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Businesses need separate accounts

Commingling business and personal funds can cause many commercial law problems for small business owners in Arizona. All businesses, from a start-up company to a sole proprietorship, should have separate business checking accounts and records.

Separate accounts help monitor expenses and identifies what business costs must be paid. Separation also helps identify any tax-deductible expenses for the business. Comingling personal and business funds also makes it harder to form a corporation that can protect an owner from incurring the risk of personal liability for business debts or negligence.

Businesses should also have a separate record-keeping system. This reduces bookkeeping errors and helps owners with periodically reconciling checking accounts. Keeping separate records is also important when there is an Internal Revenue Service or state tax audit and helps prevent these from occurring.

Larger businesses usually open business bank accounts. Smaller enterprises can utilize a business checking account that is like a personal account.

Banks usually require the name of the business, personal and business contact information and identification such as a driver's license, passport or social security card. An enterprise that operates under a fictitious name must provide a fictitious name certificate or statement, a certificate of assumed name, a business license and registration of trade name.

Other types of entities must submit additional documents. A general partnership will have to submit a partnership agreement or use a fictitious name certificate or statement, certificate of assumed name, business license or trade name registration.

Limited liability entities also protect owners. These partnerships must provide a statement of qualification, limited partnership document or limited liability partnership election. Limited liability company owners should submit articles of organization, certificate of organization or certificate of formation. Corporations can submit articles of corporation or certificate of good standing.

A lawyer can help owners select the right legal structure and prepare the proper documents for their business formation. This helps protects their owners from financial or tax problems or legal liability.

Source: Business 2 Community, "When is your business big enough for a separate business checking account?," Chalmers Brown, April 27, 2018

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