A sole trader can use a personal bank account, but setting up a business account can have multiple benefits. It may help you look more professional.
Types of Bank Accounts Needed for a Sole Proprietor
Almost all banks will require the following to open a business bank account for a sole proprietor:
- Valid personal identification with a photo
- Social Security number
- Doing-business-as certificate (DBA certificate) if the business name differs from the personal name.
Advantages of Having a Sole Proprietorship Bank Account
- Separate business finances from personal finances
- Track all payments and expenses
- Apply for small business loans
Best Business Checking Accounts for Sole Proprietors
- Bonsai Cash
- Axos Basic Business Checking
Importance of Separating Personal and Business Finances
Even if not legally required, it is recommended to have separate accounts as the business grows. Open a separate business bank account to avoid issues.
Setting Up a Business Bank Account
To open a sole proprietorship bank account, follow these steps:
- Register your business name
- Research to find the best bank account
Using Personal Bank Account for Sole Proprietorship
While technically allowed, it is advisable to use a dedicated business bank account. Keep track of business transactions separately.
Legal Aspects of Using Personal Accounts for Business
While not a legal requirement, using personal accounts for business may have consequences. Abide by bank rules to avoid any complications.