relay Financial, and PNC.
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.