Personal Account - transferring money to/from Business Account

Personal Account - transferring money to/from Business Account

Rental Property Investor · Member since 2019 · 91 posts · 30 votes

Planning to close on our first investment property in the next month or 2 (If all goes well). We have a personal checking and savings right now. We will be starting a business checking and savings with a different bank.

I’m planning to have all rents go into the business account and stash a portion of the rent into the business savings for repairs and other business needs. 

I was also planning to Transfer some money from my personal checking to my business checking when needed to cover repairs and other business expenses until my business accounts have built up enough buffer. 

Once my business accounts have enough buffer that I am comfortable with, I was planning to transfer money to my savings account in my personal account for personal use.

Is there any issue with this when trying to separate accounts? Do you have any best practices when managing financials with a personal and business account? 

TLDR: Planning to transfer money to and from personal and business account depending on where cash is needed. But will only be using those accounts for their intended purposes. IE. Business account will only be used for business transactions. Personal will only be used for personal transactions. Any issues with this?

0Reply
61 views

Most Popular Reply

Daniel HymanBusiness Member
CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
6y

@Josiah Sia

Having a separate bank account does keep the banking (and bookkeeping) clean. Its much easier to keep track of business income and expenses. Same thing with credit cards. This is imperative with an LLC, but also recommended without an LLC.

Also, keep in mind mind that cc interest associated with the business will be tax deductible, whereas the interest associated with the personal transaction would typically not be. Another reason to segregate real estate transactions from personal transactions.

Its typical to transfer personal funds in and out when contributing capital or making a draw. Otherwise, its best to keep everything segregated. 

My Online Accountant572 Reviews
See this reply in the discussion

7 Replies

Jump to latestLatest
  • Real Estate Agent · Wauconda, IL · Member since 2016 · 208 posts · 99 votes
    6y

    That's how I do it and it works well for me! Hope your closing goes well, congrats!

  • Rental Property Investor · Member since 2019 · 91 posts · 30 votes
    6y
    Originally posted by @Martin Vehlow:

    That's how I do it and it works well for me! Hope your closing goes well, congrats!

     Thank you!

    Does it make a difference if I don't have an LLC? I was wondering if I should do the 2nd checking and savings business accounts at another bank, or just open a 2nd checking, savings and CC personal at the bank I'm already with...

    Thoughts? Would love to hear your opinion.

  • Real Estate Agent · Wauconda, IL · Member since 2016 · 208 posts · 99 votes
    6y

    From what I understand, the bank doesn't care if you have an LLC or not. That is more on the legal side of things to limit your liability if you are ever sued.

    If you are someone who does your banking in-person and like where you are at now, it would be simplest to open it at the existing bank. If not, or there is a big enough advantage that another bank offers, you could consider opening them at a separate bank for sure. 

  • North of Houston · Member since 2018 · 350 posts · 181 votes
    6y

    @Josiah Sia every moving part gives your CPA one more thing to track thus one more thing to screw up. I would avoid too much back and forth with personal and business. may be just do a standard distribution to your self once a month or quarter as your profit to pay taxes on.

    Every transaction back and forth to your business and to your personal has to be coded as an expense, a profit or a loan to your business? it can get daunting for the CPA if you do it too many times

  • Daniel HymanBusiness Member
    CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    @Josiah Sia

    Having a separate bank account does keep the banking (and bookkeeping) clean. Its much easier to keep track of business income and expenses. Same thing with credit cards. This is imperative with an LLC, but also recommended without an LLC.

    Also, keep in mind mind that cc interest associated with the business will be tax deductible, whereas the interest associated with the personal transaction would typically not be. Another reason to segregate real estate transactions from personal transactions.

    Its typical to transfer personal funds in and out when contributing capital or making a draw. Otherwise, its best to keep everything segregated. 

    My Online Accountant572 Reviews
  • Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
    6y

    @Josiah Sia, @Daniel Hyman had great advice.

    I'm not a CPA but I think the biggest question is if you are the sole owner of these properties/LLC. If so, you shouldn't have a major problem.

    I would put in the initial minimum amount your bank needs but then wait for the repairs.  Hopefully it only takes a couple of months to build a cushion.  If needed, you can always use your personal account to cover repairs if you have not accumulated enough savings.

  • Rental Property Investor · Member since 2019 · 91 posts · 30 votes
    6y

    Thank you all. This is very informative. 

    I’ll plan to split it up and keep things organized in 2 accounts. I’m planning to use the same bank for now but separate savings, checking and CC.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.