Business Bank Account vs Personal Bank Account

Starting Out
4yFollow

Business Bank Account vs Personal Bank Account

Becca Flim
New to Real Estate · Member since 2021 · 2 posts · 3 votes

Hey BP community! 

We are in the process of purchasing our first rental property in PA and looking at opening up a separate bank account in order to track our expenses. At this time we are not looking at setting up an LLC as we only have one property, although we may in the future once we have acquired more properties. I have a couple of questions:

1) Are there advantages/disadvantages of opening a business bank account vs a personal account?

2) Does anyone know if PA has a law as to where the security deposit needs to be placed or can we just keep it in a savings account?

3) Is it best to open up both a savings and checking account or should we stick to one?

4) Should we do the down payment and closing costs from the new account?

Thanks in advance for your help!

Becca

3Reply
82 views

Most Popular Reply

Ashley Yoviene
New to Real Estate · VT · Member since 2020 · 29 posts · 34 votes
4y

We manage out business expenses out of a separate account. I have several bank accounts…

1. Personal savings/checking

2. Property acquisition checking (purchase and rehab costs)

3. Property management checking (income from rentals, property management charges, small repairs - anything that happens in the day to day post acquisition)

3Reply
See this reply in the discussion

13 Replies

Jump to latestLatest
  • Andrew Kiel
    Investor · Tucson, AZ · Member since 2017 · 208 posts · 235 votes
    4y

    I would highly recommend opening a business checking account and keeping a separate and distinct set of books for your rental.  This will especially make things easier for taxes, your accountant / tax preparer will thank you.  Keep it simple with just a low cost / free checking account and do your best to keep the funds separate while taking payouts or draws as needed.  It will also help keep your sanity as to how much you really are making (or losing) on your rental.  Things tend to get buried if comingled with personal (is that Home Depot charge for me or my rental?)...

    2Reply
  • Becca Flim
    OP
    New to Real Estate · Member since 2021 · 2 posts · 3 votes
    4y

    Thank you @Andrew Kiel. I want to make it as easy as possible during that dreaded tax season. Is there a bank that you would recommend?

    0Reply
  • Andrew Kiel
    Investor · Tucson, AZ · Member since 2017 · 208 posts · 235 votes
    4y

    My personal preference is a smaller local bank or credit union.  Ideally, one that holds their own notes / loans (especially mortgages).  Somewhere that you can build a relationship with a decision maker at the bank and you're not just another number to them.

    0Reply
  • Ashley Yoviene
    New to Real Estate · VT · Member since 2020 · 29 posts · 34 votes
    4y

    We manage out business expenses out of a separate account. I have several bank accounts…

    1. Personal savings/checking

    2. Property acquisition checking (purchase and rehab costs)

    3. Property management checking (income from rentals, property management charges, small repairs - anything that happens in the day to day post acquisition)

    3Reply
  • Micah Paroline
    Investor · Chittenden County, VT · Member since 2019 · 9 posts · 2 votes
    4y

    Don't forget to check your state's requirements on how security deposits are held. You will likely need to have an account specifically to hold security deposits, to avoid co-mingling funds. 

    0Reply
  • Vincent Le
    New to Real Estate · CA · Member since 2022 · 5 posts · 4 votes
    4y
    Quote from @Ashley Yoviene:

    We manage out business expenses out of a separate account. I have several bank accounts…

    1. Personal savings/checking

    2. Property acquisition checking (purchase and rehab costs)

    3. Property management checking (income from rentals, property management charges, small repairs - anything that happens in the day to day post acquisition)


     Is your property acquisition and property management checkings account business or personal accounts?

    1Reply
  • Jason Jaan
    Member since 2018 · 10 posts · 4 votes
    4y

    It's just good practice to have a dedicated bank account because, heaven forbid, if you ever get into a lawsuit and need to provide records, or you get a letter from uncle sam to audit you......

    Plus it'll save you time when you want to run the numbers to see how well you're doing on the property. Time is money.

    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    Having everything in a business bank account will make record keeping a lot easier. Everything in there should be a tax write off/expense and income. 

    0Reply
  • Vincent Le
    New to Real Estate · CA · Member since 2022 · 5 posts · 4 votes
    4y

    I'm planning on having a separate account.  The question is does it matter if it's a business or personal account?

    2Reply
  • Joe Minteer
    Rental Property Investor · Mechanicsburg, PA · Member since 2021 · 47 posts · 22 votes
    4y
    Quote from @Becca Flim:

    Hey BP community! 

    We are in the process of purchasing our first rental property in PA and looking at opening up a separate bank account in order to track our expenses. At this time we are not looking at setting up an LLC as we only have one property, although we may in the future once we have acquired more properties. I have a couple of questions:

    1) Are there advantages/disadvantages of opening a business bank account vs a personal account?

    2) Does anyone know if PA has a law as to where the security deposit needs to be placed or can we just keep it in a savings account?

    3) Is it best to open up both a savings and checking account or should we stick to one?

    4) Should we do the down payment and closing costs from the new account?

    Thanks in advance for your help!

    BeccaI 

    I too live in PA and just opened a business account since I'm starting to purchase homes every few months. I had to give them all kinds of info on my LLC in order to open the account. I'm not sure if you can open a business account account like a personal account. You may have to use a federal ID to open the business account, other than that, you may need to open a personal account. Best to check their requirements.

    0Reply
  • John M.
    Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 803 votes
    4y

    it doesnt matter what type of account you open just make sure the account is dedicated toward your business.  There are no tax benefits whether your account is labeled personal vs business

    Ideally you want all your properties under their own llc. Eventually you can funnel those into one an operational business account. You can use quickbooks to separate the expenses for each property. 

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    4y

    On one hand, building a relationship with a small local bank or credit union has its benefits for potentially getting future loans - but only if you engage and develop a relationship with someone in authority there.

    On the other hand, we've found these banks and CU's to not offer all the online tools we want.

    [email protected]248-209-6824
    Logical Property Management4.9469 Reviews
    WebsiteView Page
    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    1) Are there advantages/disadvantages of opening a business bank account vs a personal account?

    I don't think you can open up a business bank account without an entity(business)

    3) Is it best to open up both a savings and checking account or should we stick to one?

    I think checking account is the best - You may be required to write checks throughout the year(to county, city, school taxes that are not currently accepting online payments, etc)
    interest rate on savings account is minimal right now.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
    View Page
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free