Bank Business Account or Personal Account

[George W. Bush]

A while ago I have opened a topic on this subject. I thought I got things figured out, but nope, not yet. Still fuzzy. It is me after all, your commander guy trying to do some good in this world after all...

Well, I have this personal business that I would like to start, but not sure whether I will have many clients, and I have low expectations of the income generated from here. If I generate $50 per month that would be nice. The first few months may be just $0 income, but hopefully in a few months, someone may purchase something. Selling small wood designs and such.

I have registered a business name. I am kind of unsure and a little hesitant on opening a business bank account (fees range from $5 minimum per month, with over 50 cents per transaction, etc, etc) and I am unsure whether this may be wise since I am selling small things for low prices per item, and wonder whether I better use my personal savings account for all business related transactions.

I also intend to use PayPal and use this personal savings account as the account for all money in and out. With PayPal, people can also use other credit cards (and do not require to have a PayPal account I have read)?

Would this create any problems? Any issues with tax returns for the business? With PayPal, I intend to register as business name of company, and tie this account with the savings account in my personal banking account. I expect all payments in to be made via PayPal.

If I sell a $5 item, and get charged 50 cents at least by banks for this, and PayPal will also charge in turn more so I get that much less in return. It would be unfair to the people to charge more just to offset the bank fees and such, or would it not?

With PayPal, all money paid to PayPal get in the PayPal account, and all other money paid via other credit cards go directly in this account (ie. thus bank will charge for that transaction).

What suggestions you have in regards this, and if it would be better to go?

[nightwolf]

Would you ever be getting a check addressed to your business name?
You won't be able to deposit that into a personal account.

[PrinceMS]

Seems like he can easily ask them to write a cheque to him, rather than to the business - not a big deal.

I say take ING guy's advice and SAVE YOUR MONEY, go with personal account. Doesn't effect TAX.

P.S: i think if you have a "merchant" paypal account then ALL funds coming in gets charged (regardless of source). Please feel free to correct me. (without merchant account, u cannot accept credit cards).

[George W. Bush]

True, I will not be getting cheques - just payment via PayPal that gets sent to the personal savings account. I opened a PayPal account under the name of the business and tied this personal savings account I have so that at checkout the receipt to the purchaser shows that the payment has been made to the business name. This will be used by me for income tax as receipts of items I sold, etc.

The only thing that I am unsure of is, what if I need to purchase a camera say to take photos of the items - how do I purchase this? With my personal credit card? Cash? (what if I have to purchase from online store?) so that I can then use this purchase towards the business for income tax purposes, and not to confuse the tax people when my name shows up on receipts put towards the business?

[grant]

...and not to confuse the tax people when my name shows up on receipts put towards the business?
That's not confusing at all, they don't care what name is on the receipt as long as it's obviously for your business.

No need to be worry, it's not black magic. Just keep track of & document your income & expenses and you're fine.

the odds of getting audited are low anyways. receipts are only used to support your tax return in case you ARE audited.