There are many reasons to open a bank account for your agriculture business separate from your personal account. There are advantages, no matter how big or small your business is.
In the eyes of the IRS, just about any money you make, they want to know about. If you are a five-head operation or a five-thousand-head operation, your income and expenses are what the tax people care about.
You need a system for keeping your bookkeeping records straight.
The easiest way to do that?
Open a bank account separate from your personal account.
If owning and operating an agricultural business is your end goal, there’s no need to wait for this step. Here’s why:
A BANK ACCOUNT TELLS A STORY
You have used a bank account before. Chances are, you have deposited your livestock sale check into your personal account along with the paycheck from your job.
There’s nothing wrong with this if the account and livestock sold are in your name.
You likely paid for expenses like feed and fencing materials out of that account as well the same time you picked up a collar for your pet.
You save and record your business expenses based on receipts; this system works great until you want to start upscaling your business.
When income and expenses increase, it becomes more difficult to keep track of everything when business and personal money are mixed. This is where bookkeeping software comes in handy.
WHEN A BUSINESS BANK ACCOUNT IS REQUIRED
**** Disclaimer: As a business owner, it is completely your responsibility to make these changes and follow the rules the government puts into play. This is only a guide and not legal or financial advice. ****
Let’s dive a little deeper into the business world.
If your business is not a legally formed entity (LLC, LLC Partnership, etc.), there aren’t many rules at this time that say you have to have a separate bank account.
But if you are a legally formed entity (LLC, LLC Partnership, Inc., etc.), you are REQUIRED to keep your business and personal money separate. If you don’t, you will be “piercing the corporate veil,” which could remove the legal protection this type of structure grants you.
HOW TO FIND THE RIGHT BANK
Local bank vs. corporate bank. Which one is better? They all have advantages and disadvantages. When it comes to shopping for a business bank account, here are a few things to keep in mind:
Make sure this bank aligns with your goals and values. Don’t choose the bank because it’s popular; choose it because it’s what is best for your business.
LEGAL ITEMS YOUR BANK REQUIRES FOR A NEW BUSINESS ACCOUNT
Requirements to open a business bank account may vary from bank to bank. Here are a few things your bank may require:
- Certificate of Filing
- Certificate of Formation
- Company Agreement/Operating Agreement
- Employer Identification Number (EIN)
- Form SS-4
- Organizational Minutes
- Authorized Signer Information
When you make an appointment for the opening of your new account, your banker will be able to tell you specifically what your bank requires in order to open this business account.
It’s also important to note that you communicate with your bank about requirements BEFORE you take a check in your business name. Your legal documents need to be completed in your state before you tell a customer to write your check in your new business name. A business may already be operating under the name you’ve chosen.
OTHER BANK ACCOUNTS YOU MAY NEED IN THE FUTURE
Allocations can decrease the need to open multiple accounts. If you feel that moving these allocations into separate bank accounts will help your business, here are some common accounts used for this:
All of these accounts can be linked to your primary bookkeeping software to organize your records of purchases and transfers.
Bank accounts are necessary for running your agricultural operation. Regardless if you are an established farmer or rancher or starting as a hobby, having a separate bank account will ease your money flow.
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