Expert: Don Sadler - 10/19/2007

Question
Do I need to create a separate, business bank account in order to make purchases for my LLC that I can legally deduct as business expenses?  Or, can I purchase items for my LLC with my personal bank account and simply label them business purchases on the receipt?

Answer
It is not absolutely necessary so long as you keep very accurate and detailed records to support whatever assertions you make regarding business expenses and money management.  However, it is better to keep the money compartmentalized so that personal finances are separate and distinct from business finances.  This still allows you the freedom to transfer money from one account to another as needed but it maintains a clear and auditable record of monies spent and transferred.

From a practical standpoint, it helps to bolster the corporate image whereas not having a business account smells "fishy" and may convince a potential client or business partner that are not a serious or legitimate business.  Especially since it is increasingly common to run a credit check on a business to assess their viability.  Can you imagine the reaction when they discover that your corporation doesn't even have a bank account?  

Most banks offer a variety of business accounts including free accounts so there is no negative to having a business account but many positives.