A quarter of small business owners still keep company funds in accounts that also hold their personal finances, a study by Citizens Bank released Wednesday (Nov. 4) found. That lends risk to both tax status on a personal basis and also business credit availability.
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In a statement released alongside the report, Quincy Miller, president of business banking at Citizens, stated that “using a personal account for business finances is an easy mistake to make when starting out but it can quickly become a liability. For instance, paying personal expenses using business money or vice versa makes it far more difficult to get your accounting right at tax time."
Miller continued: “You also want to have a separate account for business so you can build a financial history that you can later use to apply for credit and other products or services you may need to run your business. Finally, not having a separate account can make it too easy for companies to spend personal funds that may be needed for personal mortgage payments and other important household expenses."
The Citizens survey found that 31 percent of respondents agreed with the statement that “my business doesn’t make enough transactions to warrant a separate checking account.” And 26 percent of those surveyed maintained comingled accounts.
Almost all respondents, or 98 percent, said that the lack of monthly maintenance fees was of the highest priority to account preference — a reason why they run their business with personal accounts. A business checking account also marked with the absence of fees swayed 90 percent of businesses.