Does My Company need a Bank Account
New business owners often ask, does my company really need a bank account? The short answer is Yes. The value of creating a Company is that doing so shields your personal assets from certain liabilities that the company might incur.
This is sometimes referred to as a Corporate Veil. If a third party ever sues your company and wins, the company might owe that third party money. As an owner of the Company, the corporate veil prevents the third party from collecting money from you personally. The third party
can only go after money or other assets owned by the company itself.
Occasionally, courts will pierce the corporate veil. If this happens your personal assets such as your house, car and savings can become subject to possible collections for liabilities incurred by the company. A common reason that courts pierce the corporate veil is that companies operate as if that they are not independent entities from the people who own them.
This might happen if you use your personal checking account to process both personal and company money, you make personal and company payments from a single bank account or you use money received from company activities to pay your personal bills. If you co-mingle funds in this way, courts will see no value in giving you the special protections that the corporate veil provides.
If you didn’t place a shield between yourself and your company, why should a third party be prevented from collecting payments from any of your joint commingled access? In order to ensure your personal assets are protected, it is especially important that you create and maintain a separate bank account for your company.
Use your company’s bank accounts only for business purposes and use your personal bank account solely for personal purposes. Only transfer money between your company and your personal bank accounts if you followed all the appropriate corporate formalities for doing so. If you’re not sure what to do, ask your lawyer or accountant for help. It’s always better to ask for help before mistakes occur. By doing so, you can rest easy at night knowing your personal assets are safe.